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March 12, 2007

Workers' compensation reform in a New York minute

Well, that didn't take long. Only 19 days ago we wrote about the profound need for top to bottom reform of New York's worker' compensation statute, arguing that the election of Governor Eliot Spitzer provided the best opportunity in more than a decade to accomplish meaningful reform in the state that needed it the most.

Lo and behold, if a legislative bullet train didn't roar through Albany almost immediately. On March 6, the New York Assembly and Senate unanimously passed identical bills, whisked them through conference, beamed them up through first, second and third readings, and delivered them to Governor Spitzer for signature on March 8. If anyone can tell me of a piece of serious legislation that moved faster and with a better result through a legislature anywhere in America, I’d love to hear of it. It's as if the Governor waved some Harry Potter wand and dragons died and mountains moved. We should credit Speaker of the Assembly Sheldon Silver and Senate Majority Leader Joseph Bruno for bringing News York's Business Council and AFL-CIO to the table for a lesson in the fine art of political compromise.

The reform is broad-based and deep. It ratchets up the penalties for employer premium fraud, an allegedly humongous problem, the scope of which has only recently been exposed, and with which the insurance industry takes great issue. (PDF) For the first time, it establishes medical, as well as pharmaceutical, fee schedules that should be very helpful in the future.

What the reform adds to New York's workers' compensation statute is worthy and needed, but even more impressive is what the reform kicks to the side of the road.

Gone is New York's "till the day you die" permanent partial disability, replaced by a disability ranking system that, depending on the level of disability, can last up to ten years. However, there's a section that allows for conversion to "total industrial disability" in "extreme hardship" when an injured worker is more than 80% disabled. Not exactly what labor and claimants' attorneys wanted, but certainly as good as they were going to get.

Gone is the paltry maximum weekly temporary total disability payment of $400, replaced by a maximum rate to be phased in over three years, which will equal two-thirds of the average weekly wage in the state, indexed annually. This is still relatively low; I would have argued for the maximum rate to be exactly equal to the average weekly wage in the state. The result achieved, nonetheless, demonstrates the power of the compromise.

Gone is the Special Disability Fund (which, everywhere else in America is called the second injury fund), as of July 1, 2007, just three and a half months from now. Workers may not submit claims for injuries that happen after that date and cannot submit claims for any injuries that happened prior to that date after July 1, 2010. These funds are considered anachronisms by many policy makers, having come into being to assist wounded World War II veterans whose wounds might have made them prone to re-injury when they returned to the work force. Subsequently, they were viewed as employer incentives to hire previously injured workers.

Gone also, if I read the legislation correctly, appears to be the New York Compensation Insurance Rating Board (NYCIRB). Acting as Bureaus do in other states, such as Michigan, Pennsylvania, Massachusetts, etc., the NYCIRB is the insurer-funded organization that collects data, files for rate changes, and represents the insurance industry in workers' compensation matters in New York. Someone very powerful seems to have it in for Monty Almer, president of the board, and his actuaries and data collectors. The legislation mentions the NYCIRB in two key places, among others. First, the new law gives this charge to the Superintendent of Insurance:

"The Superintendent shall report to the governor, the speaker of the assembly and the majority leader of the senate on or before September first, 2007, on the compensation insurance rating board on matters related to the compensation insurance rating board. Such report shall address, among other matters the Superintendent may deem relevant to the compensation insurance rating board including: (1) the manner in which the insurance compensation rating board has performed those tasks delegated to it by statute or regulation; (2) whether any of those tasks would more appropriately be performed by any other entity, including any governmental agency; and (3) the rate-making process for workers' compensation."

Second, in Section 2313, a new subparagraph(s) is added, a poison pill if ever there was one. Apparently regardless of whatever the Superintendent's "report" says, the new subparagraph(s) clearly states that the NYCIRB can no longer file rates after February 1, 2008, five months after what can only be considered its performance report is delivered:

"The workers’ compensation rating board of New York… shall mean the compensation insurance rating board until February first, 2008, and thereafter such entity as is designated by law."
"…no rate service organization may file rates, rating plans or other statistical information for workers’ compensation insurance after February first, 2008."

Ouch! When these passages first appeared in the draft legislation on March 2, 2007, Mr. Almer and the NYCIRB issued a "bulletin" (PDF) reminding insurers, legislators and anyone else who might be listening that the NYCIRB is "a non-profit, unincorporated association of insurance carriers" funded by those carriers to represent their interests in the rate-making process. Neither Mr. Almer nor his bulletin appears to have had the necessary mojo to persuade the legislators to remove the offending passages. One has to wonder how New York's P&C industry is going to file its rates with the Superintendent of Insurance if the new law says it's illegal for it to do so. Just who does the governor and legislature think is going to represent the insurance industry? Some "governmental agency," as is hinted by the legislation?

We should congratulate the groups that came together so quickly to create and put in place this reform legislation. In most cases, it seems an admirable compromise. Folks at the NYCIRB might be excused for thinking otherwise, of course, but you have to hand it to New York politicians. When they take out the long knives, they're not afraid to use them.

This all bears continued scrutiny.

Posted by Tom Lynch at 7:19 AM Link to, Comment (4), or E-mail this post
Comments

You are so far off base on your take on the comp bill in New York. As always the legislature failed to address the real issues and real cost drivers of the comp system. Once again the legislature took away benefits from the people who most need it. That would be those who are seriously injured.

It is easy to say what you think you would do if you were an injured worker. Actually living with a serious injury is quite different than you would think.

You sound like you think being on comp is something someone would prefer to do than work. There may be a few malingerers on comp but most people would prefer to work if they could.
There are many things that stop these people from going back to work other than the injury. For one thing try and get a job after you have had an injury. No one wants to hire you. Your own company wants to settle out the injury and as part of that settlement they require that you resign your position with your employer.

It is high time for some incentives or penalties to employers who refuse to put thier injured back to work.

I used to think like you. Everyone on comp is a fraud. Then I had the misfortune of becoming an injured worker. I must tell you things look a lot different from this side of the table.

There are many ways to reform the comp system. The first being requiring insurers to comply with the law and holding them accountable for their poor business practices. One day we will have to talk. There is a lot to debate in comp. There is one thing I can prove without a doubt. That is that the comp insurer themselves are the biggest cost drivers to the comp system

Mary Bailey
President, VOICES Inc.
www.voicesflorida.com

Posted by: Mary Bailey at March 12, 2007 12:01 PM

Well, Ms. Bailey, I won't respond to everything, but I will respond to this: I have never in my life believed that, "Everyone on comp is a fraud." Anyone with half a brain, and I count myself at least making it partway into that club, knows that the vast majority of workers on workers' compensation really did get injured, really do deserve workers' compensation benefits and really do want to get back to work and off comp as fast as they can. And, if you'll check the more than 700 blog articles that my colleagues and I have posted on Workers Comp Insider, you'll see that not once has anything less ever been suggested.

Moreover, all of our employer consulting at Lynch Ryan over the last 23 years has been geared to building systems that are both good for our clients, yet highly sympathetic to the needs of injured workers. Frankly that's just good business.

That said, I'm sorry that you had what must have been a hideous experience in the workers' compensation system.

Posted by: Tom Lynch at March 12, 2007 1:33 PM

I'm not sure how NY State intends to keep rates down by requiring WC insurers (but not self-insureds or the State Ins. Fund) to deposit the present value of a PPD award into the Aggregate Trust Fund on every claim where the claimant in classified with a permanent partial disability. See Section 46 of the bill. Such a requirement, in my opinion, will discourage insurers from writing WC in NY. My cynical side leads me to believe that this is an attempt to drive more business to the SIF and encourage self-insurance.

Posted by: JP at March 12, 2007 11:44 PM

CRS: Computer-Related Syndrome: The Prevention and Treatment of Computer-Related Injuries. By Richard Dean Smith, MD and Steve T. Garske, MS, PT.

The computer workstation must be considered a potentially hazardous place. Computer keyboard workers are akin to armchair athletes subject to the same stresses and injuries experienced by athletes. Our purpose is to alert keyboard workers to early warning signs, explain how to best arrange workstations, provide both preventive and therapeutic exercises, and enable workers to 'train' for computer keyboard work. With drastic cutback of workers compensation insurance benefits, prevention and early intervention is especially important.

Link: Prometheus Books. richardsmithmd.com.

Posted by: Richard Smith, MD at April 1, 2007 7:13 PM
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