Public Citizen, a national non-profit representing consumer interests on a broad range of issues, has just published a report entitled, Aim Higher: New York Should Reform Its Workers' Compensation Laws To Reduce Injuries. The report focuses on New York's Service Industry Sector, which, according to the U.S. Bureau of Labor Statistics (BLS), represents 91% of New York's non-farm working jobs and 83% of all occupational injuries and illnesses.
Public Citizen suggests that OSHA is woefully under-serving New York's Service Industry, given that sector's over-representation in both population and occupational injuries and illnesses.
Public Citizen looked at New York for a number of reasons, one of which was its 2012 position in the Oregon Department of Business Insurance's bi-annual rankings of the states - New York came in as the fifth most costly, even after all of the Spitzer reforms had settled in. We've written often about New York's myriad problems and the efforts of the Workers' Compensation Board to address them. And we'd be remiss if we didn't mention that the recent revamping of New York's Trust Fund Assessments, by far the largest in the country, will lower costs. However, it will take some time to make a significant dent there.
But the Public Citizen Report's primary recommendation is that New York modify Labor Code Part 59: Workplace Safety Loss Prevention Program.
Part 59 requires that an employer with payroll greater than $800,000 and an Experience Modification Factor greater than 1.2 institute a formal safety program, the requirements of which are listed in Part 59. Public Citizen's recommendation is that:
"New York state's legislature should remove the threshold(s) for requiring a workplace safety plan to capture all employers in New York state."
In otherwords, New York should mandate that all of its employers comply with the requirements of Part 59, which, in case it has slipped under your professional radar, is a safety inspection and remediation program. Its 19 pages of bureaucrat mumbo jumbo require that state-approved consultants inspect employers who exceed the threshold. Part 59 lists the requirements for employers, the duties of the consultants, their required qualifications and the costs the state imposes on them for certification ($1,000 per consultant if you're a one or two person shop).
There. Now you don't have to read it. You can thank me later.
Public Citizen's Report is well-intentioned, but it misses the mark and is rather impractical. For example, in 2012 there were 592,148 workplaces in New York. Using OSHA inspection rates as a model, inspecting all of them in one year would require more than 12,000 consultant inspectors. Moreover, Public Citizen's recommendation lacks any loss cost or injury reduction performance requirements.
Nonetheless, right about now you may be asking about New York employer compliance with Part 59 as it currently exists. Me, too. However, a call to the New York Department of Labor was not returned.
In November, 2012, we wrote about Part 59's sister regulation, Part 60:, the New York Workplace Safety and Loss Prevention Incentive Program. If Part 59 is mumbo-jumbo, Part 60 is mumbo-jumbo written in Pig Latin. Like Part 59, it is totally process-driven. No performance requirements; no performance measurement. Just build a certified program, and good things will happen. As we wrote then, "The New York DOL doesn't seem to care if the program reduces loss costs. All the DOL wants to know is: Have employers built their programs the way we told them to build them?"
Well, we said it then, and we'll say it now: the most successful workers comp incentive program in history is the Massachusetts Qualified Loss Management Program (QLMP), instituted at the height of the worst workers compensation crisis ever - 1990 to 1993.
To describe how it works, here's what we wrote in 2012:
Premium credits accrue to Loss Management Consulting Firms whose Massachusetts customers the WCRIB certifies have reduced their loss costs in the year following engaging a firm. The greater the loss cost reduction, the greater the credit, up to 15%, which is then passed on to the Loss Management Consulting Firm's customers in the succeeding year. Lower loss costs mean lower premiums for employers. The Loss Management Consulting Firms have to requalify every year. So, if a Firm's results slip, it will see its credit, and probably customer portfolio, reduced. In the QLMP, all of the incentives are lined up so that everyone is motivated towards reducing costs, while providing safe workplaces and high quality care for injured workers.
In the first year following QLMP approval, loss costs dropped more than 20% throughout the entire Massachusetts Residual Market. Our Lynch Ryan clients saw reductions of 49.6%.
After Massachusetts, we tested the QLMP in Missouri's $145 million Assigned Risk Pool. Fifteen percent of the pool entered what we called the Missouri Injury Management Program (MIMP), while the remaining 85% of the Pool received normal Pool service.
After one year, the MIMP accounts had incurred loss ratios of 48% and paid loss ratios of 15%, while the non-Mimp group had incurred loss ratios of 90% and paid loss ratios of 25%.
Employer premiums go down, insurer residual market loads decline and consultants flourish - but only if the loss cost results of their employer clients remain stellar.
One would think that Chambers of Commerce and Business Councils everywhere would be clamoring for this type of program for their members, but such has not been the case. Perhaps we happy few who were present at the creation never publicized results well enough. You live and learn.
Regardless, if New York, or any other state, wants to really incentivize employers to reduce injuries and loss costs, it should consider adopting a version of the Massachusetts QLMP. The good people at the Massachusetts Workers Compensation Rating & Inspection Bureau would be happy to help, and so would I.
Note: Thanks to friend and colleague Peter Rousmaniere for sharing the Public Citizen report with us.