NU Online News Service, June 8, 3:35 p.m. EDT

The group self-insured trust workers' compensation program in New York should be terminated, as the risks inherent in the group model outweigh the benefits, according a task force report sent to the governor.

New York Governor David Paterson formed the Task Force on Group Self-Insurance on June 30, 2008 after 15 group self-insured trusts became insolvent through 2007 and 2008, creating a combined deficit of $498 million, the report notes.

The report, issued to the governor this month, calls for legislation to terminate the group self-insurance program effective Dec. 31, 2010.

It also "strongly recommends that such legislation include alternative coverage options and be enacted sufficiently in advance so that all existing groups and their members have time to find alternative coverage which maintains the full benefits and rights of claimants."

Among the most notable flaws with the program, the report cites:

oJoint and several liabilities that "can significantly impact the member employer's business operations" and impact the employer's ability to borrow and acquire surety bonds.

oExcessive costs and time in pursuing litigation to enforce the joint and several provision.

oFluctuating assessments to meet the cash flow needs related to the unfunded liabilities of insolvent groups.

oThe cost and feasibility of providing an adequate level of regulatory oversight to ensure groups maintain necessary standards to protect employer members in a group self-insurance program.

While its recommendations are considered, the task force suggested that the state's Workers' Compensation Board implement regulations to mitigate additional deterioration of the group self-insurance program, continue independent reviews and remediation efforts with the trusts to strengthen their financial position, intervene earlier when trusts are under-funded to ensure timely joint and several collections, and assist group members in obtaining alternative coverage as needed.

The task force said it met bi-weekly from April 2009 through March 2010, and completed its report on May 27.

The report notes that the group self-insured trust program is a form of self-insurance for workers' compensation where employers join together and request approval to operate as a trust. The members of a trust share in any surplus generated, but are jointly and severally liable for any deficit incurred to pay the trust's obligations.

A call to the governor's office was not returned.

Kristina Baldwin, assistant vice president for the Property Casualty Insurers Association of America (PCI) said there has been concern for a long time about inadequate supervision and solvency of the group self-insured trusts. She said PCI supports the task force's recommendation to terminate the program.

Special Reports /

N.Y. Group Self-Insured Trusts Should End, Task Force Says

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