Fla., N.Y. Workers' Comp Reforms Working, But Officials Say More Needs to Be Done

Both Florida and New York are reporting that their respective workers’ compensation reforms are having an impact, but officials in both states indicated that further changes, likely through additional legislation, are necessary.

In Florida, state Insurance Commissioner Kevin McCarty rejected a proposed 1 percent annual rate increase in workers’ compensation premiums proposed by the National Council on Compensation Insurance (NCCI), but said he would approve a 0.7 percent increase effective in January if requested by NCCI.

McCarty said that an analysis by his department showed that an increase in production expenses requested in the NCCI request were not supported by the information submitted by the group.

He added that while a marginal rate increase is necessary for workers’ compensation insurance in Florida, the underlying factors causing the spike in rate increases over the last four years still merit legislative attention.

McCarty said a rate hearing demonstrated that rates could be reduced by as much as 8.3 percent if the reimbursement for hospital inpatient, hospital outpatient and ambulatory surgical centers were statutorily limited to 120 percent of Medicare reimbursement.

He also pointed out that the smaller increase would still represent a 56 percent cumulative reduction in Florida workers’ compensation rates as a result of legislative reforms introduced in 2003 and keep Florida rates comparable to other states.

For New York, a WCRI report says an update on the impact of reforms enacted in 2007 found that the implementation and subsequent change of the pharmaceutical fee schedule decreased the average price per pill by 10 to 20 percent, depending on drug and dosage.

The reforms in 2007 increased maximum statutory benefits, limited the number of weeks of permanent partial disability (PPD) payments, created medical treatment guidelines, adopted a fee schedule for pharmaceuticals, established networks for diagnostic services and thresholds for preauthorization, and enacted administrative changes to increase speed of case resolution.  

The latest report also states that the average weekly temporary total disability benefit increased 26 percent after the implementation of three increases in the benefit rate between 2007 and 2009. Additionally, the percentage increase in permanent partial disability cases with no lump-sum payments at an average 24 months of experience fell 13 points from 2007 to 2009, while there was a 10.5 point increase in cases with lump-sum settlements but no PPD payments.

The report also finds that defense-attorney involvement increased from 2005 through 2007, was relatively stable from 2007 through 2009, and then increased by about 2 percentage points in 2010, driven mainly by cases with defense-attorney payments of less than or equal to $500.

But an official of the New York Insurance Association says that while “some progress” has been made, a great deal of change still needs to occur with workers compensation insurance in New York.

Moreover, said Ellen Melchionni, NYIA president, Gov. Andrew Cuomo has acknowledged that additional work needs to be done related to workers’ compensation insurance.

She adds that the NYIA feels a thorough evaluation of cost drivers in the workers’ compensation system needs to occur, which would highlight necessary modifications.

“In addition, in order to make the marketplace competitive and attract companies to write in New York, the state’s consistent artificial rate suppression needs to be addressed,” she says.

Melchionni says the current workers’ compensation system is burdened with escalating medical costs wages and stretched even thinner by expenses to comply with increased regulation, not to mention continually plagued with fraud.

The NYIA acknowledges that the creation of medical treatment guidelines, adoption of a pharmacy fee schedule and the formation of diagnostic service networks and preauthorization thresholds have all been helpful in streamlining workers’ compensation insurance while still providing the necessary care to injured workers.

However, says, Melchionni, “We have not yet seen the full realization of the cap on permanent partial disability duration, but remain optimistic that it will have a positive effect.”

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