Representatives from two New York agents' associations – the Independent Insurance Agents and Brokers of New York (IIABNY), and the Professional Insurance Agents of New York (PIANY) – expressed concerns about the implementation of the state's workers' compensation reform legislation passed in March. But opinions differed as to what parts of the reforms were causes for concern.

One issue cited by Jamie Deapo, member advocate and assistant vice president of member programs for IIABNY, involves the Aggregate Trust Fund (ATF). According to the legislation, carriers that sell workers' compensation in New York must pay the “present value” of permanent partial disability (PPD) benefits into the ATF.

Mr. Deapo stated that insurers who pay into the ATF are not eligible for a refund in the event of an over-estimate, but must pay more in the event of an under-estimate. “Imagine you have a younger person that gets a PPD, and you throw up $200,000 for this gentleman or lady, and a couple of years later they're killed in a car accident. You don't get any of that money back,” Mr. Deapo explained.

He also said that self-insured trusts and the New York State Insurance Fund (NYSIF) are exempt from making these payments, and he questioned the fairness of requiring carriers to pay into the fund while exempting NYSIF and self-insured trusts.

But while Mr. Deapo cited the ATF as one of his biggest issues with the reforms, David Dickson, past president of the PIANY, does not see it as a major concern in the long run.

Mr. Dickson said, “I would say with regards to the application of the funds, and their availability, that there is going to be an 'ironing out' period. I'm not worried about it. I wouldn't put [the ATF] as one, two, or three in my list of concerns.”

Mr. Dickson said he is more concerned with the state's failure to enforce employee misclassification and employer non-compliance. Citing a Fiscal Policy Institute (FPI) report released last summer, Mr. Dickson said, “There is $90 billion in unreported payroll…and that amounts to roughly 20 percent of the reported payroll in New York State.”

He explained that the reform law granted the state broad powers – including making intentional misrepresentation a felony, increasing fines, and allowing the Workers' Compensation Board to issue stop-work orders if it discovers misclassifications or employer non-compliance – to pursue employers that are taking advantage of the system and not paying their fair share for workers' compensation coverage.

But Mr. Dickson said that there have been only a few instances of enforcement in this area, and he cited that as his top concern with the reform law.

Mr. Deapo, though, does not see misclassifications and employer non-compliance as a major issue. He said that the idea of finding people not covered under workers' compensation is well-intentioned, but that the state's appetite for pursuing this issue may be too heavily based on one source of data – the FPI report. “I think some of the people that [the state thinks] are not being properly picked up, are being properly picked up.”

He said that while the state is trying to make a big push to go after these people to justify rate decreases, the state may “not get all the bang back for its buck.”

Mr. Deapo expressed concern in general about the state's decision to lower workers' compensation rates by 20 percent earlier this year. He wondered if the state will be able to “hold the line with the rates and not have them shoot back up,” and he doubted if the reforms are going to generate as much savings as the state believes.

Noting that health care costs are going up, and that industry analysts are generally saying that workers' compensation rates overall will rise, Mr. Deapo said, “Here we are in this state saying we're going to give more benefits; higher benefits, and reduce the premium and keep reducing the premium. How are we going to do that? It must be that they have a magician in Albany because I just don't know how that's going to happen.”

Mr. Dickson, however, believes that the rate decrease is justifiable, and that the state may be able to lower rates even further in the near future, and without employing the use of magic.

Mr. Dickson said that the reforms have resulted in “significant cost reductions for employers.”

He added that the rate decrease is sustainable “for a couple of reasons. First, there is nearly $1 billion in uncollected premium that's out there right now…. Number two, if rates had gone down too much, you'd think there would have been some kind of hiccup or change, or influence in the marketplace, and there hasn't been.” To the contrary, Mr. Dickson added, the market is operating softer now than it was at the beginning of the year.

Mr. Dickson and Mr. Deapo did find common ground on one issue in the reforms: the impact on out-of-state employers. On July 12, the WCB, in interpreting a provision in the law, posted on its website, “…effective September 9, 2007, all out-of-state employers with employees working in New York State will be required to carry a full, statutory New York State workers' compensation insurance policy.”

Agents pointed to potential unintended consequences, noting that this interpretation means that any worker passing through the state for any reason would have to have a full statutory workers' compensation policy, rather than the previously-accepted “all states endorsement,” in order to comply with the law.

In a column written for Insurance Advocate, Mr. Deapo called for a change in this interpretation, stating, “Certainly, the intention was not to require employees of an out-of-state employer attending a conference in New York, or driving through the state, to be provided full statutory coverage.”

The WCB has acknowledged the agents' concerns and has vowed to review the guidelines. But Mr. Dickson noted that until there is an actual change in the law, employers are still liable. “If an employee from an out of state employer presents a workers' comp claim, and that employer does not have a New York policy, by statute you are talking about an uninsured employer.”

Mr. Dickson said that he has advised employers to either find a way to get full New York coverage, or avoid traveling through the state altogether.

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