Negotiations to craft legislation that deals with a series of defaults by New York employer groups that self-insure for workers' compensation claims are underway at the state capitol in Albany, with a deadline for action approaching rapidly.

Taking part in the talks with lawmakers and representatives from the governor's office, business groups and labor is the New York State Workers' Compensation Board.

The board has so far been stymied in court in its efforts to make solvent self-insured trusts pay emergency assessments to cover claims against those groups that have gone bust. Meanwhile, at the capital, legislators are due to go on a month-long summer recess starting at the end of June.

According to Art Wilcox, director of the New York AFL-CIO's public employee division, at least $100 million a year will be needed to take care of the cash flow required to pay claims against the defaulted trusts.

There have been estimates that the board could run out of cash anywhere from next month to January, but Mr. Wilcox's best guess is October.

Ken Pokalski, representing the Business Council of the State of New York, said that 12 self-insured trusts have been closed, "with projected liabilities talked about in the $200 million-plus dollar range."

He said the council is concerned about any move to saddle additional businesses with long-term costs that could force them into insolvency as well.

The council, he said is arguing that any legislation should precipitate "aggressive recovery" from those groups that have defaulted, and be the first place funds should come from. They are also suggesting a bond act with recovery and assessments to pay principal and interest costs.

In addition, Mr. Pokalski said his group wants to see a measure that enhances the board's authority to effectively oversee the finances of self-insured groups, and makes its regulatory powers more explicit.

Currently the board's tools for dealing with sagging trusts, he said, are almost all discretionary. The council, he explained, wants to see a clear path in the law for bringing any flagging group back to solvency, or to terminate its operations before the financial damage is excessive.

Brian Keegan, the board's spokesman, will not discuss what the figure is for unfunded claims, calling it a moving target. He said the legislation being discussed would be a broad measure to address the self-insurance industry. The board, he said, is looking for more authority and a solution to some monetary problems.

Mr. Pokalski said that everyone involved in the negotiations "understands there has got to be a sufficient shoring up to pay claimants through the summer months."

"Our interest is to make sure we come out of this with a regulatory environment that allows for a healthy group insurance industry going forward," he added. "The last thing we need is a financial burden on remaining trusts to force them into insolvency as well."

Mr. Wilcox said his only goal is making sure injured workers and treating doctors get paid, but for businesses it is more complicated because there are different categories of employers.

About one-third are covered with commercial insurance, one-third through the state insurance fund, and the other third self-insured--with 17.6 percent in the latter category via group self-insured trusts.

Ideas that have been floated for legislation range from having insolvents having to pay for everything, to all employers paying for defaulted group claim costs--with "conflict" among business groups, he said.

In addition to the trusts that have gone belly up, according to Mr. Wilcox, there are 22 underfunded trusts that could default any time. In his view, group trusts have been functioning like "mutual insurance companies without regulation."

He said he wants a measure to provide for the claims of injured workers--including regulation that mirrors those covering the mutual insurance industry.

Special Reports /

N.Y. Grapples With Rules For Self-Insured Comp Groups

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