New York Announces WC Reform Package

New York officials unveiled a series of workers' compensation reform measures intended to increase benefits for the injured and cut costs for employers.

New York Governor Eliot Spitzer announced an agreement between the legislative and executive branches to reform the state's system that would increase benefits for injured workers over a four-year period. At the same time, employers' costs would be cut 10-to-15 percent and more over time.

"This is a remarkable win-win situation for both workers and employers," Gov. Spitzer said.

State Assembly Speaker Sheldon Silver, D-Manhattan, said, "By protecting workers and reducing the costs to businesses, this historic agreement establishes a more effective environment for economic development, and will spur job creation in the hard-pressed Western New York economy and throughout New York State."

Assembly Republican Leader James Tedisco said, "The outdated system had long been an impediment to job creation and economic growth, especially in upstate New York. This is an important victory."

Under the plan:

o The maximum weekly benefit for injured workers will be increased from $400 to $500 in the first year, $550 in the second year, $600 in the third year, and to two-thirds of the average weekly wage in New York in the fourth year. Once the maximum benefit reaches two-thirds of the average weekly wage, the maximum benefit will be indexed annually.

o The minimum weekly benefit will be increased from $40 to $100.

o Cost savings worth hundreds of millions of dollars will be achieved by setting a maximum number of years that a small population of claimants can receive cash benefits. Medical services will continue, however, and a safety net will be established to help these workers return to gainful employment and to intervene in cases of extreme hardship.

o Programs will be established to return workers to work promptly.

o Strong antifraud measures will be in place, including the ability to stop work on a job site where workers' comp insurance has not been purchased.

o The Compensation Insurance Rating Board will sunset as of Feb. 1, 2008. The superintendent of insurance will determine what, if any, replacement should be recommended.

o The Second Injury Fund--established to help injured World War II veterans--will be closed. Some carriers have used it to avoid paying claims.

The superintendent of insurance has been directed to ensure that savings from these reforms are captured in premium rate reductions with the next rate-setting cycle in July.

The governor's office said reductions in premiums and assessments related to the Second Injury Fund are expected to reach double-digit levels, providing significant relief to the state's business community--especially small employers.

As part of the reforms, the superintendent of insurance will:

o Collect data on system costs.

o Design a system to expedite the hearing process.

o Design fact-based medical guidelines to replace current outdated system and design treatment guidelines and training for law judges.

"We are pleased that the governor and legislative leaders have tackled this important issue; however, the devil is always in the details," Gary Henning, assistant vice president for the Northeast Region with the American Insurance Association, said in a statement.

"We need to carefully review this measure so we know exactly how the cost savings will be generated," he added. "AIA is hopeful that this legislation will result in meaningful cost savings. Injured workers, employers and insurers all benefit from a stable, predictable workers' compensation system and a competitive marketplace."

"The plan is bold and forward-thinking," said Sharon Emek, chairwoman of the Independent Insurance Agents & Brokers of New York. "Eliminating such inefficiency as the Second Injury Fund and the Compensation Insurance Rating Board, while limiting the number of years a small population of claimants can receive benefits under permanent partial disability, will drive substantial costs out of the system."

"We are pleased that the governor and legislature have heard our appeals to identify and address inefficiencies in the system," said David Dickson, president of the Professional Insurance Agents of New York. "Achieving reform is absolutely crucial to restoring integrity to New York's workers' compensation system."

Frank O'Brien, regional manager for the Property Casualty Insurers Association of America, said in a statement: "The governor and others recognize that the system is not working for injured workers, employers or insurers. The agreement...will have to be analyzed to determine the full ramifications of the proposed savings." He added that the association would comment further after a complete review.