New York's medical malpractice and workers' compensation markets are heading in opposite directions, with the state cutting comp rates 20.5 percent shortly after approving a 14 percent rate hike for doctors.
The rate cut ordered by New York Insurance Superintendent Eric Dinallo was prompted by reforms in workers' comp laws earlier this year, estimated to save New York businesses about $1 billion in the 2007-2008 fiscal year, according to the New York State Insurance Department.
In March, Gov. Eliot Spitzer and legislative leaders announced what was called an historic agreement designed to lower the cost of workers' comp insurance while increasing weekly benefits. The governor projected then that the result would be a rate decline of 10-to-15 percent.
New York previously permitted lifetime permanent partial-disability payments to injured workers, but the new law caps payments at 521 weeks in all but the most severe cases. It also increases penalties for workers' comp fraud.
Under the legislation–which Gov. Spitzer made a top priority in his new administration–injured worker benefits will increase for the first time in more than a decade. Weekly benefits will increase from a minimum of $40 to $100, and the maximum will rise from $400 to $500.
"We promised that we would reduce the cost of workers' compensation as part of our effort to make New York more business-friendly," Gov. Spitzer said. "I'm proud to say that the reforms we instituted have already produced the biggest single-year decline in workers' compensation rates since at least 1975, the first year for which data is currently available."
He added that this means "even more cost savings for employers than we expected, while increasing the weekly benefits for injured workers. I thank Superintendent Dinallo, the legislature, the business community and the unions for their continued cooperation that has led to this result."
Mr. Dinallo said that "we believe the rate reduction is fair, that the private carriers will remain profitable, and that the market will continue to be competitive."
Kenneth Adams, president and CEO of the Business Council, said "this is welcome news, and the business community remains grateful to Gov. Spitzer and the legislative leaders for their continuing efforts to drive down the costs of workers' compensation."
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