New York property and casualty insurance industry officials are questioning a statement from Gov. Andrew W. Cuomo that workers compensation premiums for state employers will decline by 26 percent next year.
The governor's statement said a series of measures aimed at reducing workers' compensation costs enacted through the governor's budget earlier this year will save businesses and local governments $300 million in annual expenses. He said the Business Relief Act cuts the assessment to employers from 18.8 percent to 13.8 percent, the largest reduction since 1998, and provides a one-time workers' compensation assessment savings to all self-insured employers of approximately $500 million.
However, an industry official who is experienced in workers' compensation issues said the governor is using fuzzy math to draw his conclusions–math "that is not being taught to even third grade students."
"In the end, the proof of the press statement's claim is going to be in the premium bills that New York's employers will be seeing – did their cost actually go down 26 percent?" the official said. "If not, they now know who to turn to for answers."
And Ellen Melchionni, president of the New York Insurance Association, said that the NYIA fears the workers compensation savings projected "will not be as far reaching as public policymakers hope."
She said Cuomo has stated that $800 million in savings will be realized by the workers compensation reforms that were passed. But, Melchionni said, the bulk of the savings, amounting to $500 million, is specific to self-insured employers, so not all employers will benefit from the measure.
She notes that New York has the highest assessment rates in the country, rates which are five times the national average.
Melchionni acknowledged Cuomo's reforms will reduce the assessment rate by 5 percent next year, but said further cuts should be made.
She also said that Cuomo "has acknowledged" that additional work needs to be done related to workers compensation insurance. She said property and casualty insurers are hopeful that the state's current review of the workers' comp system will include a thorough evaluation of cost drivers in the workers compensation system as this would clearly highlight necessary modifications.
The industry official who asked not to be named said the changes made to the system through approval of the governor's budget in April, including the recent decision by the State Workers' Compensation Board to reduce the annual assessment on premiums from 18.8 percent to 13.8 percent, plus other changes in assessments and fees, do not justify Cuomo's projections of a 26 percent cut in assessment cost for employers next year.
The official said that, for one thing, the governor's calculations do not take into account the $1.75 billion that will be taken out of state Workers' Compensation Fund through the budget over the next two years. He also said that closing the so-called "Reopened Case Fund" as mandated by the budget, will not yield anywhere near the savings needed to help pay for such a large estimated cut in WC costs next year.
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