A Raise in Workers' Comp Rates

A Raise in Workers' Comp Rates
July 28, 2005

A 5 percent increase in the average workers' compensation premium for the 12-month period beginning on October 1, 2005 has been approved by the state Insurance Department.

The New York Compensation Insurance Rating Board (NYCIRB) had proposed a 16.1 percent increase. The Insurance Department also approved an increase in the assessment tax that is added to premiums to support special-funds and the staffing of the Workers' Compensation Board. That tax will increase from 15.1 percent to 17.5 percent.

Despite sweeping reforms in 1996, New York's workers' compensation system still has the third highest costs in the country while offering some of the slimmest benefits. RBA member Scott Liebert of CLG, Financial is an expert on the issue and was against the increase. Rate increases should be unnecessary because the system's costs can be dramatically decreased through some simple reforms, he said.

For example the system must begin to use electronic billing because it will save a lot of time and money. Though many other fields have made the change, the workers' comp system is still being done by hand and besides wasted man hours has a 60% error rate, Liebert said.

The workers' compensation board and staff itself are too big, he noted. The model needs to be made more efficient and slimmer. His positions are similar to those held by the Business Council of New York State. The Council has been vigorously lobbying the legislature on the matter for years and recently submitted testimony to the Insurance Department. To read more please visit their website at www.bcnys.org.

A reform the council proposed is "giving injured workers only half of remaining scheduled benefits if they return to work before scheduled benefits expire." Currently if a worker returns to the job early, he is still paid his workers' compensation benefits on top of his regular salary. This creates a double expense for the business owner and incentive for the employee to exaggerate initial injury claims.

Another reform the Council proposed is "providing for Social Security and pension offsets—that is, reductions in workers' compensation benefits applied when workers receive Social Security and/or pension benefits."

Liebert said that most parties agree with the need for reform but that things can move at a crawling pace in Albany. New York Assemblyman Ryan Karben (D), a majority member of the Assembly's Insurance Committee, said he wants to get to work on the reforms suggested by Liebert and the Council but this past session's time on workers' compensation had been wholly dedicated to fixing the emergency fund that went bankrupt. As a result the committee authorized the increase in the assessment tax.

Governor Pataki championed major reforms in 1996 that have resulted in close to a 30% decrease in rates, though a recent Business Council survey says in the past five years most businesses have reported an increase in their rates.

The NYCIRB proposed the increase in rates this year because they are under pressure from insurance companies who are reporting high loss experience. Companies threaten to leave the state if rates are not fixed, Liebert said.

Often times, however, the reported loss experiences are inaccurate due to problems with the way insurance companies mind their reserve systems. When an employee gets injured the insurance company puts aside a certain sum for the worker and reports that as a loss. If the worker returns to work before the expected sum is paid out, the insurance company does not always correct their original report, Liebert said.

He also noted that the loss experience reported by the state's insurance fund was favorable compared to those reported by the private insurance funds, indicating they manage their books better.

"They are doing something right," he said.

The RBA encourages you to contact your local state representatives to get things moving in the right direction on this important issue.

FACTS

NYS has third highest worker's comp costs in country at $11,793 per case.

That's 72 percent above the national average on a costs- per-case basis.

77% of costs come from the 14% of cases that are open-ended.

In a recent survey more than a third of respondents to the survey said New York's workers' compensation costs are encouraging them to consider re-locating their business out of state.

A Raise in Workers' Comp Rates July 28, 2005

FACTS

A Raise in Workers' Comp Rates
July 28, 2005