Tuesday, September 11, 2012

New York May Want Strategy From CA's Playbook

While the Left Coast may be going through a bit of drama and turmoil in the wake of an historic reformation of the California workers' compensation system, at least the people of The Golden State can claim that they DO SOMETHING about their workers' compensation system to get things under control.

Not so for those of The Empire State.

The New York Workers' Compensation Policy Institute reported yesterday that assessments on New York workers' compensation premiums are nearly five times the national average and remain the highest in the nation.

New York has always carried the stigma of being one of the highest taxing states in the nation. But even Governor Andrew Cuomo's order that policy assessments be reduced from 20.2% of premium to 18.8% of premium effective on Oct. 1, 2012 is more than twice the next highest state, Minnesota, which charged 8.3%.

By contrast, California's premium assessment for 2012 was 2.285%.

According to the Institute's report:
  • More than half – 51% – will go to pay claims from the Special Disability Fund, which serves as New York's Second Injury Fund. Lawmakers closed the fund to new claims in 2007. The New York Special Funds Conservation Committee, which supervises the fund, paid out $570 million to retire legacy claims last year.
  • Another 26% of the assessment went to pay off claims from New York's unique Reopened Case Fund, which pays costs for claims that are at least seven years old and for which no lost wages have been paid for the past three years.
  • About 16% of the assessments will pay the administrative costs of SWCB, which has one of the largest budgets of any state workers' compensation regulator in the nation.
  • Assessments have grown by slightly more than 74% since 2008 – from $13.40 per $100 in premium to $23.24 today.
  • Florida, Michigan, Pennsylvania and Texas all are charging less than 3% of premium this year.
Despite a "reform" deal pushed through by embattled former Governor Eliot Spitzer in 2007, New York's insular system remains non-responsive to employers and workers, unable to provide any semblance of value to either constituency.

An example of the system's insularity, Brian Keegan, SWCB's former director of public information, stopped responding to questions from WorkCompCentral in December 2010.
Keegan threatened to cease all communications with WorkCompCentral at that time if the news service continued to publish columns written by Michael T. Berns, a former member of the SWCB appointed by former Republican Gov. George Pataki, highly critical of the SWCB and its failure to respond to the needs of the state's workers and employers.

Keegan described Berns as "disgruntled"" and made good on his threats after an editor for WorkCompCentral refused to bar Berns' columns.

Keegan resigned his $92,936-a-year job last month to work for the Pew Center on the States in Washington, D.C.

I can only assume that Keegan's silence since 12/2010 was on order from higher up the food chain since post resignation he did talk to WorkCompCentral, but only to say "no comment" (which is more than any prior statement since 12/2010).

New York's failure to deal with its administrative burdens has thwarted the promise of any salvation with reform.

While rates were cut by 18.4% in 2007 and another 6.5% in 2008, the state has approved loss-cost increases of 4.5% in 2009, 7.7% in 2010 and 9.9% in 2011.

And the NYCIRB, New York's rate-maker, called for an average 11.5% increase in loss costs, effective Oct. 1, 2012. The rating board, in part, blamed delays by SWCB and task forces assembled by Spitzer in implementing the reforms needed to put the Permanent Partial Disability caps in place.

There are huge issues within the SWCB that remain thorns in the state's workers' compensation system, and while current SWCB Chairman Robert Beloten has made great efforts at dealing with these issues on a regulatory basis the forces that perpetuate status quo are too great for a single soldier to combat.

Thwarted on attorney fees, court reporting, and other anachronistic implements of a system long ago parlayed into special interest group's profit centers, it seems that New York could learn a lessor or two from California.

I never thought I'd say this after being so critical of the manner in which California's SB 863 was put together, but secret negotiations by a limited set of interest groups most directly affected by workers' compensation - employers and workers - is probably the only way that the Empire State will ever get any control over its workers' compensation costs, and in particular the cost of system administration.

It's not pretty. It's not socially acceptable behavior. It's not democratic. But if that is what's necessary to save a system that chokes on its own bile, and the people of New York feel that workers' compensation provides some value if properly administered, then a surgical team needs to be called in to do what is necessary.

New York needs more than reform. It needs salvation.

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