New York Gov. Andrew Cuomo said on April 8 that employers in the state are poised to save some $800 million annually, thanks to reforms in the state workers’ comp system that were included in the recently passed state budget. At the same time, the approved 2013-14 budget will also boost injured workers’ minimum weekly benefit from $100 to $150.
Gov. Cuomo said the state will create one method for collecting annual assessments from employers, thereby saving self-insured employers an estimated $500 million. This change will eliminate “an overly complicated and bureaucratic system” that was not only expensive for the state but also for employers, Cuomo said, adding that the new system will achieve administrative efficiencies and provide predictability to employers.
Additionally, previous law allowed payments in certain old and re-opened claims to be made out of a special fund known as the Fund for Reopened Cases. Cuomo said his reforms close this fund, eliminating the need for New York businesses to make payments into a fund that is unnecessary. The governor said his reforms also include a series of measures to increase competitiveness in the workers’ comp marketplace. He said these changes will reduce annual workers’ comp assessments on New York businesses by $300 million.
He also said that providing a path to resolution for companies involved in the Group Self Insurance Trust crisis will provide relief for 10,000 businesses across New York, who are currently saddled with an estimated $850 million in liabilities.
Some industry participants, however, are expressing concerns about certain aspects of the reform package.
Julia Stenberg, an assistant vice president at CNA, said recently that closing the reopened case fund could create a reserve deficiency among New York comp writers.
Under Cuomo’s plan, the reopened case fund would close on Jan. 1, 2014. Insurers would remain responsible for any reopened claims. The closing creates an actuarial issue, Stenberg said. Because these reopened claims were handled by the New York Compensation Insurance Rating Board (NYCIRB), the losses aren’t included in an insurer’s claims experience. To handle pricing, data collected by the NYCIRB will be available to rating bureaus, so rates can be properly adjusted. But insurers won’t have that information, so their loss estimates will likely be understated. Stenberg estimated the deficiency to be between $1 billion and $2 billion.