New York workers compensation insurers should find out today whether they will be allowed to raise rates beginning in October.
By law, the New York Insurance Department must issue a decision on rates by July 15. The industry has asked for an average 29.3 percent increase.
Last year the NYSID approved a 1.7 percent increase after the industry had requested an 11 percent raise. Since 1995, rates have been cut more than 35 percent.
Industry officials have cautioned that if no rate increase is granted, some private carriers will likely restrict writings in the state.
The department held its third and final hearing yesterday on the latest filing from the New York Compensation Insurance Rating Board (NYCIRB).
At public hearings surrounding the filing, Monte Almer, president of NYCIRB, and others made the case for the industry, citing insurer losses, the rising cost of medical claims and prescription drugs, the failure of managed care to lower costs for caring for injured workers, and increased terrorism exposure among other factors.
Most witnesses expressed regret that state lawmakers have failed to act on reforms proposed by Gov. George Pataki and others to control rising costs.
“If the legislature had acted favorably on the Governor’s proposals, we probably wouldn’t be having this hearing,” Bernard Bourdeau, president, New York Insurance Association, told department officials.
According to the industry, actual losses make up the bulk of the requested increase (27%) while anticipated trends account for only a fraction (2%).
Industry statistics indicate that in the same years that rates have been cut more than 35 percent, the combined loss ratio for all workers compensation writers in the state has gone up and down: 110 in 1995; 123 in 1996; back down to 110 in 1998; up to 122 in 199; way up to almost 170 in 2001; and back down to 112 in 2003.
According to NYIA’s Bourdeau, to call the rate request “staggering is an understatement” but it must happen if the state wishes to maintain a competitive private workers compensation system.
“Actuaries may quibble about trends but it’s hard to argue over actual loss experience,” Bourdeau testified.
Bourdeau estimated that if the full 11 percent had been granted last year, this filing would be about 18 percent.
“I’m not here to tell you it’s pretty. I am here to tell you it’s accurate.”
Failure of the department to approve an increase in line with loss costs “will cause private sector compensation companies to reduce or eliminate their risk exposures in New York,” Bourdeau warned.
Warren Heck, chairman and chief executive officer of Greater New York Mutual Insurance Company, which has reduced its own workers compensation writing to 15 percent of its business, down from more than 50 percent several years ago, termed the proposed rate hike “essential for the health and well-being” of the state economy and protection of workers.
“Rising claim costs and rampant medical inflation are placing a crippling burden on the New York business community, and have strained the ability of insurance companies operating in New York State to meet the demand for workers’ compensation insurance,” Heck said.
Employer groups were not so quick to endorse an increase, citing the impact on businesses and the economy, but agreed with industry leaders that the real need is for system reform.
The Business Council of New York State did not come right out and oppose the 29.3 percent increase but told state regulators costs are already too high.
“New York’s costs of workers’ compensation are high—72 percent above the national average on a costs-per-case basis,” said Kerry Kirwan, The Council’s legislative analyst. “There are specific reasons these costs are high, and it is time for them to be fixed.
“Until we reform the system itself by easing the fiscal burden on the employers of the state, we will find ourselves here year after year addressing the issue of the rates,” she said. “We must not let this opportunity to fix the system slip through our hands.”
Jean Kase, vice president of government and public affairs at the Rochester Business Alliance, represented Advance Upstate New York (AUNY), a coalition formed in 1999 by the leaders of the Buffalo-Niagara Partnership, the Rochester Business Alliance and the Syracuse Metropolitan Development Association.
She said her group opposes the 29.3 percent rate increase “because of the negative effect it will have on employers.” Kase maintained that the state’s workers compensation system is “already a tremendous burden on business and this excessive rate increase will only add to the growing expense of providing jobs for New Yorkers.”
Until meaningful reform is achieved, her group will oppose any increase, Kase told the department.
“Not to be flip, but I never thought Advance Upstate would suggest the New York State Legislature take its lead from California in addressing workers’ compensation reform,” Kase said in arguing that the current system is not working for employers, employees or insurers. “Trial attorneys are the only party benefiting from the gridlock on comp reform in Albany,” she said.
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