N.Y. Gov.: New Workers’ Comp Legislation Will Offer Relief to Businesses

January 11, 2013

New York State Gov. Andrew Cuomo said this week his administration plans to introduce new legislation to continue to improve the workers’ compensation system and provide relief to thousands of businesses.

N.Y. Gov. Cuomo speaking at the 2013 State of the State address. Photo: Office of the Governor
The new proposals were included in the governor’s State of the State report, published Wednesday, Jan. 9.

Gov. Cuomo plans to introduce new legislation with following goals in mind: provide savings to New York State’s employers; eliminate unnecessary friction in the system; alleviate and resolve the burden facing employers who are members of an insolvent Group Self-Insurance Trust (“GSIT”); simplify and reduce assessments on employers; promote system-wide transparency, efficiency, equity, and consistency; and create more competition in the insurance marketplace.

The report said that within the first year of his administration, Gov. Cuomo fully implemented the legislative workers’ compensation reforms passed in 2007, increased administrative efficiency, and improved medical care to injured workers.

However, the report noted that significant improvements to the New York State workers’ compensation system are still needed to restore New York as a national model.

The following are the main proposals described in the governor’s report this week:

• Resolve Employer Group Self-Insurance Trust Liability

The report noted that starting in 2006, because of the negligence of many involved in the group trust business, a large number of group self-insurance trusts (“GSIT”) began to default. Statutory changes in 2008 enhanced the Workers’ Compensation Board’s ability to pursue action against responsible parties.

The 2011 executive budget effectively capped the potential for future defaults by closing the group self-insurance trust program to all but the healthiest GSITs, according to the report. However, the defaulted trusts (and, as a result, the state) are still saddled with significant liabilities.

The report said a system-wide solution is required to minimize the potential costs of doing business in New York currently faced by healthy self-insurers, and to provide the 10,000 businesses that are affected by GSIT insolvencies with repayment mechanisms that feature easily attainable repayment options resulting in final releases.

Under the proposal, a bonding program would be implemented to address these issues. The bond sale’s proceeds would go to purchase assumption of liability policies for claims associated with defaulted GSITs. The state can then offer much more flexible repayment plans that will ultimately result in settlement and release for insolvent GSIT members.

The proposal would enable 10,000 businesses to reasonably settle their existing claim liabilities with the state and simultaneously protect future benefits of injured workers.

• A Pass-Through Assessment

Gov. Cuomo also plans to makes workers’ compensation assessments more equitable and transparent, and help produce a more efficient marketplace. The report noted that over the life of the workers’ compensation system, separate assessments have been established and annually charged to New York businesses to fund a variety of expenses. These various assessments are billed separately by the state. The report said these separate assessments created an overly complicated process to fund the workers’ compensation system. Additionally, the report said, what a particular business pays in assessments differs depending on how a business chooses to insure its workers.

The report said the existing assessment process places a disproportionate burden on long-term self-insurers and does not permit employers to easily change coverage types. Gov. Cuomo will seek to combine all of the workers’ compensation assessments into one assessment and create a single process for calculating assessments irrespective of how an employer maintains workers’ compensation coverage.

The new assessment would be calculated based on the overall anticipated yearly expenses of the workers’ compensation system and will be assessed upon all employers based on an equitable and transparent formula. The calculation of a single assessment rate would be more efficient for the state to administer and would lessen the carriers’ administrative burden of assessment collection and payment, according to the report.

• Reducing Costs for Stakeholders by Closing Unnecessary Funds

The governor is also seeking to reduces costs for New York businesses by closing unnecessary funds. For example, the legislation would close the fund for reopened cases to generate an immediate annual assessment savings to New York State employers of approximately $300 million, according to the report. The proposal is part of Gov. Cuomo’s long-term plan to improve the workers’ compensation system in New York State, by allowing greater transparency, equity and security to all stakeholders without infringing upon the rights of injured workers.

Gov. Cuomo’s plan was given a positive reception by industry associations. “NAMIC applauds Gov. Andrew Cuomo’s on-going commitment to improving New York’s workers’ compensation system. NAMIC supports many of the workers’ compensation reforms outlined in the governor’s State of the State address,” said John Murphy, state affairs manager at National Association of Mutual Insurance Companies.

“We look forward to reviewing the proposed legislation and working with the governor and Legislature to enhance and strengthen the system.”

Kristina Baldwin, assistant vice president state government relations for the Property Casualty Insurers Association of America (PCI), stated: “PCI applauds Gov. Cuomo for making workers compensation reform a priority. Gov. Cuomo has shown, both through ensuring the full implementation of the 2007 workers compensation reforms and through his continuing efforts to ensure that workers compensation works both for the employer and the worker that he clearly ‘gets it’, that bringing down workers compensation costs is critical to bringing jobs to New York and continuing New York’s economic recovery.”

“PCI looks forward to continuing to work with Governor Cuomo to contain workers compensation costs for businesses and continue to increase jobs in New York.”

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