New York has approved a 9.3 percent average hike in workers’ compensation loss costs.
The new benchmarks will go into effect Oct. 1.
New York businesses, while not pleased, see the hike as necessary in order to keep the insurance market stable after the state hiked benefits in 2007, according to a leading business group’s representative.
The New York State Department of Financial Services (NYDFS) approved the recommendations by the industry’s New York Compensation Insurance Rating Board (NYCIRB).
The hike reflects a continued rise in the cost of claims, according to the industry’s filing. While claim frequency is mostly stable, indemnity costs are rising at an annual rate of about 5.3 percent and medical costs at about 5.1 percent.
Last year the state approved an average 5.9 percent increase in loss costs.
The increase reflects planned increases in the maximum weekly benefit. Under a schedule approved by lawmakers in 2007, the maximum weekly benefit of $864 as of July 1, 2016 will rise to $886 on July 1, 2017 and $922 on July 1, 2018. These increases in the maximum weekly benefit account for about a 0.5 percent increase in total workers’ compensation claim costs, according to the industry.
The Business Council of New York State accepted the news as a cost of doing business while urging lawmakers to enact reforms to address the factors driving up costs.
“It is unfortunate, but this number reflects the true costs of New York’s workers’ compensation system and is a necessary correction in order to keep the insurance market stable for employers,” said Lev Ginsburg, director of government affairs for BCNYS, in an emailed statement.
But Ginsburg said the state needs to act to offset the effects of changes made in 2007.
“New York’s system is deeply troubled and with this decision, the Department of Financial Services is acknowledging the reality that this system is vastly more expensive than before the 2007 reforms. The more than doubling of maximum benefits, indexed to the state’s average weekly wage, increases in medical costs, rapidly growing costs of scheduled loss of use awards, extensive litigation and excessive fees paid to claimant attorneys are pushing the system to its limits. Serious reform is the only way to ensure lower comp costs into the future,” Ginsburg said.
According to NYCIRB, data actually supported a loss cost level increase of 9.6 percent across all classifications but it proposed the 9.3 percent increase after considering no change in the loss cost provisions for terrorism, natural disasters and catastrophic industrial accidents.
Workers’ compensation insurers add their own expense and profit factors to the approved loss costs to generate rates.
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