Employers and Labor Debate Impact of 2007 New York Reforms: Employers Advocate New Initiatives While Workers Claim Success

Employers and Labor Debate Impact of 2007 New York Reforms: Employers Advocate New Initiatives While Workers Claim Success

By John Stahl, Esq.

Two analyses regarding the effectiveness of the 2007 Workers’ Compensation Reform Law (Reforms) in New York State provide a textbook example of how identical statistics can support totally conflicting results. One undisputed conclusion is that the voices of New York employers were adequately loud regarding workers’ compensation costs to enact the Reforms.

The answer of the Public Policy Institute of New York State, Inc., (PPI) to whether those employers are better off today than they were when the Reforms were enacted five years ago is no. PPI, which is associated with the Business Council of New York State, concludes that the situation is now worse regarding several workers’ compensation components.

Conversely, the New York Workers’ Compensation Alliance (Alliance) states in a press release regarding a recently issued 95-page white paper that “workers’ compensation costs in New York State have declined dramatically in the past two decades and that workers’ compensation is also a declining portion of overall employer costs.” The Alliance described itself as “a coalition of injured workers and those committed to protecting the rights of injured workers.”

The scope of this article’s exam of these competing views is limited to overviews of the Alliance’s white paper and an October 2012 PPI report entitled “Revisiting the Reforms.”

Alliance’s General Conclusions

In contrast to PPI’s findings, the Alliance determines that the Reforms, “combined with other administrative and regulatory initiatives, reduced worker access to benefits while also reducing claim costs.” The Alliance’s press release states as well that workers’ compensation costs “have actually declined by a full 30 percent during the past 18 years.”

Another reported finding from the Alliance is that workers’ compensation costs in New York are comparable to those in similarly situated states, which include New Jersey and California. One advocated solution to further reduce New York rates is requiring that workers’ compensation insurers “be transparent and verify the projected costs that they use to justify rate increases.” This relates to Alliance chair Robert Grey asserting that “any increased costs in the system have come from excess insurer profit.”

Broader findings from the white paper include:

  • “Workers’ compensation costs in New York were declining prior to the 2007 reform legislation”
  • Current workers’ compensation costs are lower than the 2007 amounts
  • “The reforms have been fully implemented without increasing costs”

Alliance Perspectives on Overall Costs and Assessments

Without challenging PPI’s observations provided below regarding the 2012 Oregon Workers’ Compensation Premium Rate Ranking determining that New York has the fifth highest workers’ compensation costs in the United States, the Alliance provides the perspective “that New York’s workers’ compensation costs are lower than the cost of living and [the] cost of doing business in the state.” The Alliance further states that the statistics are consistent with those from states in the same region as New York.

The white paper does challenge the accuracy of the Oregon statistics based on that data reflecting “the ‘high water’ mark of costs in New York, which have already begun to decline comparative to other states based on actions that have already been taken, but are not reflected in the Oregon report.” In other words, the Alliance finds that the Oregon ranking is not based on the most recent statistics from New York.

The Alliance further offers thoughts on the 18.8-percent workers’ compensation assessment that PPI cites as an example of New York’s high workers’ compensation costs. The Alliance views that assessment as a means of reducing how much the taxpayers must pay regarding the New York workers’ compensation system.

It is additionally noted that “eighty percent of assessments are returned to employers and insurers through reimbursement from the Second Injury and Reopened Case Funds” and that the Reforms closing the Second Injury Fund ultimately will reduce the amount of the assessments.

PPI Finds Reforms Have Not Met Potential: Better Implementation and New Efforts Required on Five-Year Anniversary of Reform Law Act

PPI’s report states at the outset that the Reforms’ objectives include achieving the basic workers’ compensation principle of balancing “increased benefits to injured workers with policy and administrative reforms that provide premium reductions for employers.”

In other words, the Reforms strive to provide workers’ compensation claimants the “reasonable and necessary” treatment to which they are entitled while properly managing the associated costs.

The impetus for the report includes business community concerns that the state government has not timely implemented the Reforms and that employers have not enjoyed the intended “tangible cost savings.” PPI further observes that “the only post-reform years to show any cost savings to employers have been those in which the loss cost rate was established in spite of actuarial findings.”

The report asserts as well that the estimated $6 billion current cost of the workers’ compensation system is approximately the same as the pre-Reforms amount. One element of this expense is the aforementioned 18.8-percent assessment that the state imposes on premiums to fund system costs; PPI states that that assessment is nearly five times higher than the average rate of 3.8-percent in other states.

Analyzing the post-Reforms era shows as well that the average New York workers’ compensation claim cost $27,533 when the Reforms were enacted and that an estimate of that cost for 2013 is $50,000. The related research from Oregon that the Alliance puts into perspective regarding other costs of living in New York concludes that the workers’ compensation premium rates in New York are the fifth highest in the United States.

PPI Identified Primary Obstacles to Real Reform

Another specific goal of the Reforms that the report discusses is capping non-schedule permanent partial disability (PPD) payments. PPI determines that disincentives regarding establishing classifications of claims that further that objective have hindered that effort.

A specific identified issue is anticipated reluctance by workers’ compensation claimants and their attorneys “to begin a countdown to durational caps on indemnity payments.” Further, the intended classification requires that workers’ compensation insurers deposit a permanent partial disability’s present value into the state’s Aggregate Trust Fund (ATF).

PPI observes as well that the maximum weekly benefit (MWB) in New York has almost doubled in the five years since the Reforms were enacted. As an aside, the Alliance’s white paper minimizes the impact of that increase based on that conclusion that that benefit is not widely utilized.

PPI Recommendations

PPI states that identifying the challenges described above, and numerous other reasons that the Reforms have not reduced workers’ compensation costs, provides an opportunity for solutions. The first of copious suggestions is improving the schedule loss-of-use rating system by “updating the applicable medical treatment guidelines to more accurately reflect the severity of an injury with respect to its effect on a claimant’s ability to perform necessary job duties, recovery time and amount of permanent disability.” Another advantage of that reform is workers’ compensation awards that more effectively measure the extent of the compensable harm.

PPI further advocates looking at region-wide average weekly wages when establishing the MWB for workers’ compensation benefits. Another suggested method for reducing lost-wage benefits is removing unintended disincentives for claimants to return to work.

The report states specifically that “the anticipated major cost-savings provision of the 2007 reform was the cap on the maximum number of weeks the [non-schedule permanent partial disability] PPD-NSL claimants are able to receive indemnity payments.” The Reforms also provide for granting an exemption on the wage-loss benefits caps if a PPD is determined to be at least 80 percent.

Similarly, PPI advocates that New York no longer require that commercial carriers deposit the present value of a PPD into the ATF. A related suggestion is opposing legislation that attempts to undo some of the Reforms’ provisions.

The report concludes even more definitively that “[medical] practitioners interviewed by PPI touted the use of evidence-based medicine in guidelines as a means to both provide quality care to patients and deter excessive or ineffective treatment.” This essentially involves referring to the relevant instruction manual to determine which procedure or other care that the relevant compensable harm requires.

A cited example of the benefits of guidelines is an orthopedist prescribing a claimant Oxycontin that greatly exceeded the applicable guidelines regarding dosage and duration. That prescription cost the liable workers’ compensation insurer between $4,000 and $5,000 monthly. PPI declares that similar waste exists regarding other common prescription painkillers.

Another recommendation regarding prescription drugs is removing legislative barriers that prevent self-insured employers from participating in pharmaceutical networks. These networks can “contract for prices below the pharmaceutical fee schedule.”

PPI: Special Concern Regarding Schedule Loss-of-Use Awards

PPI additionally discusses issues related to schedule loss-of-use (SLU) awards. The report comments that many claimants receive that benefit despite that, “given today’s medical treatment procedures,” some SLUs “result in little permanent loss of use or work time.”

The institute concludes as well that statistics reveal “a steady and significant upward trend in SLU awards.” The cited average value of such an award was $21,231 in 2006 and rose to $27,695 in 2009.

One proposed solution from PPI is that workers’ compensation SLU guidelines reflect medical advances. A more general related suggestion is that the guidelines provide for accurately reflecting the extent of a loss of function.

View From the Sidelines

Both the Alliance and PPI assert statistically supported positions. It is equally true that their competing interests regarding workers’ compensation issues impact which statistics that they offer and how they present them. As it true in most such cases, the actual “truth” likely falls somewhere in the middle.

© Copyright 2012 LexisNexis. All rights reserved.

____________________________

Larson's Workers' Compensation Law, the nation's leading authority on workers' compensation law.

Larson’s Workers’ Compensation Law

For more information about LexisNexis products and solutions connect with us through our corporate site.