Perspectives | Workers Compensation Reform in New York State

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New York Workers Compensation Crisis: How Do We Fix This Mess?

Douglas H. Hartman, ARM

January 19, 2006 - New York City. Monthly breakfast meeting of the New York Chapter of the Risk and Insurance Management Society. Moderator: Diane Askwyth, Senior Director of Risk Management & Insurance, Schering-Plough Corporation.

This was a pep talk given by Joseph Edwards urging risk managers and other guests assembled to to get involved in the political process to reform the New York workers compensation system. New York's $16,000 average workers comp claim cost is much higher than its neighbors. More dangerous,he said, is the New York Insurance Department's failure to grant insurance companies the rate increases that insurance executives and their actuaries think they need. In response, insurance companies are likely to cut back on writing workers compensation insurance in New York State -- and this may prompt employers to leave the state. This will be a political mess unless the legislature changes the law and the Insurance Department approves higher rates.

Mr. Edwards, who said that he led similar successful reform initiatives in Maine and California, told us the easiest way to get involved is for Risk Managers to get their CEOs or CFOs to write checks payable to the New York Workers' Compensation Action Network, "NY CAN." Otherwise, he warned, "Silver, Bruno and Pataki will tell the legislature what is going to happen." Until reformers can "stack their caucus," there will be no committees, no hearings and no democratic process.

"New York is the most process-driven system in the U.S.," he declared. New York has too many claimants receiving benefits -- and for longer disability periods. Too many claims are being litigated. "I've never seen a lawyer get paid without a client," he quipped. As a result,lifetime awards for permanent partial disabilities average more than $86,000, much higher than in other states.

 

 

We thought Mr. Edwards presented a spirited call to arms. However, we wondered how many risk managers he had enlisted. Our guess is that most of the risk managers assembled -- most who work for some of New York State's largest employers -- have already armed themselves with choices of carriers and programs, such as high deductibles and self-insurance. Some of our clients have already innauculated themselves against a possible crisis. For example, we helped an operator of school buses join with other operators to form a group self-insurance fund.

This is not to suggest that we disagree with the idea that employers and insurance companies join political forces. Thanks to a more employer-friendly comp law, California Senate Bill 899, one of our clients has been able to dramatically reduce the number of accidents that become litigated claims. We are reminded, too, of our Perspectives article published two years ago concerning Texas House Bill 2600, which is greatly benefiting another one of our clients.

For more information about NY CAN, visit NY CAN. Also, consider using us to prepare an assessment of your situation and help you formulate a strategy to carry you through any messes that you may encounter.