Reform Has Some Flaws That Need Repair

Saturday, August 25, 2007 | 0

By Brad Walters

As many people are now aware, Gov. Eliot Spitzer recently signed into law a comprehensive Workers' Compensation Law that will overhaul the antiquated system that exists in New York state. Let me be the first to applaud the governor and Legislature for taking a big, positive step toward helping the New York state economy remain competitive.

The new law contains a number of potential cost savings such as a cap on the length of permanent partial disabilities of four to 10 years, the elimination of the second injury fund, a pharmaceutical fee schedule, plus a much- needed boost in weekly benefits for injured workers, which were previously among the lowest in the nation.

Overall, the bill has been promoted as offering a 10% to 15% reduction in premiums for employers. While there are clearly some items in the new law to celebrate, there are some bad aspects to it as well.

As of 2010, benefit levels will be set at two-thirds the average weekly wage. Right now the statewide weekly wage is hovering around $1,200, meaning that in 2010, weekly benefit levels will top $800. After 2010, the benefit level will be indexed annually to reflect the new average weekly wage across the state. A big disadvantage to indexing is the loss of a bargaining chip that can be used to get certain groups back to the negotiating table in the future.

The new Workers' Compensation Law also contains some potentially very ugly points that could lead to increases in workers' compensation premiums for employers. For starters, the new law contains no means for expediting claims. It currently takes more than 200 days on average for a claim to be settled, with many controverted claims taking upwards of four years to be concluded.

Under the new law, injured workers will collect benefits and medical treatment during the claim process. However, on permanent partial disability cases that are supposed to be capped at four to 10 years, this initial period of payment is not factored into the cap. This means that a cap of 10 years could potentially be lengthened to 14 years in some instances.

The lack of a formula for determining wage-earning loss capacity is also frightening. At the end of a determined permanent partial disability period, the worker can file for an extension based on the loss of wage-earning capacity. Without a definitive method for determining how much an injury has diminished a worker's capacity to earn, the bill will create another opportunity for expensive litigation and potentially negate the savings realized by capping permanent partial disability's in the first place.

The new law also lacks updated medical guidelines for classifying injuries and determining proper treatment protocol. New York state needs to adopt the American Medical Association (AMA) and American College of Occupational and Environmental Medicine (ACOEM) guidelines that will establish effective and efficient treatments for injured workers, allowing them to get the proper care that they need and deserve. Without these guidelines, lawmakers have left the door open for senseless litigation that will only prolong treatment and increase the cost of the system.

Finally, the creation of the Aggregate Trust Fund is something that most readers have probably not heard about. Traditionally, in the event of a permanent partial or total disability case, the insurance company involved would set aside $300,000 that would be used to pay out the benefits associated with that claim. This would be controlled by the insurance company, which could invest the money accordingly and use it as an asset. However, under the new system, this money will be immediately placed into a state-controlled fund, and in the event that the claim is settled for less than the $300,000, the state will keep any additional funds remaining.

New York state has taken a positive step with this new legislation, but now is not the time to rest on our laurels. Currently, three committees have been assembled with the hopes of making recommendations that will correct some of the flaws mentioned above. However, if these recommendations are ignored, the positive steps made in the past few months might soon do an about-face, costing employers more in insurance premiums and putting business in New York state at a disadvantage with the rest of the country.

Walters is executive director of Associated Building Contractors of the Triple Cities. This column first appeared in the Press and Sun-Bulletin newspaper located in Binghamton, N.Y.

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