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Trends in N.Y. Point to Increased Costs and Litigation

Tuesday, September 4, 2012 | 0

As the Workers’ Compensation Policy Institute prepares its second annual comparison of workers’ compensation premium assessments, I cannot help noting the contradiction between the recent moratorium placed on manual rates and the ominous trends indicating that costs in New York are still rising.

The recent report by the National Academy of Social Insurance (NASI) contradicts the notion that costs in New York State are stabilizing.  This report is a comprehensive study of compensation costs among all 50 states and according to the study; costs in New York are trending higher than in other states.   Key findings include:[i]

  • Overall costs nationwide were down 2.1%
  • Benefits paid nationwide decreased by 0.7%
  • New York’s overall costs increased by 4.5% as a percentage of payroll
  • New York’s benefit payments increased by 11.5%
  • The portion of employers’ compensation costs that is not used to pay benefits is 30% higher than the national average.

The data published by NASI does not indicate that costs in New York are stabilizing. If costs in New York are to be stabilized, there must be meaningful reform to a system that continues to produce higher than average administrative costs.   Last year the Workers’ Compensation Policy Institute issued a report which found that New York’s tax on employers to fund the compensation system is five times the national average. The Institute’s preliminary research on this topic for 2012 seems to indicate that this situation has not changed despite a 6% reduction in the assessment tax.

Consider the following data from the 2011 Annual Report issued by the New York Workers’ Compensation Board (WCB):[ii]

  • The WCB assembled 123,245 new claims in 2011.
  • 227,030 claims were reopened in 2011 because of newly arising issues after the Board had determined that no further action was needed.
  • 329,319 claims were resolved informally.   The Workers’ Compensation Board defines an informal resolution as one which “…memorializes certain events in a claim that require a WCB decision or to propose a decision when there is no significant dispute between the parties.”
  • 266,046 formal hearings were held.
  • The number of claims needing further administrative action by the WCB increased from 85,286 to 99,995.  This is an increase of 17.2%

When seen in the context of Michael Whiteley’s recent special report in WorkCompCentral[iii] which describes a dysfunctional and inefficient system at best, it is hard to imagine that costs are stabilizing.

Advocates for reform would do well to consider the following:

  • How necessary are the 329,000 “informal resolutions” conducted by the New York Compensation Board?   What is the cost of so many reviews to the state, to the payers, and to employers?
  • Can anything be done to streamline the number of reopened claims and the number of hearings held annually?
  • Is the increase in the number of claims awaiting resolution the beginning of a trend towards more litigation and delays within the system?

Footnotes

i] See Workers’ Compensation: Benefits, Coverage and Costs 2010

[ii] See 2011 Annual Report Workers’ Compensation Board.

[iii] See Special Report: State Comp System Still Busy Big and Embattled. 

<i>Paul Jahn is executive director of the New York Workers' Compensation Policy Institute, the research affiliate of the Public Employer Risk Management Association (PERMA). This column was reprinted with his permission from the institute's Compensation Chronicles blog.</i>

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