Cautious optimism is the prevailing mood among industry members and observers with regards to the workers compensation reform bill that was approved by both houses of the New York State Legislature on March 6.

Is it going to save as much money [as lawmakers predict] for the system and employers who end up paying the bill? Its hard to tell, said Les Boden, an economist with the Boston University School of Public Health who studies workers compensation.

Governor Eliot Spitzer predicted that the bill, which reflects an agreement that he reached with Assembly Speaker Sheldon Silver and Senate Majority Leader Joe Bruno on February 27, would save employers 10 to 15 percent over time.

The bill includes a number of proposals, including raising the current $40 minimum weekly benefit to $100 immediately and increasing the maximum weekly benefit to $550 during its first year and then gradually increasing that level until the fourth year, when it will be indexed to two-thirds the average weekly wage. New Yorks weekly benefit maximum of $400 has not increased since 1992 and comes in just above the federal poverty level of $372 per week for a family of four. Currently there are only two states with lower weekly benefit maximums: Mississippi and Arizona.

The agreement also calls for capping the amount of time that injured workers can collect permanent partial disability (PPD) benefits to 225 weeks to 525 weeks, depending on the injured workers wage-earning capacity. The bill also calls for increased assistance and return to work programs for workers with at least 80 percent partial disability. The original agreement reached late last month by Spitzer and Legislature leaders called for an option to apply for extensions beyond the cap for such workers.

Other major provisions of the bill call for increasing the penalties for payroll-related fraud. Failure to secure coverage for five or more employees in a year would carry a three to four year sentence. A second conviction would carry a three to seven year sentence. The bill also extends the definition of failure to obtain coverage to include intentionally misrepresenting or concealing relevant payroll data and specifies what records employers will be required to keep and the criminal penalties they would face it they failed to do so. The bill also would give the Workers Compensation Board investigative powers, such as the authority to issue subpoenas, to weed out dishonest employers.

The bill also calls for the elimination of the second injury fund and a review of the Compensation Insurance Rating Board (CIRB) by the superintendent of insurance to determine what the future of the board will be.

At the time of this writing, it was not clear how exactly the predicted 10 to 15 percent cost reduction to employers would be reached, but a significant portion of that savings would likely be from the new PPD limits. Boden said he is concerned that the most vulnerable workers, those who are poor and significantly disabled, would bear the brunt of reducing employer costs.

It would be like having homeowners insurance that, if the living room is destroyed, you receive payments, but if the whole house is destroyed, they only pay you for the living room, Boden said. But for those workers who would see their weekly benefits increase and those employers who would see their premiums decrease after fraud is reduced, Boden said the proposals sound promising.

And Dick Poppa, president and CEO of the Independent Insurance Agents and Brokers of New York, agreed that the initial overview of the proposals appears to address some of the major problems with workers compensation.

He said he believes eliminating the second injury fund will be a good approach to reforming workers compensation. He also said that if reviewing the CIRB led to the development of a more effective and timely system for data collection, then IIABNY would support it.

One insurance industry executive, who requested not to be named, said several of the major provisions of the proposals sounded positive. These include increasing the weekly maximum and minimum benefit levels and stepping up antifraud measures. He also said that increasing return to work programs was a good objective.

But he also opposed eliminating the second injury fund. He said that carriers currently include the fund in their rate calculations and might have to change their rate structure if it were eliminated. It all has to add up to 100 percent, he said. If you eliminate the second injury fund, you have to adjust rates upward to account for that.

The bill is expected to be signed into law by Spitzer this week.