ALBANY, N.Y., March 16 – A 25 percent increase in the maximum workers compensation benefit from $400 to $500 a week, the first benefit increase in more than a decade, proposed in legislation by Governor George Pataki, was one of a number of reforms reviewed by insurance, business, and labor officials at a Senate Majority Roundtable on workers compensation.

The roundtable, chaired by Senator George D. Maziazi (R/C Monroe), Chairman of the Senate Labor committee, explored financial inequities facing businesses and injured workers, and discussed the systems administrative costs, high insurance costs for businesses and low payments to injured workers, the role New York Compensation Insurance Rating Board plays in formulating rates, potential improvements to the Compulsory Workplace and Loss Prevention Program, and expensive permanent partial disability payments.

Richard A. Bell, executive director of the New York State Workers Compensation Board, said that all the parties getting together under legislation proposed by the Governor in 1996 was arguably the biggest reform made in the workers compensation system since its inception in 1914. So perhaps, 10 years later, here we are in 2006 and perhaps the same kind of impetus can be used to reach some sort of consensus.

Legislation proposed by the Governor this year calls for increased access to pharmaceuticals, and increasing the threshold for which pre-authorization for health care must be granted, Bell told the participants. By coordinating the duration of benefits with the intensity of the injury for situations that are not currently scheduled; by enacting a pharmaceutical fee schedule and by employing a form of objective medical guidelines, the Governor anticipated a 15 percent decrease in costs to the system. Currently 37 states engage a ceiling for workers compensation benefits for partially disabled workers while 30 states use a form of objective medical guidelines.

Helping Workers and Businesses

Paul Magaril, legislative counsel for the New York State Insurance Fund, indicated the Governors legislation addresses the need of the injured workers by increasing their benefits for the first time in many years, and it also doubles the disability benefits, weekly disability benefits, for off-the-job injuries.

It also helps businesses, and it does this at a time when its also very important for us to keep in mind the needs of the business community and the need for jobs for all New Yorkers. And so while this bill increases benefits by 25 percent, looked at as a whole with the reforms in the bill, it ends up reducing costs for business in New York by 15 percent.

This is absolutely critical that the Governors bill address both ends of the spectrum, that we provide workers with greater benefits than they currently enjoy, and we do it in a way that ensures the competitiveness of New York companies.

Insurers Not Profiting Greatly

Magaril also challenged assertions that large profit margins by private carriers are main contributors to the states workers compensation woes. He pointed to data provided by the NAIC which shows that, of the 14 lines of insurance that the NAIC reviewed in the state, workers compensation ranked 11th in profitability. The underwriting profit is a negative 13.3 percent in New York, Magaril said, adding that the loss ratio by the private carriers in the state is 10 percent higher than the national average. Underwriting profit among private carriers, he added, is 34th highest in the country.

Clearly the problem here is not the profit by our competitors, Magaril declared. Attempting to define the problem, he said that there are a myriad number of problems that are affecting the system, and the Governors bill, which runs to many sections, attempts to address all of these.

Magaril cited the proposal to increase weekly compensation benefits, the proposal to increase weekly disability benefits, and the provision regarding permanent partial disabilities (PPD) as the key points to Patakis proposal.

High Costs, Low Benefits

Daniel B. Walsh, president of the Business Council of New York State, Inc, told the other participants, We know what is wrong with New Yorks workers compensation system. It sticks employers with crushing costs but provides injured workers only relatively modest benefits. Both parties suffer. And so does New York. It doesnt have to be this way. Strategic reforms to our workers compensation system can benefit New Yorks employers, workers and the economy all at once.

It ought not to be business versus labor, he continued. It ought to be taking as a starting point Patakis bill. I dont want to call it a no-brainer because it does involve some intelligent legislative decisions, Walsh said. [Many feel that] therere a lot of things around here that are a lot more important than resolving workers compensation, because we dont think workers compensation is that complicated. We think, if a worker gets hurt, a worker ought to be compensated for it, the worker ought to get back to work as soon as he can. I think the worker who is injured would agree that it ought not be a system that pays a lifetime benefit.

Walsh concluded that Patakis plan gets the gaming out of the system, and creates predictability, and that is what the entire program is supposed to do: get gaming out. Dont question the insurance companies, because youre always going to have the arguments between [the department] the rating board, the actuaries who write, and everybody falls asleep and wakes up five months later and we still have the problem. So take the Governors bill and use it as a starting point, cost it out, start with the cost of the system as you have it right now and dont go above that number.

Equal Third Party a Problem

Denis Hughes, president of the New York State AFL-CIO, while acknowledging the system needs change, said whats more important is how we can all help fix it together. When the system was established 100 years ago employers wanted some predictability for their businesses and injured workers wanted justice. Injured workers were promised that they would have a fair, adequate, fast and simple system to navigate. Well, almost a century later, were both unhappy.

The problem today, he added, business and labor have an equal third party: the insurance industry. How is it, he asked, that the insurance industry has come between the people business represents and the people I represent? He further asked, How has the insurance industry become an equal third party in this system? And more, how are they the only entity making a profit and reaping a benefit within the system?

Hughes declared that one thing that is very important based on the politics and the complication of this as it all goes down, people havent had a benefit increase in 14 years. We have to have a mechanism that is able to move this system with the amount of money that people actually make.

On the permanent partial disability piece, said Hughes, thats something thats very important to an injured worker because youre talking about your ability to work in your trade, your industry, as a result of the injuries that came.

What we want to do is find out where the money is in the system and go forward, Hughes said. Walsh said we shouldnt blame the insurance companies. We just want information from the insurance companies so that we could collectively negotiate and move forward. Its like any negotiation youre in.

Board, Department Define Their Roles

Monte Almer, president of the New York Compensation Insurance Rating Board, outlined the role of the board in the collection of data and the development of workers compensation insurance rates. The board develops rates by job classification and currently has over 600 classes of business within the state which maintains its own rate; employs a team of auditors who make sure, by examining the books and records of each employer, what carriers are charging, and that employers are paying the proper insurance premiums; enforces fines if carriers do not comply with rules for accuracy and completeness, and administers the New York Safety Compliance Notification Program.

According to Almer, the board performs a myriad of other insurance related functions including the handling of policyholder, broker and carrier inquiries regarding workers compensation rates and classifications, and provides a forum for any aggrieved employers to have their grievances heard at public hearings.

Peter Molinaro, senior deputy superintendent for Superintendent Howard Mills, said, Our current role is one of the financial oversight role. It is the obligation of the department to make sure of the solvency of all the workers comp carriers that work in the system. We take that obligation very seriously. However, we also have an obligation to all the businesses in New York State to make sure that [insurers] charge a fair price for workers compensation insurance. That is why the law provides that rates are approved by the Superintendent of Insurance each year.

The system as it currently works depends on filing with the Insurance Compensation Rating Board, Molinaro continued. That filing is a very thick, complex document full of actuary formulas, essentially compiling all of the sort of cost information, income information that the industry has filed collectively with the Compensation Rating Board in the prior year. Ive worked on these filings for the past four years.

The board has come to us with a good heart and very professionally and made a case for their increases, said Molinaro. The Insurance Department has significantly disagreed with the board over the last four years. One request that was rejected was for as much as 29 percent, but not granted in that time frame. We carefully analyze the findings. The department is well-staffed with qualified actuaries.

Our job seems to become more difficult each year as the volume of information we get from the industry conflicts with the outside. National Association of Insurance Commissioners keeps its own information. New Yorks profitability margin has significantly differed since 2004. We have to make sure companies have sufficient capital so were here to hear just what they need to be treated fairly and get the best possible price, especially with the 1996 reform, Molinaro concluded.