The past month has been a very difficult time for pessimists and skeptics. The lucky ones have only had to eat their words. But others have been spotted at eateries everywhere, from modest diners to expensive restaurants, glumly chewing on their headgear.

What has cast such a pall over those whom Spiro Agnew " channeling William Safire " once called the nattering nabobs of negativism? Simply this: just before the Ides of March, the New York State Legislature passed, and Governor Eliot Spitzer signed, a workers compensation reform bill. And so far, no one is crying foul, and just about everyone involved is willing and eager to take credit.

Applause and Kudos

The actual passage of the legislation and its signing by the governor on March 13 were almost a let-down compared to the fanfare that accompanied the February 27 announcement that an agreement had been reached by Spitzer, legislators, and business and labor leaders.

This is a remarkable win-win situation for both workers and employers, Spitzer said, noting that the agreement resulted from the cooperation of legislative leaders and staff, and with constructive input from business and labor. Some legislators, who subsequently made good on their word to approve the new legislation almost immediately, were quick to agree with the governor " if also to claim that many of the measures originated from their respective chambers.

But others discarded their respective agendas entirely in expressing their enthusiasm. Assembly Republican Leader James Tedisco, for instance, took the occasion to say, Governor Spitzer deserves a lot of credit for bringing together disparate groups and leaders to agree on a truly significant workers compensation reform package.

State Senate Democratic Leader Malcolm A. Smith, too, lauded the consensus-building that underlies the reforms, saying, The fact that both the Business Council of New York and the AFL-CIO are supportive of the governors proposal speaks volumes about the merits of the agreement.

They were, indeed, supportive. Kenneth Adams, president of the council, called the agreement a major step toward reducing the cost of doing business in New York State.

And New York AFL-CIO president Dennis Hughes, better known in the past for resisting compromise, pronounced his organization immensely pleased with the agreement and deeply indebted to Governor Spitzer and the leaders for their dedication throughout this process.

The Insurance Industry Weighs In

Although many industry groups called the agreement historic, landmark, and a victory, their reactions tended to be measured. IIABNY chairperson Sharon Emek described the plan as bold and forward-thinking, but IIABNY legislative representative Michael Barrett tempered his enthusiasm at the announcement by noting that the legislation itself had yet to be finalized, passed, and released. Although the agreement echoes what we have fought for, he said, we look forward to first reviewing and then supporting the legislation.

The AIAs Gary Henning, assistant vice president, Northeast region, expressed similar caution, saying, We are pleased that the governor and legislative leaders have tackled this important issue, however the devil is always in the details. We need to carefully review this measure so we know exactly how the cost savings will be generated.

Such review will take time and effort: the bill is some 72 pages long; and not only is the devil in the details, the implications and effects of many of those details will only gradually become evident. PCI regional vice president Frank OBrien, while noting that the measure shows promise, said, As with any reform legislation of this magnitude, the long-term success of the change will be judged by the results it provides.

The Gist of Reform

At 15 pages, even the summary of the bill can hardly be called succinct (summary is available on the State Assembly website, www.assembly.state.ny.us/leg/?bn=A06163). But the fundamentals are outlined in a March 13 release from the governors office:

The maximum weekly benefit for injured workers will be increased from $400 to $500 in the first year, $550 in the second year, $600 in the third year, and to two-thirds of the average weekly wage in New York in the fourth year. Once the maximum benefit reaches two-thirds of the average weekly wage, the maximum benefit will be indexed annually;

The minimum weekly benefit will be increased from $40 to $100. Even those on the business side of the table have long acknowledged that the states benefits, which have not been increased in over a decade, are far too low " among the lowest in the country, according to the Insurance Information Institute, which also points out that $400 is less than 40 percent of the average weekly wage;

Cost savings worth hundreds of millions of dollars will be achieved by setting a maximum number of years that a small population of claimants " those classified as being permanently partially disabled " can receive cash benefits. Those maximums will be based on the claimants degree of disability. Medical services will continue, and a safety net will be established to help these workers return to gainful employment and to intervene in cases of extreme hardship;

Innovative programs are being established to get workers prompt medical treatment and to help them return to work. Quite apart from simple humanitarian interests, there is good evidence to suggest that workers who are treated promptly have a more positive attitude toward their employers and are far less likely to initiate law suits. Moreover, conventional wisdom notwithstanding, most workers prefer to return to gainful employment, even if that means their workers compensation benefits are reduced or eliminated. The bill would call for a so-called rocket docket, ensuring that essential decisions are made within 90 days. And while insurance carriers are forbidden from challenging doctors recommendations for tests costing less than $1,000, the legislation establishes a fee schedule for drugs, lab tests, and prosthetics. Carriers will also be permitted to contract with a provider network;

Strong anti-fraud measures will be in place, including the ability to stop work on a job site where a company has failed to purchase workers compensation insurance for its workers, higher criminal penalties for violators, and debarment provisions. The release of a PIANY white paper in May 2006, followed by a report published in January of this year by the Fiscal Policy Institute, together highlighted the issue of employer non-compliance with respect to payroll reporting. While some hotly disputed the findings of the FPI study, which suggested that up to $1 billion annually in premiums is not being paid, there has been a general consensus that the annual loss of premium is substantial. In addition to the stop-work provision " already in effect in Florida, for example, with significant results " the bill would bar non-compliant employers from receiving state and municipal contracts for five years, according to The New York Times. The intentional misclassification of an employee as an independent contractor is a felony under the new legislation. The Times also reports that the antifraud unit of the Workers Compensation Board is to double in size;

An expensive fund known as the Second Injury Fund, which is now financed by assessments passed through to employers, will be closed to new claims. The fund was initially set up to help injured workers, but is now instead used by some insurance carriers as a costly loophole by which they transfer claim costs to the entire industry. By closing the fund, the new law eliminates this practice.

Living Up to Its Promises

The governors office and others who participated in crafting the workers compensation reform legislation are predicting fairly rosy outcomes. Anticipated savings, as reported by Peter Pope, the governors director of policy, include $120 million from the fee schedule for drugs, tests, and equipment; between $60 million and $114 million from anti-fraud measures; and at least $500 million from caps on PPDs. At the same time, employers should see a reduction in premiums of 10 to 15 percent.

In a forcefully worded letter on March 13 to Acting Superintendent Eric Dinallo, Labor Commissioner Patricia Smith, and Donna Ferrara, chairperson of the Workers Compensation Board, Spitzer wrote, As we collectively analyzed the many problems that needed fixing, it became clear that a number of them should be solved by regulatory streamlining, rather than by statute. There was, he continued, vast unrealized potential for improvement within current law.

The letter specifies five efforts the superintendent, with help and assistance from the Workers Compensation Board and the Department of Labor, is to undertake:

The design of a data collection system " Spitzer points out, as others have long recognized, that [t]here cannot be accountability without data and that the state cannot make policy determinations if it lacks basic information;

The design of a streamlined docket " The intended goal is to develop draft streamlined workers compensation regulations that ensure a claimants case is adjudicated within 90 days;

The design of new guidelines " These pertain to medical reports to the board that will eliminate dueling experts; a set of best practices for health care professionals; and protocols and training for law judges and other WCB employees;

Recommendations regarding the CIRB " The governor requires the superintendent to report on the manner in which the CIRB has performed tasks delegated to it by statute or regulation; whether those tasks would be more appropriately performed by any other entity, including any governmental agency; and the rate-making process for workers compensation insurance;

Review premium rates with carriers " Savings that we achieve through legislation and smart management, the letter states, must translate both into higher benefit levels for workers and lower premium levels for employers.

The Pressure is On

It should be noted that the first three directives carry with them an April 27, 2007 deadline for reporting on progress and/or producing a plan of action. Thats just one month away. Meanwhile, after three months on the job, Dinallo is still acting superintendent " though by all accounts the conditional status implicit in that title has nothing to do with either his current role or the relative likelihood of his confirmation, which is all but a foregone conclusion. He has already represented New York States interests before congress and at the recent NAIC meeting in Manhattan. Surely, if Albanys leadership can pass a precedent-setting workers compensation reform bill, it can raise its hands in support of confirmation and let the new superintendent get on with the tasks at hand.

More on workers comp next issue: Expert analysis and a look at the details