There is no one in New York who could find fault with the recently-enacted workers compensation reform. Governor Eliot Spitzer and the state Legislature are to be commended for bringing together business and labor and creating legislation that will increase benefits to injured workers while at the same time reducing workers compensation costs for businesses.

The concerns come with implementation of the new law. Spitzer was proud to recently announce that rates would be reduced by 20.5 percent, saving businesses an estimated $1 billion in premium (see July 16 Insurance Advocate e-Newsletter). The majority of the savings allowing for such a significant decrease are to come from the elimination of the states Second Injury Fund, and the elimination of lifetime benefits for permanent partial disability.

Its the mechanics of calculating the present-day cost of all permanent partial disability claims and how they will be funded that could be the fly in the ointment. The New York Workers Compensation Board is required to determine the present-day cost of all PPD claims made after July 11. The board must also make this calculation for all previously-filed PPD claims.

All stock and mutual insurance carriers are mandated to pay a lump-sum amount determined by the Workers Compensation Board into the Aggregate Trust Fund. If the boards estimate is too low, carriers will have to pay additional money toward the cost of the claim. If the boards estimate is too high, carriers are not entitled to a refund. This is the same principle my family uses when asking for money to go shopping, and I can tell you from experience it doesnt work. The party putting up the money stands a good chance of losing. The carriers are concerned they will lose, too.

There are two intertwined issues raised by this provision: will carriers find the savings to be too little or slow and decide to exit the market? Does this provision unfairly penalize stock and mutual carriers?

There is concern amongst industry experts that the expected savings may not show up quickly enough to support the rate reduction and worsen the market. In addition, many believe an open and competitive marketplace is critical for the long-term success of workers comp reform. Unfortunately, it would appear that the New Yorks State Insurance Fund and self insured trusts are given another competitive advantage by not having to make lump sum payments into the Aggregate Trust Fund. No one wants to see this reform have a negative impact on an already ailing workers compensation system.

There is one area in which the state Workers Compensation Board is properly utilizing its new authority. The board is identifying and rectifying situations involving businesses, both in New York and out of state, who fail to secure workers compensation coverage for their New York employees. They are also aggressively working on the proper identification of all workers required to be covered by a business and making sure that coverage is purchased. Businesses operating with employees in the state should take note and make every effort to ensure they are purchasing the appropriate coverage for all their New York workers.

At this point, there is only one thing to do, and that is rely on the Workers Compensation Board and the state Insurance Department to make the right decisions and hope they achieve the correct final outcome. We hope the savings are significant enough to support the rate decrease. We hope the insurance carriers are not unfairly impacted and continue to actively compete in the workers compensation insurance marketplace. We hope that aggressive identification of uncovered workers will have a positive impact on the system. Most of all, we hope that the New York workers compensation system will provide injured workers fair and appropriate compensation while offering businesses affordable rates provided by a choice of insurance purchasing methods.

As IIABNY member advocate and assistant vice president of member programs, Jamie Deapo acts as communicator between agent, company, and trade association. His 15 years of experience as an independent agent coupled with a background in underwriting and marketing for insurance companies has given him a well-rounded perspective. A daily dose of conversation with independent agents from every corner of New York helps him understand the issues and concerns of the day. Deapo is also the outspoken voice on IIABNYs Word on the Street Podcast. Listen to these candid conversations at www.iiabny.org, by clicking on the News link on the left-hand side of the homepage, then Newsletters and Publications and Word on the Street Podcast.