Governor Cuomo announced last week that his administration plans to introduce new legislation to continue to improve the workers’ compensation system and to attempt to provide relief to thousands of businesses.
Cuomo’s goal is to provide the following with this reform:
- Savings to New York State’s employers
- Elimination of unnecessary friction in the system
- Resolving the burden facing employers who are members of an insolvent Group Self-Insurance Trust (“GSIT”)
- Simplify and reduce assessments on employers
- Promote system-wide transparency, efficiency, equity, and consistency
- Create more competition in the insurance marketplace.
We have summarized below the three main ways he plans to accomplish these goals.
- With the high number of GSIT defaults in 2006, legislatures knew something needed to be done. In 2008 the workers comp boards were given the power to take action against responsible parties. In addition the executive budget of 2011 eliminated the potential for future defaults by eliminating all group self insured trust programs. Although the program has been eliminated, there still lies defaulted payments and liabilities to take care of. To insure repayment and to relieve financial stress of debtor, the government will now be issuing bonds to collect the needed dollar amounts. This action will account for those claims and allow the defaulters to pay back their debt in a more suitable fashion.The proposal would enable 10,000 businesses to reasonably settle their existing claim liabilities with the state and simultaneously protect future benefits of injured workers.
- A second issue due for correction are workers comp assessments. To fund a multitude of expenses the workers compensation system has configured separate assessments that charge New York businesses annually depending on how you decide to insure your workers. While an annual fee to support funding is understandable, the fact is currently some pay more than others. The existing process places a disproportionate burden on long-term self-insurers and does not permit employers to easily change coverage types. Gov. Cuomo will seek to combine all of the workers’ comp assessments into one and therefore create a single process for calculating assessments irrespective of how an employer maintains coverage. The new assessment would simply be calculated based on the overall anticipated yearly expenses of the workers’ compensation system and will be assessed upon all employers based on an equitable and transparent formula. The calculation of a single rate would be more efficient for the state to administer and would lessen the carriers’ administrative burden of assessment collection and payment.
- Finally, Governor Cuomo also plans to reduce costs for all New York businesses by closing unnecessary funds. Although this is to be noted as a long term plan, just cutting the re-opened cases fund will cut about $300 million off New York State Employer’s expenses.
Bringing down workers compensation costs is critical to bringing jobs to New York and continuing New York’s economic recovery. If you have any questions about if these reforms will affect your business, please contact one of our risk advisors.
