Brooklyn's Progress
February/March 2007

BY LETICIA THEODORE-GREENE

In late February, after only two months in office, Governor Elliot Spitzer announced a landmark workers’ compensation reform package. The agreement will cut employers’ costs, increase benefits for injured workers and lower medical expenses, while reducing fraud.

“New York’s mandatory workman’s compensation insurance program reflects our collective respect and concern for our workforce,” said Mark M. Kessler, interim president of the Brooklyn Chamber of Commerce, “By restoring the system’s fiscal and ethical equity, Governor Spitzer has revalidated our fundamental values while at the same time taking his first significant steps to reduce the extremely high cost of doing business in the state.”

Workers’ compensation is a mandated insurance program that guarantees employees who fall ill, are injured or die because of job-related conditions or incidents will receive income replacement and medical coverage. These benefits are provided through non-tax deductible state or private insurance policies paid for by employers. In NYS workman’s comp premiums are the second largest operating expense after payroll, placing an especially heavy financial burden upon small business owners. The rates are based on the individual employer’s total payroll, the risk inherit in the defined work activities and the employer’s accident record. Worker’s comp not only protects employees, but is also meant to protect companies from being sued by employees hurt on the job.

New York’s workers’ compensation system is considered one of the most expensive in the nation. The state ranks 10th in the nation for the highest premium rates paid by businesses.
 
Negotiating Reform
The agreement was reached after intense negotiations among parties that, for decades, had not been able to find consensus on the issue. According to New York State Governor Spitzer the new package will lower premiums 10 to 15%. It also limits the amount of time some injured workers can receive benefits.

“This is a remarkable win-win situation for both workers and employers,” Governor Spitzer said in a press release. “Thanks to the cooperation of legislative leaders and staff, and with constructive input from business and labor, we’ve developed an approach that will achieve the twin goals of helping injured workers and improving the state’s competitiveness.”

The reform package agreed upon by the Governor, legislative leaders, the Business Council of New York State, Inc. and New York AFL-CIO would:

• Cap benefits for permanent partial disability (PPD) cases at eight years or less for more than 90% of cases. Current law allows for lifetime payment of cash benefits in all such cases;
• Increase the maximum weekly benefit for injured workers from $400 to $600 over three years. In the fourth year, the maximum weekly benefit would become two-thirds of the average weekly wage in New York, with the maximum thereafter adjusted annually beginning in the fifth year. Benefits have not changed in nearly a decade and are currently capped at $400 per week;
• Medical services for workers whose benefits in PPD cases expire would continue, and a "safety net" would be established for cases determined to involve extreme hardship;
• Create new programs designed to help injured workers get prompt medical treatment and return to gainful employment;
• Create a fee schedule for drugs, laboratory tests and prosthetic devices used in workers compensation cases;
• Eliminate the Second Injury Fund, which is blamed for significant increases in surcharges that are added to all employers' workers' compensation bills. The fund, financed by assessments passed on to employers, was originally set up to help injured World War II veterans.

Workers’ compensation related fraud has long been a problem. Under the new laws anti-fraud measures will empower state officials to halt construction projects and close businesses where workers compensation coverage is not provided for all employees. Further, intentionally misclassifying workers as independent contractors in order to avoid paying premiums will be considered a felony. The size of the anti-fraud unit, which covers the worker’s comp system, will double.

As of now Governor Spitzer has directed the state's superintendent of insurance – Eric R. Dinallo is currently the acting superintendent awaiting confirmation – to ensure projected savings are reflected in premium rate reductions that show up in the rate-setting cycle that concludes this July.

"This is a major step forward toward reducing the cost of doing business in New York State," Kenneth Adams, president of the Business Council of New York State and former president of the Brooklyn Chamber of Commerce, said. "It's a big win for improving our economic climate, especially Upstate."

“This agreement not only addresses some of the most pressing needs and concerns of injured workers, but immeasurably improves a system long believed to be broken beyond repair,” said Dennis Hughes, president of the AFL-CIO. “The New York State AFL-CIO is deeply indebted to Governor Spitzer and the leaders for their dedication throughout this process.”

The final package must be approved by the legislature to become law and no date has been set for the laws to take effect.

To read Governor Spitzer’s press release visit http://www.state.ny.us/governor/. For more information about the New York State’s Workers’ Compensation Board visit http://www.wcb.state.ny.us/.