Posts Tagged ‘New York’

New York Self Insurance: Chicken Stew

Tuesday, May 28th, 2013

The folks at Murray Bresky Consultants are just trying to scratch out a living by raising chickens – not just any chickens, but free range chickens that are “happy and healthy.” Their signature breed is “fed an all-natural and all-vegetable diet that, combined with plenty of exercise, makes our birds the leanest on the market. The leisurely lifestyle eliminates the need for antibiotics to prevent diseases commonly found in chickens as a result of stress and confined living conditions. Minimally processed, without the use of preservatives or other artificial ingredients, Murray’s Certified Humane Chicken is truly all chicken.”
Unfortunately for the company, they secured workers comp insurance through New York Compensation Managers (NYCM), the now defunct operator of a dozen self-insurance groups in New York. NYCM claimed to offer favorable rates, strict underwriting standards and exemplary claims services. They ended up with egg on their face with their inadequate rates, suspect underwriting and rampant under-reserving of claims. In retrospect, the operation ran around like a chicken with its head cut off. By the time the problems emerged (in 2006), it was too late to shake a feather and correct the problems.
Following the SIG’s failure, Murray Bresky Associates was hit with a $1.2 million assessment to make up their share of the SIG’s deficit. That ain’t chicken feed.
A Game of Chicken
Murray Bresky is not chickening out of a fight. Indeed, the chickens have come home to roost in the form of a lawsuit filed against NYCM and its board of trustees. The lawsuit seeks to recover the $1.2 million and then some, alleging breach of contract and breach of fiduciary duty. The case worked its way up to the NY Supreme Court, Appellate Division, where the motion by the defendents to dismiss the lawsuit was, for the most part, dismissed.
Now the defendents are walking on egg shells, facing the prospect of personal liability for the failures of the SIG. Where they once feathered their nests with the proceeds of the operation, their financial security has flown the coop. This is a legal mess perhaps best described by the late Lyndon Baines Johnson: “Boys, I may not know much, but I know chicken poop from chicken salad.”
Roles and Irresponsibilities
One of the former trustees of the SIG is squawking that he was not aware that he was, in fact, a trustee. He may have signed off on a few trustee documents, he may have performed some of the functions of a trustee, but he insists that he had no memory of being appointed. He insisted that he was not a bad egg and claimed that he had no place in the pecking order. The court, however, ruled otherwise.
As the saying goes, you have to break eggs to make an omelette. Quite a few more eggs will be broken before this particular concoction is served up. Hard-boiled attorneys will parse the details to figure out who, if anyone, owes Murray Bresky Consultants and exactly how much they owe.
Pecking Orders
The courts now rule the roost. They have upheld Murray Bresky’s right to sue, with the exception of some actions that are time-barred. There may well be a sunny side up in the chicken company’s quest for justice. We look forward to the final resolution of this stew, the chicken scratch of a judge’s signature that will put a final number on the liability of an insurance operation that flaps my wattles (ie., annoys me).
Here’s a little unsolicited advice to Murray Bresky Consultants: don’t count your chickens before they hatch. This one has a long way to go before the company can feather its nest with the proceeds of a complex litigation. In the meantime, their free range chickens have the run of the coop, enjoying their cage-free, stress-free lives right up to the very end. Bon appetite!

News roundup: risk, happiness, state fund in Illinois, new hire compliance & more

Wednesday, March 20th, 2013

Risk Roundup – Check out this week’s Cavalcade of Risk #179 – March 20th, 2013 Edition posted at My Personal Finance Journey
Taking care of business – At WorkCompWire, Joe Paduda poses the question What business are you in?” He hazards a guess that most of us would say “the insurance business” but he argues that we are really in “the medical and disability management business – with medical listed first in order of priority.” He suggests that, “Senior management misunderstands their core deliverable – they think it is providing financial protection from industrial accidents, when in reality it is preventing losses and delivering quality medical care designed to return injured workers to maximum functionality.” We could quote the whole thing, he makes a compelling argument so be sure to check it out. It echoes one of the Lynch Ryan founding tenets. When many of us got into this business, we did not come with insurance backgrounds. We felt at its core, managing injuries required a focus on the human event and not the dollars. We believed then and still believe now that if you took excellent care of the injured worker, got them quality medical care and helped them get well and back to work, the dollars would follow.
Smile – it’s March 20 – Did you know that March 20 is International Day of Happiness? Now you do. It’s also the first day or Spring, and if, like us, you wondered why Spring isn’t commencing on the usual March 21 date, Joe Rao at explains Why Spring Begins Early This Year.
New State Fund in Illinois?Illinois Bucks Trend in Other States; Looks to Establish Competitive Workers’ Comp State Fund – “Illinois state legislators are running counter to a national trend by proposing creation of a state workers’ compensation insurance fund that would compete with the private system. The development is generating deep angst amongst Illinois insurers and industry trade groups.”
Other state news

New Citizenship Verification form – As of 3-8-13, a revised US Citizenship & Immigration Service (USCIS) Verification Form I-9 has been issued. There is a 60-day grace period to come into compliance – new USCIS I-9 Formsforms must be in use by May 7, 2013.
When healthcare workers are unsafe, patient quality suffers – “Many medical work environments are unsafe for health professionals, adding stress and distraction that can expose patients to harm,” according Kevin B. O’Reilly who writes about a recent report by the National Patient Safety Foundation’s Lucian Leape Institute. In an article in entitled Warning sounded on demoralized health care work force, he cites a high injury rate that is 33% higher than private industry as one factor, as well as “the lingering problem of disruptive behavior in health care, which can create a culture of fear and intimidation that inhibits safe, high-quality care.”
Fatalities Report – The March Monthly Labor Review has a report on Hispanic/Latino fatal occupational injury rates (PDF). The fatality rate for Hispanic/Latino workers is much higher than that of other demographic groups. Studies also show that, “… foreign-born Hispanic/Latino workers have higher rates than native-born Hispanic/Latino workers in certain occupations, a statistic that is explainable by differentials in employment between the two groups.”
Worker Costs – According to the latest Department of Labor report, the Northeast leads the U.S. in worker costs. “Hourly costs per employee in the Northeast – which includes the New England states, New York, New Jersey and Pennsylvania – averaged $33.10 in December, higher than the national average of $28.89. The next costliest region was the West, which consists of the mountain and Pacific coast states, at $30.29. The average hourly wage in the Northeast was $22.85, while the average per-hour employer cost in benefits was $10.25, both the highest in the U.S.”
More news of note

Annals of Risk Management: Guns and Mental Illness in New York

Wednesday, January 16th, 2013

New York has just signed into law a new gun control measure [S. 2230] that comes as a direct response to the incomprehensible tragedy in Sandy Hook, CT. While the bill touts its “first in the nation” status, with respect to its approach to mental illness, it is by no means a model for other states to follow.
The bill addresses three distinct issues relating to mental illness: first, limiting access to gun licenses for those diagnosed as mentally ill and dangerous. Second, the bill requires gun owners who reside with a mentally ill and “dangerous” individual to keep guns under lock and key. Finally, and most disturbingly, the bill requires mental health professionals to report any patient who is “likely to engage in conduct that will cause serious harm to
him- or herself or others.” In other words, the bill assumes that any individual with suicidal tendencies is a potential mass murderer. Such stereotyping is not what is needed in the mental health community.
Double Bind
S.2230 places a formidable burden on mental health professions – who not only must treat their patients, they are held accountable for predicting future behavior:

A new Section 9.46 of the Mental Hygiene Law will require
mental health professionals, in the exercise of reasonable
professional judgment, to report if an individual they are treating
is likely to engage in conduct that will cause serious harm to
him- or herself or others. A good faith decision about whether to report
will not be a basis for any criminal or civil liability.

If we have learned anything in the all-too-frequent incidences of random slaughter, the “likelihood” of homicidal acts is usually only revealed retroactively, long after the fact.
The bill goes on to read:

When a Section 9.46 report is made, the Division of Criminal Justice
Services will determine whether the person possesses a firearms
license and, if so, will notify the appropriate local licensing
official, who must suspend the license. The person’s firearms will
then be removed.

After a therapist reports a potentially violent patient to the state – once again, this rather large population includes people who only threaten to hurt themselves – New York will run the names through the data base of licensed gun owners. All hits must result in license suspension. Of course, bureaucracies being what they are, it might take months for the suspension to take place. Hence, the individual who at one time exhibited psychotic symptoms or discussed violent feelings with a therapist might find him or herself months later confronted by cops on the doorstep. Such encounters will hardly be helpful for people trying to establish mental equilibrium.
Finally, the image of forcefully removing guns from the home surely presents enormous risk to gun owners and public safety officials alike. Who will do this and under what circumstances? My guess is that, given the profound implications of reporting patients to the state, most therapists will err on the side of non-reporting and rationalize their inaction, when necessary, under the heading of acting in “good faith.”
The Wrong Cohort
It is important to note that only individuals receiving treatment for mental illness will be subject to this onerous standard. Given the fractured and fragmented nature of mental health treatment in this country, the vast majority of mentally ill individuals have never received and are not about to receive any treatment. And among the violent individuals who might well contemplate an attack of homicidal proportions, few would bother to discuss it with a therapist or go through the formality of securing a gun license before buying an assault weapon.
The relatively small subset of people impacted by the New York bill – people diagnosed with mental illness who are licensed gun owners – is likely to prove statistically insignificant, as is the probability that a single mass murder can be prevented by this radical undermining of the doctor-patient relationship. Surely, there is a better way to manage what has become a remote but appalling risk of life in the 21st century.

A Modest Proposal for New York

Monday, November 5th, 2012

New York’s workers’ compensation system has taken a few high hard ones to the head lately. Premiums are now the 5th highest in the nation (according to the well-respected “2012 Oregon Workers’ Compensation Premium Rate Ranking”); its surcharges are the highest in the nation; the Spitzer reforms, aimed at reducing costs to employers and improving care for injured workers, have done neither; attorney involvement is among, if not the, highest in the nation; the house-that-Jack-built bureaucracy is cumbersome and unwieldy; and all the parties in the system, every last one of them, bemoan what they perceive to be a train wreck of monumental proportions.
At the same time, New York’s Workers’ Compensation Board has come under wilting criticism from nearly all quarters. Mike Whitely, from Work Comp Central, has been doing an excellent job of reporting and documenting the whole thing. Last week, the New York Business Council weighed in with some heavy artillery of its own. In short, everyone’s frustrated, and tempers are frayed.
I know the Board’s senior management, and I am absolutely convinced that all of them, from Jeff Fenster on down, are highly dedicated. These are competent professionals doing the very best they can, but they are up against long odds. They are David with a broken slingshot, and Goliath is growing bigger every day. It does not appear that New York’s loggerheaded vested interests – lawyers, doctors, insurers, unions, the Legislature, employers, and more still – will come to any grand bargain anytime soon.
So, is there anything the Board or anyone else can do to create some positive, forward momentum? I think there is, and it involves what is known as Code Rule 60, which is the New York Department of Labor’s Workplace Safety and Loss Prevention Incentive Program. It’s sometimes known by its really catchy and memorable acronym, WSLPIP. Code Rule 60, which came into being in September of 2009, is supposed to help employers establish DOL certified and approved safety, return to work, and drug and alcohol prevention programs. Participating employers receive premium credits: 4% for safety, 4% for return to work and 2% for drug and alcohol prevention. The credits run for 3 years (but the two 4% components drop to 2% in the second and third years) and are renewable. Only employers with experience modifiers of less than 1.3 are eligible (although why the state prohibits employers who would seem to need it the most from participating is a piece of logic beyond my comprehension).
The premise of Code Rule 60 is that employers who establish these programs will have safer workplaces and, eventually, lower costs. Not a bad idea. The problem is that the DOL has made the program so ridiculously bureaucratic that it would be easier for a New York employer to find his way through a dense maze of thorns, blindfolded, than to negotiate the journey to Code Rule 60 certification. Don’t believe me? Here is the official Labor Law Regulation (PDF), in other words, the way through the thicket. It’s 20 pages of dense bureaucratese. Busy employers find it nearly impossible to wade through the legal Pig Latin.
Code Rule 60 is totally process driven. There is no performance requirement. No performance measurement. Just build a certified program, and good things will happen. Maybe. The New York DOL doesn’t seem to care if the program reduces loss costs. All the DOL wants to know is: Have employers built their programs the way we told them to build them?
With the preceding as background, you might be forgiven for asking how successful has the program been? Regardless of whether they’ve reduced loss costs, how many employers have succeeded in getting those precious premium credits? Even the New York Business Council couldn’t find out, but, anecdotally, the number is fewer than five. Since September, 2009.
So, here’s my proposal: First, scrap Rule 60. It’s not working, and it never will in its present form. Second, Jeff Fenster should pick up the phone and call Paul Meagher, the highly respected President of the Massachusetts Workers’ Compensation Rating and Inspection Bureau (WCRIB). Why? Because long ago at the height of the Massachusetts workers’ compensation crisis, when 65% of the Commonwealth’s employers were in the High Risk Pool, Mr. Meagher was instrumental in establishing the Massachusetts Qualified Loss Management Program. The QLMP (later replicated in Missouri, West Virginia and New Hampshire) is totally performance driven, and it played a big role in the Massachusetts workers’ compensation turnaround, the continued success of which was documented last week by the Workers’ Compensation Research Institute and last month in the Oregon study.
Here’s how it works. Premium credits accrue to Loss Management Consulting Firms whose Massachusetts customers the WCRIB certifies have reduced their loss costs in the year following engaging a firm. The greater the loss cost reduction, the greater the credit, up to 15%, which is then passed on to the Loss Management Consulting Firm’s customers in the succeeding year. Lower loss costs mean lower premiums for employers. The Loss Management Consulting Firms have to requalify every year. So, if a Firm’s results slip, it will see its credit, and probably customer portfolio, reduced. In the QLMP, all of the incentives are lined up so that everyone is motivated towards reducing costs, while providing safe workplaces and high quality care for injured workers. (Full disclosure moment: The QLMP was an idea I gave to the WCRIB and the Massachusetts Division of Insurance).
Here are the rules for the Massachusetts QLMP (PDF), with a Q&A at the end. Four pages, written in simple English that any employer or agent can understand.
Senior management of the New York Workers’ Compensation Board has told me on many occasions that their overarching goals are to reduce costs to employers and to see that high-quality care is provided to injured workers. It’s obvious that Rule 60 is doing neither. A New York version of the Massachusetts QLMP would be a good first step in that direction.

Annals of Compensability: Heart Attacks at Work

Monday, October 1st, 2012

Over eight years ago, my colleague Julie Ferguson blogged on the issue of workplace heart attacks: compensable or not? (Workers Comp Insider just passed its ninth birthday, but we’ve been too busy to celebrate.) Heart attacks present a unique challenge to the courts overseeing workers comp. The general standard requires that something unusually stressful happened at work in the moments leading up to the incident; if people are doing their usual work in the usual manner, the heart attack does not arise “out of” employment. If, on the other hand, the demands of work are unusually stressful and beyond the ordinary, the incident might well be compensable.
Today’s case raises the isse of whether anything that happens on Super Bowl Sunday can be ordinary. Colleen Robert’s husband (no first name given in the court documents) normally worked as a receiver for Waldbaum’s Supermarkets in New York. While the 2010 superbowl did not involve any New York teams – the contest featured the Indianapolis Colts versus the New Orleans Saints – Super Bowl Sundays are always busy for super markets. Roberts was asked to manage the store during the unusually busy day. At one point, he engaged in a verbal altercation with a customer (which in itself may not be unusual for those working in New York). Later that same day, while still at work, Roberts suffered a myocardial infarction and died.
The case was first deemed compensable, then denied by an administrative law judge, and then finally adjudicated by the Appelate Division of the New York Supreme Court. The judges noted that any death at work is presumed to be work related, but they also looked for a causal connection between the fatal attack and the work being performed. The autopsy revealed that Roberts suffered from extensive cardiovascular disease and thus was a good candidate for a myocardial infarction. In arguing against compensability, the defense pointed to the lapse of time between the verbal altercation with a customer and the attack itself. However, the judges noted that the entire day was full of stress and excitement for Roberts, who was not performing his usual job in the usual manner. They determined that the fatal heart attack was compensable.
Best Practices
In a similar case involving a supermarket in Massachusetts, a 70 year-old man with a pacemaker collapsed and died on his break. Because he had a known heart condition, and because of his age, the market assumed the fatality was not work related and failed to report it to their insurer. Months later, the widow filed for comp benefits. Due to the absence of timely interviews with co-workers and supervisors, and due to the “death at work” presumption, the case was deemed compensable.
The lesson for employers is both simple and straight-forward: report any and all incidents of heart problems immediately. Regardless of the state jurisdiction, the courts are likely to apply the same standards as in New York. And if a heart attack occurs on Super Bowl Sunday, defense may have a tough time proving it was just another working day.

New York: A Micro-Step into the Electronic Age

Monday, August 27th, 2012

Last month, Tom Lynch posted a concise and rather devastating macro view of workers comp costs in New York. Today we revisit an issue that illustrates the difficulty of lowering costs in the Empire State: the use of stenographers in each of the several hundred thousand hearings that take place every year in New York. With some reluctance, we will set aside the question as to whether the 300,000 hearings and the 30 million scanned documents are actually necessary in overseeing comp in New York. (They are not, but that is fodder for another day.)
As we read in Work Comp Central (subscription required), New York employs over 100 stenographers, along with their supervisors, to generate an “accurate record” of comp hearings. The staunch defenders of these stenographers – they are legion in the legislature – believe that the only way to secure an acceptably accurate account of a comp hearing is the use of a live stenographer. Electronic devices will miss the nuances, will mess up the occasional non-English word, will make unintentional errors, and will be flummoxed by occasions where more than one person is talking at the same time. In other words, without stenographic documentation, courtroom justice as we have come to know it in the Western world will cease to exist.
Best Practices
When the New York Workers Comp Board proposed a program to test digital recording of hearings, 67 comments were generated. Would it surprise you to learn that 66 of the comments objected to making any changes in the way hearings were documented?
As is often the case, the only reasonable context for examining the Byzantine construction that is New York comp is a comparison to other states. Do other states conduct hearings for any proposed change in each and every claim? Do other states scan every document moving through the comp system? Do other states require stenographic documentation of every comp hearing? Do other states prohibit the use of digital recording in the courtroom? Clearly, New York is out of step with the nation in these areas. Thus it should come as no surprise that the only aspect of comp where New York is a pace-setter is in the spiralling cost of comp to its employers.
One Small Step for Man…
In response to the NYWCB’s plan to introduce digital recording into some of its hearings, the legislature passed Assembly 7508, which made explicit and absolute the requirement to use live stenographers. The Insider is pleased to report that Governor Cuomo vetoed the bill. This green – or should we say yellow? – light to proceed with a testing of digital recording will begin to align New York with other states in its approach to courtroom transcripts.
It’s Not About the Jobs
In the context of a faltering economy, it is important to note that court stenographers are unlikely to face any layoffs. They are union employees, covered by a five year contract negotiated last year. The pilot use of digital recording is not aimed directly at them. So how does the new program, made possible by the Governor’s veto, save money? By gradually shifting away from live stenographers to the use of cheaper – and comparably accurate – technology. As the current incumbent stenographers retire – or move on to new careers – the vacancies will not be filled. In all likelihood, these $60K per year jobs will eventually disappear.
With all the humongous cost-drivers in New York workers comp, the stenographers are a very small part of the problem. Nonetheless, there is significant symbolic value in taking on this miniscule stake holder. The long-standing problems in New York stem from a system that has made very little movement away from the bitter labor environment of the early 20th century. A profound lack of trust permeates the system.
The Governor, the legislature and the comp board need to evaluate each and every proposed comp initiative from a simple and fundamental test, based upon the essence of comp: does the proposed action improve benefits and conditions for injured workers? And does it lower costs for employers? Other considerations – politics-as-usual, stake holder leveraging and sheer bureaucratic inertia – should no longer be part of the discussion.

New York: Workers Comp Smoke and Mirrors

Monday, July 23rd, 2012

Anyone involved with policy making knows that insurance rate filings can have, how best to put this, political dimensions.
Case in point: Last week, New York Governor Andrew Cuomo and his Insurance Department of Financial Services stuck their collective fingers into the holes in the dike holding back a workers’ compensation cost Tsunami.
Here’s what happened and what we think it means for the future. The New York Compensation Insurance Rating Board (NYCIRB), which in New York functions much like the National Council on Compensation Insurance (NCCI) functions in most other states, had filed a loss cost rate increase request of 11.5% to be effective 1 October 2012 (we’ll come back to that in a bit). After due consideration, the Department of Financial Services rejected the Rating Board’s filing, ruling that there would be no increase in loss costs. Result: status quo.
In his remarks about the decision, Governor Cuomo said, essentially, that the last thing New York’s employers needed, given the economy in which they are forced to exist, was an increase in the cost of workers compensation. Amen to that. The Governor also said that the insurance industry had not taken fully into consideration the decrease in costs associated with reforms enacted in 2007 under the Spitzer administration.
It’s a great picture – reforms enacted, costs go down, everybody’s happy. If only that were true. There are a number of fact-based reasons why it’s not.
We talked with Consulting Actuary Scott Lefkowitz, FCAS, MAAA, FCA (Lefkowitz has more initials than I have fingers), a partner at Oliver Wyman, a leading global management consulting firm with offices in more than 50 cities across 25 countries and a member of the Marsh & McLennan companies. Mr. Lefkowitz specializes in workers’ compensation and operates from Oliver Wyman’s Melville, NY, offices. In addition to consulting to many of New York’s employers and reviewing loss cost filings for numerous regulators, he offers expert testimony in many jurisdictions. His testimony with respect to the Rating Board’s filing and his comments following the Department of Financial Services’s rate request rejection offer a stark contrast to the optimistic (perhaps a better word might be “hopeful”) remarks of the policy makers and politicians. His public comments and testimony are here: NYCIRB Hearing 2012 Comments with Cover Letter (PDF).
In the first place, there is the indisputable fact that the 2007 reform has just about doubled the maximum indemnity benefits paid to injured workers, from a pre-reform maximum of $400 per week (which had been the maximum since the early 1990s) to $792, effective 1 July 2012. That maximum is still lower than most all of the industrialized states. Even so, consider this – according to the recently released 2012 Edition of NCCI’s Annual Statistical Bulletin, the average cost of a lost time claim across all NCCI administered states for 2008 adjusted to a final cost basis is $47,800. However, when the NYCIRB publishes data claim costs, it projects only to what is called a 9th report, a subtle, but important, distinction. For 2008, the NYCIRB-published average cost of a lost time claim in New York is $61,700, which is nearly 30% higher than NCCI’s all-state average. But this is not even at a final cost basis. When Oliver Wyman’s Lefkowitz analyzed New York’s data and projected to ultimate, the 2008 figure was $73,000, making it one of the highest in the nation. And he projects 2012’s ultimate cost to be about $100,000. Wow! (Oliver Wyman’s and Lefkowitz’s analysis of New York’s costs and trends) (PDF).
Employer Assessments
Then there are the employer assessments, and there are five of them. We’ll just mention the big three, and look at them relative to indemnity dollars paid. These include:

  • The slowly winding down Special Disability Fund (the SDF is New York’s version of the 2nd Injury Fund), currently assessed at 21.8%
  • The Reopened Case Fund, which since reform has grown from 3.5% to 13%
  • The funding of the Workers’ Compensation Board at 6.5% (not to be confused with the New York Compensation Insurance Rating Board).

Taken together, in 2012, New York’s assessments equate to 51% of every indemnity dollar paid in the state, or about 21% of premium. New York’s self-insured employers are assessed based on indemnity dollars paid. Employers purchasing insurance are assessed based on premium. Either way, no employer can escape from these extraordinarily large additional charges. The hope of the 2007 reform was that, by closing down the SDF, costs would decline significantly, but that hasn’t happened yet, and it won’t for a few more years. Meanwhile, New York’s employers are stuck with the highest claim costs and the highest assessments in the nation.
Next, one of the major pieces of the 2007 reform was the elimination of lifetime benefits for permanent partial disabilities. These were to be capped at 10 years, which, on its face, could save significant money for the system. However, there is what is called a “hardship” provision as part of the 2007 reform, open to claimants with at least an 80% impairment rating. They can appeal the 10 year cap based on hardship, and it’s not a wild stretch to suggest that the Board will approve a majority of these appeals, leading to lifetime benefits for the most seriously impaired and much less cost saving than the reform predicted.
So, back to the NYCIRB’s 11.5% loss cost increase request. Built into the filing was a somewhat unusual qualitative adjustment downward because the Rating Board believed, without stipulating evidence, that New York’s insurance carriers were over-reserving lost time claims. Without that highly questionable downward adjustment Mr. Lefkowitz wrote that the increase would have been not 11.5%, but 28%.
With the now 0.0% rate increase, Lefkowitz and Oliver Wyman contend that costs in New York today are just slightly less than costs prior to reform, before consideration of assessments. With consideration of assessments, which have grown from about 30% of every indemnity dollar paid in 2007 to over 50% of every indemnity dollar paid in 2012, workers compensation costs in New York today are even greater than they were prior to the 2007 law change. He compares this with post reform costs in other highly expensive states, such as Florida and California. Florida’s reforms have decreased costs by about 60%, California’s by 66% (in fact, California’s costs are at a level not seen since 1999). However, Florida, California and other reform states will have to go some to beat the decline in Massachusetts, where, due to reforms enacted in 1992, rates are now equal to what they were in the mid-1980s.
We will continue to watch events unfold in New York.

New York Comp: Fully Documented Downward Spiral

Tuesday, June 19th, 2012

We live in the digital age, with all its conveniences and consequences. It would be hard to imagine a law requiring that all telephone calls be routed through live operators, or limiting maps to those that can be purchased at your neighborhood gas station. But each technological innovation creates a few new jobs and, seemingly, the loss of many others. Which brings us to the continued – and mandated – use of stenographers in virtually every workers comp claim filed in New York.
Senator Diane Savino (D-Staten Island) has filed S. 4112, which would certainly help the employment prospects of stenographers in the Empire state. Following an aborted effort by the NY workers comp board to test the use of digital recording in a few of the 300,000 or so annual workers comp hearings, Savino wants to ban digital recording from any comp hearing and require stenographic reports as the sole recognized form of documentation. Her bill, currently under consideration, would make stenographers a permanent fixture in workers comp for years to come.
Stenographers and their allies will argue that their presence improves the accuracy of court reporting. There are fewer “inaudibles” in their transcripts. But such accuracy comes at a substantial cost. The wages of a stenographer are in the $50-60K range, plus benefits. The cost of installing digital recording equipment in a courtroom runs less than $20,000, and once installed, the cost of maintenance is minimal. The trade off becomes even more reasonable when you consider that the New York system requires an unprecedented number of hearings for each and every workers comp claim.
In contrast to virtually every other non-monopolistic jurisdiction, New York insurers and TPAs are not allowed to make routine, unilateral changes in the status of any claim. A change in claim status requires a hearing, in front of a judge, complete with legal representation on both sides and a stenographer. This is enormously redundant and, in a word, non-sensical. It is also the root of New York’s highest-in-the-country, soon-to-go- higher administrative costs. On a per capita basis, New York has more judges, more bureaucrats, more hearings, more paper flow – and more stenographers – than any other competitive state.
No Easy Answers
The fundamental goals of reasonable reform in New York can be easily stated: improve benefits for injured workers and lower the exorbitant cost of insurance for employers. It is not difficult to imagine how this can be done: simply look at the way most other competitive states manage workers comp claims. New York would have to streamline its entire system: instead of operating like a monopolistic state, micro-managing every claim, New York could empower insurers and TPAs to manage claims as skillfully and independently as they do in other states; by doing away with unnecessary hearings and hugely redundant reviews of literally millions of forms, New York could substantially reduce staffing levels at the Workers Comp Board.
But efficiency comes at a cost. One person’s cost savings is another’s job loss. These needed reforms would eliminate many, many jobs – and in doing so, would throw hundreds of loyal workers into the already burgeoning unemployment lines. In this one small example, the elimination of stenographers from hearings would lower administrative costs, even as it would increase the unemployment of people with potentially obsolete skills. This is not an easy trade off, but a necessary one.
At some point, New York has to look at the big picture: workers comp is way too expensive, even though the benefits, for the most part, are mediocre. Every adjustment to the current statute, every administrative decision, should pass through a single filter: does this improve the benefits to injured workers and does it reduce the cost to employers? When you run Senator Savino’s S. 4112 through this filter, it’s not part of the solution, but just another clog in an already overloaded drain.

New York Comp Assessments: The High Cost of Friction

Monday, April 2nd, 2012

In the 2010 Oregon rankings for the cost of comp insurance, New York comes in 13th, with an average rate of $2.34 per $100 of payroll. That does not sound too bad, until you factor in the extraordinary 20.2 percent assessment that is tacked onto premiums. ** This assessment is double that of the nearest state (Minnesota at 8.9 percent) and nearly five times the average among states. When you combine the already high rates for coverage with the assessment, New York ends up near top of high cost states.
Quoting research from the Workers Comp Policy Institute (WCPI), Risk & Insurance Magazine identifies three major components in the assessment:
– the Second Injury Fund, accounting for half the total
– the Reopened Case Fund that covers claims reopened after more than 7 years
– the Workers Compensation Board, which oversees comp in NY
Recent reforms may eventually reduce the impact of the first two cost drivers, but there is no end in sight for the third. New York operates a huge – and largely redundant – bureaucracy to administer comp claims. Where other states empower insurance companies to make decisions on individual claims, with the state involved only in disputes, New York is involved in every step of every claim. The Board has over 300,000 hearings per year, overseen by 97 judges. The system generates 31 million forms annually, all of which are scanned and saved! Stenographers document every proceeding: a well-intentioned effort to pilot the cost-saving use of video recording devices met with ferocious opposition in the state legislature. The Board employs over 1,300 people; as a point of reference, the Massachusetts DIA, in a state with one third the number of workers, has only 167 employees.
The high cost of insurance might be more tolerable if injured workers were the primary beneficiaries, but this is not the case. The maximum weekly benefit in New York is only $740, which might support a frugal worker in upstate New York, but it will not buy much in the five boroughs. By comparison, Illinois – ranked number 3 for cost – has a maximum wage benefit of $1,288, while MA, ranked 46th, pays up to $1,136.00.
New York is stuck in an archaic system that is fiercely defended by the stakeholders who benefit from its inefficiencies. If only this same energy and commitment were devoted to the protection of disabled workers in the Empire State. Surely, that would be a system worth emulating.
**We heard from our friends involved with the Oregon ranking study, who provided the following clarification:
The Oregon WC Rate Ranking study does include state assessment rates in our index rate computation. We ask our state respondents to provide the rates that are assessed as a percentage of premiums. The NY rating bureau provided us that information in 2010, and there was a 14.2% factor included in the study index rate for NY. Apparently the rate has increased since that time, and the 2012 index rates would incorporate that information in our next study, due out this fall.
Unfortunately assessments are an area that does not lend itself to straightforward comparison. States use different terminology (assessment , surcharge, tax, etc), have different bases for assessment, and fund different functions through this mechanism. So there is plenty of room for different interpretations when looking at the data, depending on where the lines are drawn for inclusion or exclusion.

Health Wonk Review, Irish style, and other noteworthy news briefs

Thursday, March 15th, 2012

Guinness is good for you – That’s the news from Tinker Ready, who is hosting the Health Wonk Review: Wearing the Green for the St. Patrick’s Day Edition at her blog Boston Health News. We think it’s pretty fitting to have a Boston blog hosting this particular edition!
From the bizarre file – Thomas A. Robinson ofRisk Management Magazine offers a list of the 10 most bizarre workers compensation cases during 2011. Robinson rightly notes that, “Despite their unusual nature, however, one must always be respectful of the fact that while a case might be bizarre in an academic sense, it was intensely real, affecting real lives and real families.” So true. We hope he’ll follow with a collection of the 10 most bizarre employer acts – we’ve seen a few in our day.
OSHA whistleblowers – Just a reminder: Don’t fire someone for reporting safety hazard. A Florida charter school is learning this lesson the hard way. OSHA is suing Manatee School for the Arts in Palmetto, Fla seeking reinstatement of the former employee with full benefits; payment of back wages, punitive damages, and compensatory damages, among other things.
New York’s Reg. 194 – There’s a big brouhaha in New York over N.Y. Reg. 194, with risk manager groups and agent groups coming down on opposite sides of the fence. N.Y. Reg, 194 is a broker-disclosure rule that requires agents to advise clients that they receive commissions from insurers. The ruling was proposed by the Division of Insurance in the aftermath of the Spitzer investigations against several large brokerage firms. Last week, a NY Appellate Court upheld the rule.
Exploding pig farms – We posted a link to this issue before – but the mysterious hog farm explosions continue to stump scientists. A strange, potentially explosive foam is surfacing near manure pits in about 1 ou tof every 4 hog farms, and has caused six explosions since 2009. According to the article: “This has all started in the last four or five years here. We don’t have any idea where it came from or how it got started,” said agricultural engineer Charles Clanton of the University of Minnesota. “Whatever has happened is new.” The National Hog Farmer has more background: Foaming swine manure poses explosive risks.
Wellness focus – Of cancers affecting both men and women, colorectal cancer (cancer of the colon and rectum) is the second leading cancer killer in the United States, and the number one cancer killer in non-smokers. Why not issue a reminder to your employees: Colorectal cancer screening saves lives.
Market conditions – Roberto Ceniceros notes that captives are thriving as the work comp market hardens. Rising prices for traditional insurance vehicles always means that alternative insurance programs see growth.