AIA Opposes N.Y. Workers’ Comp Bill

February 25, 2004

The American Insurance Association joined the PCI (See IJ Web site Feb. 24) in opposing legislation – Assembly Bill A. 9736 – under consideration in New York, indicating that the measure would further erode a workers’ compensation system already in trouble.

“The legislation contains significant increases in indemnity benefits, which would result in substantial increases in costs to all New York employers without necessary cost-cutting reforms,” said the AIA.

“New York’s workers’ compensation system is in dire need of reforms to reduce unnecessary costs, disputes and delays that riddle the system, increasing costs for New York employers without providing any benefit to injured workers,” stated Gary Henning, AIA assistant vice president, northeast region. “Not only does A. 9736 fail to include any necessary reforms while increasing indemnity benefits, the legislation also contains a host of new provisions that would further imperil New York workers’ compensation by piling even more inefficiencies on the system.”

The AIA noted that “New York’s system is already one of the most expensive in the nation. A 2003 study by the Oregon Department of Consumer and Business Services ranked New York as the eighth most costly state among 51 jurisdictions. The increased costs in this bill push New York employers” workers’ compensation costs much higher.

“Reforms are essential to fix New York’s system. Reforms to substantially reduce costs should include: the use of objective medical guidelines to determine impairment and calculate Permanent Partial Disability (PPD) benefits; a cap on PPD benefits; encouraging return to work via offsets of benefits and employer reports; and changes in scheduled benefits.”

The AIA also stressed that “in addition to increased indemnity benefits that are expected to increase costs by as much as 25 percent, there are several new cost drivers in this bill, including:
— Weakening the exclusive remedy which currently serves as the bedrock principle of a stable workers’ compensation system;
— Increasing attorney involvement in a system that is already wracked by excessive attorney participation, disputes and delays;
— Allowing organized labor to select the insurance carrier;
— Creating a “medical trust fund” that essentially creates a state-mandated health program for uninsured workers that would require the workers’ compensation insurer to initially pay for the medical treatment even where the claim is later found to be non-compensable;
— Establishing a new “earner protection policy” that would create severe disincentives for return to work as workers would be allowed to receive almost their total income without returning to work; and
— Impairing prompt and appropriate return to work by eliminating the current prohibition on indemnity benefits exceeding pre-injury wages.

“Adoption of any of these new programs would only create further inefficiencies in the New York system and increase costs for New York’s employers. Rather than adopting such untested and unsound cost drivers, New York needs to adopt meaningful reforms that will make the state’s workers’ compensation system more competitive with those in other states,” added Henning. “The legislature should reject these new cost drivers and implement real reforms to reduce costs.”

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