N.Y. Gov. Pataki Seeks Workers’ Comp Compromise with Own Plan

Speaking at The Business Council’s annual Small Business Day, New York Governor George Pataki proposed a workers’ compensation reform package that he claims would increase benefits by 25 percent while also cutting employers’ costs by 15 percent.

He positioned it as part of a jobs-creation effort.

“We know that enacting tax cuts and lowering the cost of doing business is a proven way to create new jobs,” Pataki said.

He said the workers’ comp reforms passed in 1996 have helped. “But that was 1996, and it’s now 2004. And I know we can’t simply say, ‘Look at what we did back then,'” he told the small business crowd.

“We do understand that high workers’ comp rates are part of the problem you face in your desire to grow.”

Pataki said he hopes his plan can strike a balance between the demands of business and labor.

“Most importantly, these new reforms strike a balance between controlling costs for those who create jobs — businesses— with the needs of workers who risk their health and safety to provide for their families and keep New York’s economy growing,” he said.

Initial reaction from employers was positive.

“A 15 percent improvement in costs would be welcome news for the business community and would show the type of progress we have long sought from workers’ comp reforms,” said Business Council President Daniel B. Walsh. “We look forward to working with the governor and the legislature to achieve real reform again this year.”

Workers’ Compensation Chairman David P. Wehner was also optimistic. “The governor’s legislation is responsible and fair. Injured workers deserve a benefit adjustment and New York needs a plan that does not needlessly add to the costs of doing business and creating jobs. This proposal clearly strikes a balance with the concerns of injured workers and business owners,” Wehner said.

But labor’s reception was cooler, with the AFL-CIO arguing that the first hike in benefits in 12 years should be better than what Pataki is offering.

Pataki’s proposed changes include:

• Increasing benefit levels by 25 percent. The maximum benefit would increase from $400 to $500 per week.

• Expanding the range of injuries for which benefit levels are scheduled in accordance with the severity of the disability. Currently, cases in which benefits are not scheduled account for 13.6 percent of claims but more than 76.6 percent of overall costs.

• Allowing employers and workers in unionized factories to negotiate benefits and case resolutions under the Alternate Dispute Resolution (ADR) program. This program allows employers and unions to include alternative administrative methods for providing comp benefits. It is currently available only to the unionized construction industry.

• Authorizing a pharmaceutical fee schedule.

• Authorizing the Workers’ Compensation Board to initiate a pilot program designating a geographic location or employer to process undisputed claims separate of board intervention.

• Reducing employer assessments for the Second Injury Fund by adjusting the calculation used to determine the annual assessments from 150 percent of the previous year’s disbursements to 125 percent. Applying this formula to the 2003 disbursements would have cut the assessment up to $108 million.

• Allowing claimants to receive non-emergency medical procedures costing less than $1,000 without seeking prior insurer authorization. Currently injured workers must seek authorization before any non-emergency procedure costing more than $500.

• Expanding the “payment without prejudice” provision to include prescription medicines. Under this program, insurers may initiate benefits prior to litigation without admitting liability.

• Guaranteeing claimants’ continued access to prescribed medicines and prosthetics while their cases are being litigated under appeal.

• Enabling high wage earners the option to supplement workers’ compensation benefits by purchasing additional insurance.

• Requiring insurers to reimburse claimants for out-of-pocket expenses related to prescription drugs within 45 days.

Pataki’s legislation denies benefits to claimants who are injured while in the act of committing a crime. It would also enact into law an insurer’s right to discontinue benefits for a claimant convicted and incarcerated for a crime.

Currently, the cost of the New York workers’ compensation system is 20 percent higher than the national average, with only Louisiana higher ($11,817) in average claim cost than New York ($11,793).

Additionally, New York ranks highest among the 50 states in percentage of claims that result in indemnity benefits and is fifth highest in the average cost for permanent partial disability awards at $84,783. Only New York and two other states (Michigan and Arizona) impose a lifetime entitlement to permanent partial disability benefits.

Lawrence T. Gilroy, chairman of the New York Compensation Action Network, said his group is seeking a set of reforms that would turn New York’s workers’ compensation system from the nation’s ninth costliest to a model for the rest of the U.S.

NYCAN has warned that a proposal that would raise benefit levels across the board without addressing associated costs would raise premiums on employers in the state by more than 25 percent.

Instead, NYCAN supports a cap on the duration of permanent partial disability payments, objective medical guidelines, such as those developed by the American Medical Association to determine the degree of impairment, and expanding the list of scheduled permanent partial disability awards.
Pataki’s package did not address permanent partial disability payments.

The Business Council has also identified further workers’ comp reform as one of its top legislative priorities. The council is strongly supporting a bill (S.5320-Libous, A.8862-Schimminger) that would:

• Limit to 10 years the duration of benefits given to injured or sick workers in cases in which benefits are not prescribed by statutory schedules. The goal is to give workers both ample benefits and sufficient time to seek retraining to return to work.

• Provide for Social Security and pension offsets—that is, reductions in workers’ compensation benefits applied when workers receive Social Security and/or pension benefits.

• Give injured workers only half of remaining scheduled benefits if they return to work before scheduled benefits expire.

• Implement meaningful objective medical guidelines to determine the degree of disability and the ability of workers receiving benefits.

The highly-touted 1996 reforms limited the ability of third parties to sue New York State employers, mandated safety programs for some employers based on safety records, created new anti-fraud protections, and helped reduce costly delays in the workers’ comp system.

Also at Small Business Day, Senate Majority Leader Joseph Bruno addressed the Senate’s proposal to create a new health-insurance tax credit for some small businesses, the governor’s workers’ compensation reform proposal, the challenge of enacting a state budget on time, and the Senate’s job-creation proposal. “Nothing is more important that helping small businesses be competitive and grow,” Bruno said.

State Senator James Seward (R-Oneonta) and Paul Macielak, president and CEO of the New York Health Plan, discussed the challenge of making health insurance more available and affordable for smaller businesses. Sen. Seward reviewed the Senate majority proposal to create a 50 percent health-insurance tax credit for some small businesses.

Michael Misenhimer, executive director of the Empire State Subcontractors’ Association, and Philip LaRocque, executive vice president of the New York State Builders’ Association, reviewed how skyrocketing costs of general liability insurance are hurting New York’s construction industry.

Joseph DiGiovanni, vice president for public affairs for the Liberty Mutual Group, discussed the case for workers’ comp reform.

Nearly 98 percent of employers in New York State are small businesses, 80 percent of which have fewer than 10 employees.