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What to expect from New York’s new Workers’ Comp Reform law

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in Best-Practices Leadership,Leaders & Managers,Management Training

Governor Eliot Spitzer is trumpeting workers’ compensation reform as a positive step for both employers and workers. Although the Workers’ Compensation Reform bill recently signed into law provides just a skeletal outline of what New York’s workers’ comp program will one day look like, both business and labor groups are cautiously optimistic.

New York’s workers’ comp premiums are among the highest in the nation, but benefits paid to workers lag far behind other states. Reform proponents argue the reforms in the bill, signed into law in March, will reduce workers’ comp premiums by 10 to 15 percent.

Most of the heavy lifting in workers’ comp reform will come from the governor’s advisory committee, which includes the superintendent of insurance, the general counsel to the Workers’ Compensation Board, the state commissioner of labor, two AFL-CIO representatives, two New York State Business Council representatives and two representatives chosen by the leadership of the state legislature.

Case management, penalty reforms

Key highlights of the Workers’ Compensation Reform bill:

  • Benefits will increase across the board. Maximum benefits will rise from $400 weekly to $500 over the first year, $550 in the second year and $600 in the third year. After the third year, the maximum benefit will be set at two-thirds of the average weekly wage in New York and adjusted annually.
  • Minimum benefits will rise from the current $40 per week to $100.
  • Benefit duration will be capped, so long-term workers’ comp recipients will lose benefits. Each long-term case will be evaluated individually to develop strategies to get injured workers back on the job and find alternatives for hardship cases.
  • New York will move to the case management approach that other states have found successful. Specifically, early intervention with rehabilitation programs will seek to return workers to their jobs sooner.
  • Penalties for employers who do not provide workers’ comp coverage will be increased and other anti-fraud measures will be offered online. They will include allowing the state to close down workplaces when employers fail to provide coverage.
  • The bill shuts down the Second Injury Fund, established after World War II to help injured veterans. Squabbles between insurers and the fund have mired the system in needless litigation.
  • Another victim of the bill will be the Compensation Insurance Rating Board. The board will continue to set workers’ comp rates until Feb. 1, 2008. The law directs the state’s superintendent of insurance to recommend to the legislature what, if anything, should replace the board by this September.

Changes seen in the workplace

With the new legislation, most employers hope to see lower workers’ comp premiums. That most likely won’t occur right away. The state will begin gathering data on system costs to determine concrete cost-cutting measures, and that will take some time.

However, employers should benefit from the case management techniques the law envisions. Many states have seen injured workers returned to work faster with aggressive case management, which lays out a therapy regimen shortly after injury. Generally, this approach results in workers returning to work more quickly, thereby reducing workers’ comp payouts and premiums.

According to the governor’s plan, insurers and administrative law judges should have new medical guidelines by the end of the year. Employers could expect the first premium reductions from these reforms in 2008 at the earliest.

Speeding up the courts

If these reforms aren’t ambitious enough, the governor also seeks to speed up workers’ compensation courts. Part of the advisory panel’s job will be to streamline the workers’ compensation adjudication process.

Critics of the current system point to numerous cases languishing in the workers’ comp system. Protracted litigation keeps workers from receiving benefits and delays their return to work. It also runs up the legal bills for insurers. The governor’s advisory panel is looking into ways to move things along by setting internal deadlines for each step in the process.

Momentum?

Both business and labor leaders have expressed their support for the reforms, but how they will actually affect employers is still up in the air. The state has consistently cut costs over the last decade, but the savings have never turned into workers’ comp premium reductions. Maybe now they will.

Employers should check with their insurers to learn when new case management strategies are coming online. If both employers and the government press insurers, changes may occur sooner.  

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