PropertyCasualty360

January 11, 2013

The National Association of Mutual Insurance Companies praised New York Governor Andrew Cuomo for his call to reform the state’s workers’ compensation insurance system, with the goal of bringing savings to businesses and competition to the marketplace.

In a statement, NAMIC State Affairs Manager John Murphy says, “NAMIC applauds Gov. Andrew Cuomo’s on-going commitment to improving New York’s workers’ compensation system. NAMIC supports many of the workers’ compensation reforms outlined in the governor’s State of the State address. We look forward to reviewing the proposed legislation and working with the governor and legislature to enhance and strengthen the system.”

The remarks came after Cuomo delivered his 2013 address, in which he laid out an ambitious agenda touching on gun control, economic development, clean technology and education.

In comments about workers’ compensation and unemployment insurance, Cuomo said his aim is to lower costs for doing business in the state and save businesses $1.3 billion. He also said he plans to increase unemployment benefits to workers for the first time since 1999.

“We must continue to reduce the cost of doing business in the new New York,” Cuomo said in his State of the State address. “We must reduce the crushing burden of unemployment insurance and workers’ comp. You hear this from almost every businessman in New York.”

The governor’s plan, as outlined in a 300-plus page book detailing his agenda for 2013, calls for legislation to:

• Provide savings to New York State’s employers.
• Eliminate unnecessary friction in the system.
• Alleviate, and ultimately resolve, the burden facing employers who are members of an insolvent group self-insured trust.
• Simplify and reduce assessments on employers.
• Promote system-wide transparency, efficiency, equity and consistency.
• Create more competition in the insurance market.

To eliminate the debt 10,000 businesses in the GSIT program face, the governor calls for a bonding program to purchase assumption of liability policies “associated with defaulted GSITs.”

Workers’ comp assessments would also become “more equitable and transparent” under the governor’s plan. The practice of assessments being billed separately would be replaced by one assessment to allow for the calculation of worker’s comp. The calculation would be based on “overall anticipated yearly expenses of the system” and would be assessed on all employers “based on an equitable and transparent formula.”

This would make assessments efficient for the state and lessen carriers’ administrative burden “of assessment collection and payment.”

Cuomo’s proposals would close unnecessary funds, such as the fund for reopened cases, which would generate “immediate annual assessment savings” of $300 million to the state’s employers.

The governor emphasizes that the legislation to reform the workers’ comp program would “provide greater transparency, equity and security to all stakeholders without infringing upon the right of injured workers.”

This is great news for New York employers. Hopefully these savings will last in the long term. However, workers comp insurance tends to be cyclical. Short-term solutions will end up translating into long-term savings only if Governor Cuomo is successful in sustaining reduced costs. However, if the state finds itself unable to carry the $1 billion in costs, then the way I see it, in a few years rates will be going up dramatically with no real long-term savings to show for these reforms. 

Either way, reducing your company's current and past experience mods, as well as reducing all the other policy factors, will give you a great advantage in terms of your workers compensation insurance. With workers compensation premium recovery, you can obtain refunds on past policies and reduce your current monthly installments, with future savings for you to keep.