Editor’s Note: Working in New York

New York Governor Eliot Spitzer is off to a tremendous start on insurance issues, having helped engineer a major reform of the state’s workers’ compensation laws. Framing it as critical to restoring the state’s economic competitiveness, Spitzer made it one of his top priorities and he delivered in quick order.

Of course, he did not act alone. The measure was shaped in part by agents and insurers and in the end won the support of business, labor, Republicans and Democrats — not an easy thing to accomplish in Albany, or anywhere for that matter. It flew through the Legislature and landed on Spitzer’s desk in a day. He signed it into law immediately.

New York State’s workers’ compensation premiums have been among the highest in the nation, despite low weekly benefits for injured workers.

Scott Stevens, president of Dimension Fabricators, a Schenectady based manufacturer of steel products, put it in perspective: “As a New York manufacturer, we’ve had workers’ compensation as one of our great burdens for years. Even with a good safety record, this cost is right behind health insurance in our expense column. These reforms will reduce one of New York’s historically high business costs, helping us compete with our rivals in other states and countries.”

The legislation promises to increase benefits for injured workers for the first time in more than a decade, while reducing employer costs by 10 to 15 percent. That latter promise has insurers a bit anxious as it remains to be seen how the reforms pan out.

The maximum weekly benefit for injured workers will be increased from $400 to $500 in the first year, $550 in the second year, $600 in the third year, and to two-thirds of the average weekly wage in New York in the fourth year. Once the maximum benefit reaches two-thirds of the average weekly wage, the maximum benefit will be indexed annually.

The minimum weekly benefit will be increased from $40 to $100.

To offset the benefit increases, backers of the reforms also promise that cost savings worth hundreds of millions of dollars will be achieved by setting maximum number of years that permanently partially disabled claimants can receive cash benefits.

Insurers are cautious about whether the savings will materialize but mainly had positive things to say. Frank O’Brien, regional vice president for Property Casualty Insurers Association of America, congratulated Spitzer and the Legislature for “moving quickly to address the state’s escalating workers’ compensation crisis.”

Insurers agree with the increase in the maximum benefit for workers; the cap on permanent partial disabilities, which accounts for a large share of the cost in the system; the elimination of the Second Injury Fund for future cases and various anti-fraud provisions.

As promising as the workers’ compensation reforms are in and of themselves, their enactment could be a sign that Albany is reforming the way it does business. As PCI’s O’Brien put it:

“The comprehensive workers’ compensation reform package signed today shows promise and we are optimistic that the spirit of cooperation that was instrumental in achieving this legislative accomplishment can be carried over into other issues that will improve the insurance marketplace for all consumers.”