N.Y. Gov.: New Workers’ Comp Bill Will Offer Relief to Businesses

New York State Gov. Andrew Cuomo said his administration plans to introduce new legislation to continue to improve the workers’ compensation system and provide relief to thousands of businesses.

The new proposals were included in the governor’s 2013 State of the State report, published on Jan. 9. The following are the main proposals:

Resolve Employer GSIT Liability

The report noted that starting in 2006, because of the negligence of many involved in the group trust business, a large number of group self-insurance trusts (“GSIT”) began to default. Statutory changes in 2008 enhanced the Workers’ Compensation Board’s ability to pursue action against responsible parties.

The 2011 executive budget effectively capped the potential for future defaults by closing the group self-insurance trust program to all but the healthiest GSITs, according to the report. However, the defaulted trusts (and, as a result, the state) are still saddled with significant liabilities.

The report said a system-wide solution is required to minimize the potential costs of doing business in New York currently faced by healthy self-insurers, and to provide the 10,000 businesses that are affected by GSIT insolvencies with repayment mechanisms that feature easily attainable repayment options resulting in final releases.

Under the proposal, a bonding program would be implemented to address these issues. The bond sale’s proceeds would go to purchase assumption of liability policies for claims associated with defaulted GSITs. The state can then offer much more flexible repayment plans that will ultimately result in settlement and release for insolvent GSIT members.

Combining Assessments

Gov. Cuomo also plans to make workers’ comp assessments more equitable and transparent, and help produce a more efficient marketplace. The report noted that over the life of the workers’ comp system, separate assessments have been established and annually charged to New York businesses to fund a variety of expenses. These various assessments are billed separately by the state. The report said these separate assessments created an overly complicated process to fund the workers’ comp system. Additionally, the report said, what a particular business pays in assessments differs depending on how a business chooses to insure its workers.

The report said the existing assessment process places a disproportionate burden on long-term self-insurers and does not permit employers to easily change coverage types. Gov. Cuomo will seek to combine all workers’ comp assessments into one assessment and create a single process for calculating assessments irrespective of how an employer maintains workers’ comp coverage.

The new assessment would be calculated based on the overall anticipated yearly expenses of the workers’ comp system and will be assessed upon all employers based on an equitable and transparent formula. The calculation of a single assessment rate would be more efficient for the state to administer and would lessen the carriers’ administrative burden of assessment collection and payment.

Closing Unnecessary Funds

The governor is also seeking to reduces costs for New York businesses by closing unnecessary funds. For example, the legislation would close the fund for reopened cases to generate an immediate annual assessment savings to New York State employers of some $300 million, according to the report.