NY Fees over 18%
An employer pays, in addition to the comp premium, an assessment for the operating costs of the Workers’ Compensation Board and certain “special funds”, principally the Second Injury Fund and a fund for claims that have been closed for several years and reopened. Other states have these surcharges, amounting to a few percent of premium, but only New York has an assessment over 15% (currently over 18%). Why?
Reason #1: Bigger is Better
The answer, if it can be called an answer, seems to lie in a “bigger is better” attitude which has been part of New York comp for over 80 years. New York comp is also superlative in number of comp hearings, trials and appeals, so much so that at one time the annual number of hearings was over 600,000 and the number of appeals, 40,000 per year, exceeded the number of hearings in even the largest of states.
The number of hearings was so great that a research institute studying the NY comp system at first concluded that the number of hearings had an extra zero added by mistake. (Hearings are currently at 200,000/yr, or less.)
To manage all this, the NY comp board required over 1,500 employees, which was more than the combined comp board staffs of all states east of the Mississippi (if Florida is not included).
Reason #2: Second Injury Fund Payments
NY also led in second injury fund payments. A second injury fund pays most of an employer’s comp claim if the worker had a previous serious permanent injury. What drove the payments to the highest in the nation was the NY board’s stunning number claims for “permanent partial disability”, an award that was infrequent to rare in other states but was present, or at least possible, on nearly every claim in NY involving a back. Since extended disability on back claims was greater for older workers, second injury fund was usually involved. Older workers have the bulk of preexisting disability.
Reason #3: Reopened Cases
Finally, the assessments for “reopened cases” were anomalously high in NY. A back claim which remained open would in all likelihood continue to be litigated. But if the attorney asked that the claim be declared a permanent partial disability, but be closed without awards, the board would grant the request.
Such claims would be “warehoused” by the law firms as future assets. When the worker retired, the claim would be reopened and considered for permanent partial disability settlement since, it was claimed, the worker had retired in part due to the disability. (This has since been changed and future claims are more likely to be treated as voluntary retirements not qualifying for settlements, but many still in the pipeline must be paid for by the fund for reopened claims.)
Can Assessments Ever Come Down?
That, in brief, is why the assessments are so high. Can they ever come down to the level of the national average? Certainly, when it is recognized how they came to be so high in the first place, and there is hope for the future.
First, the number of reopened claims will diminish, since the new law for maximum amounts of future payments for permanent disability are a hindrance to “warehousing”. Then, the Second Injury Fund is in the process of being closed. Although that will take years there will be a steady decrease in payments each year.
The last factor, board expenses, will be a bit more difficult. The board has never shown an interest in substantial reduction of its total staff. It was predicted that the change from paper files to e-files would greatly reduce the staff, but that is still in the future, if ever. (Imagine the work hours which were necessary to transport paper files for 600,000 hearings a year to hearing points dozens of miles from the point of storage.)
So, the assessments, slowly, will come down. But they have a long way to go.
Author: Attorney Theodore Ronca is a practicing lawyer from Aquebogue, NY. He is a frequent writer and speaker, and has represented employers in the areas of workers’ compensation, Social Security disability, employee disability plans and subrogation for over 30 years. Attorney Ronca can be reached at 631-722-2100.
Editor Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their worker’s compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com.
Contact: mstack@reduceyourworkerscomp.com.
WORKERS COMP MANAGEMENT MANUAL: www.WCManual.com
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