December 20, 2007 |
2007-R-0696 | |
NEW YORK'S WORKERS' COMPENSATION REFORMS | ||
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By: John Moran, Principal Analyst | ||
You asked for a summary of the recent New York state workers' compensation reforms.
SUMMARY
New York is implementing a package of statutory and administrative reforms to its workers' compensation system. The reforms are a mix of benefit increases and decreases, anti-fraud initiatives, and administrative streamlining aimed at resolving disputed cases more quickly. On March 13, 2007, the legislative package was signed into law, and effective October 1, 2007 the worker's compensation insurance rate, as approved by the Insurance Department, will decrease by 20.5%.
The reforms came out of negotiations convened by Governor Spitzer, which included bipartisan legislative leaders, labor and business leaders, and insurance industry representatives. For years the New York workers' compensation system has been called unresponsive and unfathomable. Previously, it had been the subject of several unsuccessful reform efforts.
BENEFIT CHANGES
Increases
The new law increases the maximum weekly benefit for injured workers:
1. from $400 to $500 on July 1, 2007;
2. to $550 on July 1, 2008;
3. to $600 on July 1, 2009; and
4. to two-thirds of the state's average weekly wage on July 1, 2010.
New York officials estimate the current average weekly wage at $1,000 (although the federal Bureau of Labor Statistics estimates it at $1,200). Once the maximum benefit reaches two-thirds of the average weekly wage, the maximum benefit will be annually indexed.
The new law also raises the minimum benefit from $40 to $100 per week.
The law increases the maximum weekly death benefit:
1. from $600 to $750 for an accident or disablement occurring on or after July 1, 2007;
2. to $825 for an accident or disablement occurring on or after July 1, 2008;
3. to $900 for an accident or disablement occurring on or after July 1, 2009; and
4. to the state average weekly wage for an accident or disablement occurring on or after July 1, 2010.
Decreases
The law established a limit on permanent partial disability (PPD) wage replacement benefits; these were previously lifetime benefits. Now workers classified with a PPD are limited to 225 to 525 weeks of benefits depending upon the injury's severity. Lifelong medical benefits for the injury continue.
The law creates a new protection for those who lose benefits because of this limit. If a PPD injury is 80% or greater, the worker can apply to be reclassified as totally disabled and potentially get benefits for life.
Also, the labor commissioner, in conjunction with the Workers' Compensation Board and the Insurance Department, must track all PPD claimants and report on them annually to the governor and the legislature.
The decrease in the PPD wage replacement schedule is estimated to save the system about $500 million a year. It is the single largest savings of the overall reform package.
ANTI-FRAUD PROVISIONS
The new law includes a number of new or enhanced penalties against employers that either do not provided workers' compensation insurance for their employees or who attempt to defraud the system by misclassifying their employees or underreporting their workforce size.
The following anti-fraud measures are estimated to save the system between $60 and $110 million a year. Since employers that cheat the system end up with their injured workers being covered by a fund to which all employers who buy workers' compensation insurance contribute, the reduction in fraud is expected to reduce the fund's costs.
Stop-Work Orders
The law authorizes the Workers' Compensation Board chairperson to issue stop-work orders and immediately shut down a business that is not complying with workers' compensation requirements. Such orders can be made for failing to (1) maintain workers' compensation coverage for employees and (2) pay penalties related to previous failures. These violations are deemed a sufficient danger to public health and safety to justify the stop-work order.
The order remains in effect until the chairperson directs its removal because the employer paid any necessary penalties and came into compliance of the law.
This part of the law became effective on July 11. Since that date the chairperson has issued about 30 of these orders.
Increased Penalties
Table 1 shows the increases in civil penalties.
Table 1: Civil Penalties
Offense |
Prior Law |
New Law |
Failure to provide worker's compensation insurance coverage for employees |
$250 |
$1,000 for every 10 days without coverage |
Intentionally and materially misclassifying employees as independent contractors or misrepresenting employees' duties |
None |
$1,000 for every 10 days |
Intentionally and materially understating or concealing payroll |
None |
$1,000 for every 10 days |
The law also increases the criminal penalties for failing to obtain workers' compensation coverage for workers but creates a two tier system depending upon the number of employees. The criminal penalties may be applied in addition to the civil penalties.
Table 2: Criminal Penalties
Failure to provide coverage for employees |
Prior Law |
New Law |
Employers with fewer than five employees |
Misdemeanor, subject to a fine (between $500 and $2,000) or prison for up to one year, or both |
Misdemeanor, subject to a fine (between $1,000 and $5,000). Jail time provision repealed. |
Employers with more than five employees |
Same as above |
Class E felony, subject to a fine (between $5,000 and $50,000) or prison from one to four years, or both |
Repeat offenses within five years, any size employer |
Fined between $1,000 and $5,000 |
Class D felony, subject to a fine (between $10,000 and $50,000) or prison from one to seven years, or both |
The new law makes it an affirmative defense to a criminal prosecution under this provision that the employer took reasonable steps to secure compensation coverage.
DEBARMENT FROM GOVERNMENT CONTRACTS
The law prohibits business owners that fail to comply with workers' compensation from bidding on public work contracts. It creates a one year ban on a business owner (or a substantially owned entity of such person) from bidding on a public contract if he or she was (1) fined, (2) served with a stop work order, or (3) convicted of a misdemeanor violation for failing to comply. It prohibits any owner (or a substantially
owned entity of such person) from bidding on public contacts for five years if he was convicted of a workers' compensation (1) felony or (2) a Class A misdemeanor for discriminating against an injured veteran.
STREAMLINING CLAIMS DOCKET
The New York reforms include a combination of statutory and administrative changes aimed at reducing the long delays in receiving benefits. For example, the new law decreases, from two years to one, the time before an outstanding contested case can be transferred to an expedited hearing calendar (dubbed the “rocket docket”). Also, if a notice is filed that a claim is contested, the chairperson may immediately move it to the expedited calendar.
It also requires the pre-hearing conference held with both parties to a contested claim to take place in 45 days rather than 60 days.
The law also doubles the fine, from $250 to $500, for an employer or insurer who appeals a decision for (1) the purposes of delay or (2) on frivolous grounds.
The governor has ordered the insurance superintendent, the Workers' Compensation Board chairperson, and the labor commission to lead a task force to oversee the implementation of the streamlining effort.
New regulations for the streamlined docket, which include a number of administrative changes in addition to these statutory changes have been drawn up and are now being considered for final approval.
Changes for Diagnostic Testing
The new law aims to reduce hearings over doctor-ordered diagnostic medical tests by raising the dollar threshold for prior authorization from $500 to $1,000. It also requires these tests be done through designated diagnostic networks, authorized under the law.
By avoiding hearings on the necessity of X-rays, MRIs, or other radiological exams, a claimant's diagnosis can be completed more quickly. By restricting the test to networks under contract with employers or insurers, the cost per test is reduced.
The law provides exceptions for (1) emergencies and (2) situations where the network provider is not within a reasonable distance from the claimant's home or place of work.
OTHER PROVISIONS
The law requires the labor commissioner to develop regulations for work safety, drug and alcohol prevention, and return-to-work incentive programs. Employers who implement one or more of these programs will receive insurance premium credits the insurance superintendent determines. Self-insured employers will receive a similar security deposit credit granted by the worker's compensation chairperson.
The legislature gave the Workers' Compensation Compliance Division approval to hire 20 additional investigators to help enforce the new and existing workers' compensation laws.
JM:dw