Relates to assessments on workers' compensation policies and removes the mandatory aggregate trust fund deposit requirements for certain non-scheduled cases

Summary of provisions

Section 1 of the bill would amend section 151 of the Workers' Compensation Law to authorize the Chair of the WCB to establish an employer based pass-through surcharge.

Section 2 of the bill would amend paragraph 3 of section 50 of the Workers' Compensation Law to include the employer based pass-through surcharge.

Section 3 of the bill would amend subparagraph 7 of paragraph 3-a of section 50 of the Workers' Compensation Law which addresses the termination of a self-insurer to include the pass-through provisions.

Section 4 of the bill would amend clause 2 of subdivision (a) of subparagraph 10 of paragraph 3-a of section 50 of the Workers' Compensation Law to include the pass-though surcharge.

Section 5 of the bill would amend subparagraphs 11 and 12 of paragraph 3-a of section 50 of the Workers' Compensation Law to include the pass-through surcharge for former group self-insurers and non-municipal groups authorized to self-insure.

Section 6 of the bill would amend subdivision (h) of subparagraph 8 of section 15 of the Workers' Compensation Law to establish the employer based pass-through surcharge in the Special Disability Fund.

Section 7 of the bill would amend section 25-a of the Workers' Compensation Law to establish an employer based pass-though surcharge in the Fund for Reopened Cases.

Section 8 of the bill removes language from Section 27 of the Workers Compensation Law that makes it mandatory for carriers to deposit the present value of a non-scheduled permanent partial disability claim into the aggregate trust fund.

Section 10 of the bill provides an effective date.

Justification

This bill would change the mechanism by which the New York State Assessment (NYSA) fund assessments (151, 151-IDP, 15.8, 25A, and Special Funds Conservation Committee) and policyholder

surcharge are collected on workers' compensation policies written in New York.

The bill authorizes the WCB to replace the current assessment system with a simple pass-through surcharge, The NYSA policyholder surcharge would be an employer based pass-through surcharge booked outside of premium. This change will take what is a cumbersome and issue plagued process (misalignment of bases, timing, financial accounting, and policyholder surcharge rate development) and turn it into an easily administered and auditable funding mechanism for the five funds covered by the assessment, In addition, by eliminating the assessments, the WCB and the New York Compensation Insurance Rating Board will realize direct administrative savings by eliminating the production and mailing of 14 invoices per calendar year for each insurer writing workers' compensation in New York and the State Insurance Fund.

This legislation also addresses an unintended consequence of the 2007 Workers' Compensation Reform by removing the requirement of carriers to make a deposit into the Aggregate Trust Fund ("ATF"), The 2007 reform intended to increase benefits for workers and provide immediate and long-term savings to businesses in New York State. While the legislation was successful in providing immediate savings, long-term savings have not been realized. In fact, New York businesses are seeing their workers' compensation rates climb at an alarming rate.

A significant cost driver of rates is the requirement of carriers to make a deposit into the ATF for the present value of a claim in non-scheduled permanent partial disability cases, Requiring payment of a claim up front (that can take years to resolve and cost hundreds of thousands of dollars), places tremendous financial burdens on carriers. Compounding the issue is that calculating the present value of a non-scheduled claim, and thus, the deposit, is a difficult and uncertain process for carriers, The value of claims can change significantly over the life of the claim, depending on the wage earning capacity of the claimant. As a result, carriers must build such uncertainty into the deposit which is a cost that is ultimately passed on to employers.

It is important to note that removing the ATF deposit requirement will not affect the amount of a claimant's benefit under section 15 of the Workers Compensation Law. Carriers would still be liable to pay the full amount of the claim as required under law.

Legislative history

New bill,

Fiscal implications

This bill will result in administrative savings to the WCB,

Effective date

The act shall take effect immediately, provided however the amendments affecting the ATF shall take effect on the first of January next succeeding the date on which it shall have become a law, and shall apply to any award made on or after such date,