Removes the mandatory aggregate trust fund deposit requirements for non-scheduled permanent partial disability cases

BILL NUMBER:S1760

Title of bill

An act to amend the workers' compensation law, in relation to removing the mandatory aggregate trust fund deposit requirements for non-scheduled permanent partial disability cases

Purpose

Remove mandatory aggregate trust fund deposit requirements in non-scheduled permanent partial disability cases.

Summary of provisions

Section 1: 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 2: Provides an effective date.

Existing law

Current law mandates a deposit into the aggregate trust fund in non-scheduled permanent partial disability cases. This bill would remove that requirement. Instead, the Workers' Compensation Board would have the discretion to require a deposit in certain cases, as was the case before the 2007 reform.

Justification

The 2007 Workers Compensation Reform was intended to increase benefits for workers while providing immediate and long-term savings to businesses in New York State. While it was successful in providing immediate savings, the long-term savings have not been realized. Businesses across New York Stale are seeing their rates climb at an alarming rate, In fact, the loss-cost level change has gone from a decrease of 6.4 percent in 2008, to an increase of 4.5, 7.7, and 9.1 percent for the policy years of 2009, 2010, and 2011, respectively.

The requirement for carriers to make a deposit into the aggregate trust fund for the present value of a claim in non-scheduled permanent partial disability cases is a significant cost driver in Workers Compensation. Requiring upfront payment of a claim (that could extend up to ten years and cost in the hundreds of thousands of dollars) places tremendous financial burdens on carriers. These burdens are passed on to employers, especially in the event an employer participates in a high deductible plan.

Also, requiring a deposit of the present value of a non-scheduled claim is a difficult and uncertain process. The amount of such claims can change significantly over the life of the claim depending on the wage-earning capacity of the claimant. Under current law, the carrier is not entitled to any refund in the event the actual value of the claim is less than the amount of the deposit.

The huge immediate cost imposed by requiring the deposit in non-scheduled cases also has the effect increasing the amount paid out as a result of the settlement process outlined in Section 32 of the Workers Compensation Law. This is also a cost that ultimately is passed on to employers.

Finally, due to the fact that the State Insurance Fund is exempt from these deposit requirements, the Fund is able to maintain an unfair competitive advantage over private carriers. This bill would remove the ATF deposit requirement and reduce costs to carriers and employers without affecting 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

S.4587/A.1569 of 2013-14; S.7468/A.9386 of 2012

Fiscal implications

This bill could result to significant savings to workers compensation carriers and employers throughout New York State

Effective date

This act shall take effect on January 1 next succeeding the date it shall have become law and shall apply to any award made on or after such date.