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PCI Disputes Cuomo Claims of Employer Savings in NY Workers' Compensation Reforms

Source: BestWeek - Thomas Harman

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Posted on 11 Apr 2013 by Neilson

Workers Comp in NYThe Property Casualty Insurers Association of America disputes New York Gov. Andrew Cuomo's claim that workers' compensation reforms would save employers about $800 million in costs, saying instead that the elimination of the Reopened Cases Fund will trigger a cost increase.

Cuomo commented on the recently passed 2013 state budget that contains the reforms. He said $500 million in costs to self-insured employers would be saved simply by consolidating assessments and a large portion of another $300 million in savings would occur via elimination of the RCF, for which payers are charged an assessment.

But Trey Gillespie, senior workers' compensation director at Property Casualty Insurers Association of America, questioned Cuomo's figures. Gillespie said Cuomo's estimate runs counter to an earlier projection by the New York Compensation Insurance Rating Board, which forecast an increase in future loss costs for employers of anywhere from 4.4% to 5.3%. The cost increase would be triggered in part by the closing of the RCF, a move that places $1.1 billion to $1.6 billion in unfunded liabilities onto carriers, he said. The IRB report said the removal of the assessment would largely offset at least part of any increase.

Cuomo's office issued a statement saying the RCF closing would eliminate the need for New York businesses to make payments into the fund. Other savings measures, the governor's office statement said, will increase competitiveness in the workers' compensation market and combat costs.

The savings to the self-insured "will eliminate an overly complicated and bureaucratic system that was not only expensive for the state but also for employers, Cuomo's statement said. The new system will achieve administrative efficiencies and provide predictability to employers. Of the savings for self-insured businesses, more than half will be generated for businesses in New York City.

One part of Cuomo's initial workers' compensation package that was excluded from the final reform bill was the plan to change the Aggregate Trust Fund. Cuomo sought to eliminate mandatory deposits and to prohibit future deposits into the ATF, which protects claimants whose carriers default on payments, but supporters of reform indicated that the payments were now handled by the Workers' Compensation Guarantee Fund. Carriers and employers believe the ATF to be a cost driver, Gillespie said. The IRB report indicated that long-term savings resulting from elimination of the ATF were needed to help offset the remainder of the cost increases expected on employers under the reform package.

The top five writers of workers' compensation insurance in New York state during 2011, according to BestWeek, were State Farm Insurance Fund of New York, with a 35.98% market share; American International Group, with 14.33%; Liberty Mutual Insurance Companies, with 7.87%; Hartford Insurance Group, with 7.51% and Travelers' Group with 5.06%, according to BestLink.


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