Rough estimates suggest that private carriers comprise 45 percent of the statewide market, the New York State Insurance Fund comprises 30 percent, and individual self-insured employers and group self-insured pools, trusts and plans account for the remaining 25 percent.
The New York Compensation Insurance Rating Board collects data from all insurance companies, including the State Insurance Fund, but does not collect data from New York self-insurers. Insurance rate-making data could not, therefore, lead to a complete evaluation of the effects of the swap on all employers in the state.
The Workers' Compensation Board provided Milliman with a transactional database of all lost-time claims in New York with loss dates between 2000 and 2005. Because this database included claims throughout the state, it covered private carrier, State Insurance Fund and self-insured claims. The database also included wage data on each claim.
The pricing model first had to determine what the cost of the indemnity benefits would have been had the claims in the database occurred in 2007. To do this, we adjusted all wages in the database to the 2007 wage level using a 3.5 percent annual wage inflation assumption.
We then isolated the nonscheduled permanent partial disability claims in the data and valued these claims for the life of each claimant using the 2007 average weekly wages and the disability rating percentage from the Workers' Compensation Board database. Superimposing the proposed duration limits resulted in a statewide savings of $882 million.
Having adjusted the historical wages in the Workers' Compensation Board database to the 2007 wage level, indemnity benefits for all other lost-time claims were determined, first using the current limit of $400 per week and a second time using the proposed $500-per-week limit. This resulted in additional statewide costs of $187 million.
The net savings of $695 million from indemnity benefits was then combined with reforms intended to streamline medical treatment, enhance return-to-work programs and strengthen anti-fraud measures to produce a systemwide savings in the range of 10 percent to 15 percent.
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July 1, 2007
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