Study: Assessments 'five times greater' than average in New York
The organization, which bills itself as a "think tank that examines how the workers' comp system influences local taxes and services" and "focuses on nonpartisan policy research, issues and ideas pertaining to workers' compensation policy in New York State," released a study saying New York has increased its assessment surcharges on workers' comp premiums over the last two years by 10.4 percent and 27.5 percent respectively.
"These assessments are essentially a tax on workers' compensation premiums and are used by state governments to fund the system," the study explains. "While states are free to choose various methods for funding their individual workers' compensation systems, the most common method is to impose an assessment or tax on premiums paid by employers." A total of 32 states impose the assessments.
In comparing premium assessments, New York's 20.2 percent was more than twice that of the next highest -- Minnesota, which charges 8.9 percent.
New York's Second Injury Fund accounts for half the assessment charges, according to the study. Also called the Special Disability Fund, it was created as "an inducement for employers to hire disabled veterans" and mitigates workers' comp benefits if an injured employee had a permanent impairment prior to filing his compensation claim.
The second-largest assessment funds the Reopened Case Fund that assists with claims that have been closed but later reopened. "If a closed claim reopens more than seven years after the work related accident, and if three years have passed since the last payment or award of lost wages, this fund assumes the payments," the study explains. "Since long-term benefits for permanent partial disability claims are now capped, more claims will become eligible for submission to this fund after capped benefits are paid in full. It is likely that the cost of this assessment will increase over the long term."
The study says the third-largest assessment is the cost employers pay for the state to administer the Workers' Compensation Board. "New York's administrative costs are quite high and, in fact, exceed the total cost of assessments in all the comparable states except Connecticut."
Legislation enacted in 2007 closed the Second Injury Fund to new claims and made other changes intended to reduce assessments. However, "for the last three years, assessments have been increased."
The study cites three "significant attempts at reducing this tax" in the reforms:
- The Second Injury Fund was closed to new claims effective July 1, 2007.However, "payments on open claims are expected to continue for many years."
- Group self-insurers, including municipal groups, were to be assessed based on premiums paid by their members rather than by indemnity payments. "Despite the legislation, the state continues to charge municipal group self insurers based on indemnity payments." This forces municipal groups to "continue to maintain this liability, while insurance companies operate under different rules," the study says.
- Claims disputes were to be streamlined. "In theory, a more efficient litigation system will cost less. In practice, the reform was accompanied by new regulations and requirements which require about as much oversight as the old system."
The efforts "have failed to reduce assessments over the long term," the study concludes.
Read more at the WorkersComp Forum homepage.
March 26, 2012
Copyright 2012© LRP Publications