New York: Study shows legislative reforms having desired effects

Employers and injured workers are seeing some benefits from legislative reforms, according to a new study. More significant changes may be several years off.

The Workers Compensation Research Institute reports the 2007 legislative reforms have brought New York closer to the national norms for maximum weekly benefits paid to injured workers. The implementation of a pharmacy fee schedule has resulted in cost savings to the system.

The key reform measures identified by the WCRI report were:

Increasing maximum statutory benefits.
Capping the PPD benefit duration.
Requiring development and implementation of medical treatment guidelines.
Adopting a fee schedule for pharmaceuticals.
Creating networks for diagnostic services and thresholds for preauthorization.
Increasing the speed of case resolution through administrative changes.

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With new disability duration guidelines taking effect in January 2012, it will be several more years before the full impact of that and other reforms will be reflected in the data, the report says. Also, future estimates of the impact of the legislation are "further complicated by the economic recession, which began late in 2007, just several months after the passage of the reforms."

Nevertheless, the report indicates some of the reforms are having the desired effects, especially with regard to benefits paid to injured workers. The legislation increased the maximum weekly benefit from $400 to $600 between 2007 and 2009; then sets it at two-thirds of the New York state average weekly wage.

"The goal of the increases was to bring New York maximum weekly benefits closer to national norms and reduce the percentage of workers whose benefits were limited by the maximums," the report says. "The first three increases reduced the share of workers affected by the maximum from 49 percent to 26 percent. We estimate that after the change tying the maximum benefit to the New York State average weekly wage, the percentage would fall further to approximately 16 percent."

The average price per pill decreased 10 to 20 percent as a result of the implementation and subsequent change of the pharmaceutical fee schedule. The initial fee schedule was tied to Medicaid, resulting in a price decrease. While the subsequent change increased the average pill price slightly, it was not to the previous levels.

The authors note that the statutory changes had various effective dates. For example, the caps on duration of PPD benefits apply to claims arising on or after March 13, 2007. "In contrast, new disability duration guidelines became effective January 1, 2012, and apply to all cases, except those that have at least one medical opinion finding a permanent impairment with a rating based on the 1996 Guidelines before January 1, 2012. Similarly, for all classified PPD benefits on or after July 1, 2007 regardless of the date of injury or disability, private insurers are required to make a lump-sum payment of the present value of any PPD into a special fund, the Aggregate Trust Fund, which then disperses payments to workers."

In terms of the effect of PPD benefit durations, there was a "13.5 percentage point decrease in cases that received PPD payments only -- with no lump-sum payment -- and a nearly 12 point increase in cases with a lump-sum settlement only -- with no PPD payments" from 2007/2008 to 2009/2010 for PPD/lump-sum cases at an average 12 months of experience. A similar pattern was reported for cases at an average 24 months of experience.

"Although the limitation on the weeks of PPD benefits is expected to result in large savings for the New York system, it will likely be several years before significant changes will be reflected in the data because it generally takes several years for PPD benefits to be determined," the report says.

Read more at the WorkersComp Forum homepage.

November 12, 2012

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