The WCA opposes A10160/S6978, which would extend the term of the New York Compensation Insurance Rating Board (CIRB) as the rate service organization for setting workers’ compensation insurance rates for an additional five-year period.
The CIRB is an entity authorized by State law to propose Workers Compensation rates for private carriers. CIRB is trusteed and funded by private carriers. The 2007 amendments to the Workers’ Compensation Law included provisions that were intended to sunset CIRB’s authorization by 2012. In the course of the 2007 reform process it became clear that CIRB was unable to provide policymakers with accurate and reliable data. The Insurance Department rejected CIRB’s rate application in 2006 due to a lack of reliability, and reduced CIRB’s application in 2011 because it could not account for the disparity in CIRB’s claim experience as compared to that of the State Insurance Fund.
Based on dissatisfaction with CIRB’s performance, the Legislature and Governor public members were added to its Board in 2007 as an interim step to transferring its data collection and rate-making functions to the Insurance Department, now the Department of Financial Services (DFS).
In 2007 and 2008, CIRB recommended reductions in workers’ compensation insurance rates of almost 25%. These recommendations were made based on factors including (1) the imposition of time limitations on permanent partial disability benefits (PPD caps); (2) projected increases in the maximum weekly benefit rate; (3) the creation of a mandatory deposit of PPD benefits into the Aggregate Trust Fund (ATF) for private insurers; (4) the elimination of the Second Injury Fund; and (5) other anticipated administrative and regulatory forms related to insurer diagnostic test and pharmacy networks and Medical Treatment Guidelines (MTG).
From 2009 through 2011, CIRB retracted its recommendations, requesting increases in workers’ compensation insurance rates of more than 22%. It has now submitted an additional rate increase application of 11.5%. In essence, CIRB now contends that the impact of the 2007 reforms was not to decrease costs by 25%, but to increase them by 9.5%.
CIRB accounts for this reversal by claiming that the 2007 reforms have proceeded at a slower pace than it anticipated. This claim is unjustified. CIRB and all actors were aware in 2007 that the PPD caps would not result in significant benefit termination until 2015, and the impact of the caps on settlements is already being realized. CIRB was also aware in 2007 that the maximum weekly benefit rate would double in the five-year period after the reform legislation was enacted. Department of Labor data has demonstrated that increases in the maximum weekly benefit rate after July 1, 2008 have had limited impact on workers’ compensation costs, as two-thirds of injured workers do not earn sufficient wages to obtain a benefits in excess of $550 per week. Therefore, neither the PPD caps nor the increase in the maximum benefit rate present factors that were unaccounted-for in the 2007 and 2008 premium reductions, and cannot be responsible for the subsequent requests for increases in excess of 34%.
The use of diagnostic and pharmacy networks was fully and quickly achieved, and while the implementation of Medical Treatment Guidelines did not occur until the end of 2010, data has demonstrated that the use of the MTG has increased, not decreased insurer costs. Thus, the delay in implementing the MTG did not result in an increase in costs.
There is therefore no valid basis in support of CIRB’s applications for increases in 2009, 2010, 2011 or 2012. The state of the system in those years is unchanged from 2007 and 2008, when CIRB recommended substantial reductions.
It remains the case that CIRB is unable or unwilling to provide policymakers with accurate and reliable data upon which proper statutory, regulatory, or administrative decisions can be made. It is the position of the WCA that CIRB’s authority to function as the exclusive rate service organization should not be extended for an additional five year period, and that DFS should assume data collection and rate-making functions in the workers’ compensation system. A better course would be to extend CIRB authority for for one year and to hold hearings on a better entity and process to propose comp rates.
On June, 25, 2012, the WCA submitted oral and written testimony to the New York State Department of Financial Services opposing CIRB’s request for an 11.5% hike in employer’s workers’ compensation insurance premiums. A copy of that testimony can be found here.