States Look to Workers Compensation Insurance Reform
From the East to the West Coast, states are looking to get Workers Compensation costs under control through reform. For example, in California, Governor Jerry Brown signed into law a $17 billion Workers Compensation insurance program that went into effect January 2013. The legislation is intended to increase benefits for injured employees and cut costs for businesses. California’s Workers Comp insurance costs skyrocketed in the past two years from $14.8 billion to $19 billion.
The bill’s provisions (there are almost 50) in California include increasing payments by 30% to workers who suffer permanent injuries on the job, while shortening the wait for approval of medical treatment from two years to three months. It also creates an independent review process for medical treatment and billing disputes, fee schedules for home health care, language interpretation and other comp-related services, and fees for current and future lien filings. The new law also ends coverage for insomnia, sexual dysfunction or mental health issues, unless they are directly related to a workplace injury. These types of claims often lead to litigation.
There are, however, skeptics of the California bill and whether it will indeed provide savings for employers and workers compensation carriers. They are waiting to see how all the provisions will play out.
On the other side of the coast in New York, Governor Andrew Cuomo in his state of the state address proposed several Worker Compensation reforms that were lauded as common sense by the insurance industry, including the Property Casualty Insurers Association of America (PCI), the American Insurance Association (AIA), and the National Association of Mutual Insurance Companies (NAMIC). Governor Cuomo’s proposal brings a number of changes to New York’s Workers Comp system and are intended to save New York’s employers an estimated $500 million without adversely affecting workers’ rights.
Cuomo’s proposed reforms, according to the AIA, include:
1. Simplifying and rationalizing the assessment mechanism for the workers’ compensation system; employers would be assessed on their pro-rata share of premiums, regardless of how they secure their workers’ compensation coverage.
2. Closing to new cases the aggregate trust fund and the reopened cases fund, with transfers to the aggregate trust fund ceasing immediately.
3. Issuing bonds to cover the $800 million in liabilities of the self-insured group trusts.
4. Increasing from $100 to $150, the minimum weekly benefit for injured claimants.
The proposals are designed to simplify the workers’ compensation system by having the state determine a single assessment methodology, allowing private insurers to easily collect this assessment from policyholders and transmit it to the state. Currently, insurers receive 14 different invoices for five separate funds annually, with the different funds using different years as the basis for their assessment.
“Governor Cuomo has taken an important step in reforming the workers’ compensation system, which should save New York’s businesses money,” said Gary Henning, AIA Northeast region vice president. “AIA applauds the governor for his proposal and looks forward to working with the legislature towards meaningful reform.”
Legislators in Illinois and Oklahoma are among the states also introducing Workers Compensation reforms this year.
Wholesale broker and MGU Caitlin Morgan has been specializing in the placement of guaranteed cost Workers Compensation for many years. Whether your client is a minimum premium account or a tougher to place risk, Caitlin Morgan is here to help you meet your clients’ needs. Give us a call at 877.226.1027.
Sources: AIA, ProgramBusiness.com