While Albany’s elected leaders are hashing out the latest state budget, they need to add some relief for businesses plagued by the high costs of workers’ compensation.
This is not a new topic. Legislators and the governor can go to their archives and reacquaint themselves with all of the failures to reduce an unnecessary burden on businesses, nonprofits and local governments. They can skip ahead to the part where taxpayers wind up paying the largest cost as the system is constantly being gamed – legally, if unconscionably – and companies look to other, less-punishing states to locate.
Businesses, nonprofits and government do not want to deny anyone access to workers’ compensation. But New York’s program is spiraling out of control. In 2016, the state had the third-highest workers’ compensation premium rate, up from 19th highest just since 2008. This past year, the costs of the program increased more than 9 percent, and in some cases premiums increased by nearly 40 percent. This continues a decade of increases businesses have had to endure since the 2007 reforms.
It’s a complex issue, but there is a way forward that will help business without penalizing workers.
One area to address is the scheduled loss of use (SLU) awards, which bases benefits on a multiplier of time, type of injury and severity, instead of considering lost work time. Enormous awards have been granted even when there is no lost work time. In 2006, $509 million in benefits was paid systemwide in New York State. By 2015, the cost of the SLU awards had ballooned to just over $1 billion.
Not much has changed in the guidelines, despite the Workers’ Compensation Board’s project to modernize the SLU rating system. Despite advances in medicine, which are recognized in proposed new guidelines, new standards have not yet been implemented.
Another area of concern is the classification of maximum medical improvement (MMI), which the business sector points to as a major deficiency of the 2007 reform legislation due to the lack of specific criteria for commencing benefits. This problem stems from the matter of start dates. The 2007 legislation capped payouts at 10 years, but the start of the 10-year period can vary considerably, and that variation can be expensive. Instead, the state should start the clock at the date of injury, which business groups believe would significantly decrease the cost of claims.
The cost of workers’ compensation punishes businesses in New York. The budget process provides the moment to fix what is broken.