NYSIF Workers’ Comp. Advisor – 3^rd Quarter 2013

NYS 2013 Workers’ Comp. Reform

Questions and answers about the 2013-14 Business Relief Act and what it means to NYSIF customers

The Business Relief Act signed into law by Governor Andrew M. Cuomo as part of the 2013-14 NYS Budget includes sweeping reforms to the state workers’ compensation system projected to save $800 million for employers. Here’s a summary of what the changes mean for NYSIF customers.

Workers’ Comp. Board Assessments

How will the new assessment work?

The Workers’ Comp. Board (WCB) will charge employers one unified annual assessment starting Jan. 1, 2014. WCB will determine an assessment methodology that charges all employers based on a common factor, such as premium, and publish this information by Nov. 1, 2013, and annually thereafter. All carriers, including NYSIF, must now remit the assessment amount to the WBC as it is collected.

This one unified assessment includes, but is not limited to, assessment for the Special Fund for Disability Benefits, and for WCB administrative costs related to the Disability Benefits Law, the Volunteer Firefighters’ Benefit Law, and the Volunteer Ambulance Workers’ Benefit Law.

Will employers see higher assessment rates with the new methodology?

For NYS employers in general, the change in assessment methodology may result in some employers paying a slightly higher or lower share of the overall assessment. However, changes in the law regarding the Fund for Reopened Cases (FRC) [Section 25-a] and the Special Disability Fund (SDF) [Section 15(8)] are expected to reduce overall assessment costs, projecting a savings of $800 million for employers.

How will this impact NYSIF policyholders?

NYSIF policyholders will see a change in their bills to reflect the new assessment procedures starting with policies that take effect or renew on or after Jan. 1, 2014. As a service to customers, NYSIF will ensure that current policyholders do not pay higher assessment charges due to the change in the assessment formula for calendar years 2014 and 2015.

How is this different from the way NYSIF now collects assessments?

Previous, NYSIF charged policyholders for assessments and reserved funds for future assessments. NYSIF grew its reserves for assessments through prudent investments and containment of its administrative costs. In recent years, NYSIF did not charge policyholders for the full cost of the assessments and, instead, paid a portion for the annual assessments for its customers out of these reserves. Starting in 2014, NYSFI must charge policyholders for all assessments and remit the payments to the WCB as they are collected.

Will employers receive an itemized accounting of assessment components?

No. The WCB is combining the assessments into a single methodology to improve administrative efficiency. The assessment will show up as a single charge on policyholders’ bills. The WCB plans to publicize the various components of the assessment and how the assessment is calculated.

What changes were made to Section 25-a?

FRC will close to new cases on Jan. 1, 2014. Under 25-a, carriers could transfer liability for certain claims to FRC after seven years from the date of accident and three years since the last payment of compensation to the claimant. FRC, which does not exist in most other states’ workers’ compensation systems, generated significant litigation and costs for a small number of claims. Private carriers and NYSIF now assume the responsibility for handling these claims on behalf of their respective policyholders. The closure of FRC is expected to produce savings for businesses while having no impact on injured workers.

What will happen to Section 15(8) Special Disability Fund cases?

Assessments for SDF (i.e., second injury fund) will be made against affected employers rather than against insurers and Relief Act directs NYSIF to transfer these reserves to the WCB Chair for distribution to the state’s General Fund as administrated by the New York State Director of the Budget.

The monies released became available by the elimination of reserves held by NYSIF for future payments of state assessments. Any reserves held by NYSIF for future claimant benefits and medical costs remain intact and are not impacted. Furthermore, this transfer does not affect NYSIF discounts and dividends. NYSIF’s commitment to pricing policies and implementing dividends, discounts or differentials based solely upon risk and experience remains the same.

How does the Act affect NYSIF investments?

The Workers’ Compensation Law previously limited investments that NYSIF could make to grow its surplus and reserves. The Business Relief Act permits NYSIF to invest up to 10% of surplus in securities of American institutions, regardless of the company’s debt rating, and 15% of surplus under a prudent person standard.

Minimum Benefit Increase

The minimum weekly benefit increases from $100 to $150 for all injury claims on or after May 1, 2013, subject to existing rule that compensation benefits plus current earnings (or earning capacity) may not exceed one’s average weekly wage prior to the accident.

Compliance

How does the state ensure that employers correctly report both their occupational classifications and their payroll?

The WCB currently collects this information from all employers. The legislation gives the WCB the power to audit all employers, including self-insured employers, and thereby ensure the accuracy of the data used in the assessment calculations. Moreover, the legislation permits the WCB to conduct periodic audits of any employer, private insurer, or NYSIF regarding any assessment payment. It also provides for payment of any amount underpaid, along with 9% interest. Any insurance carrier or employer that knowingly makes a material misrepresentation of information concerning WCB assessments may be subject to a class E felony.

Prior law requires the WCB to asses a penalty of $2,000 for each 10-day period that an employer fails to secure workers’ compensation coverage. The legislation permits the WCB to assess a lesser penalty, allowing flexibility to assist employers with compliance.

What happens if a policyholder does not pay its assessment?

All carriers, including NYSIF, are now required to treat the non-payment of an assessment by a policyholder the same as a non-payment of premium for cancellation purposes. An employer’s policy may be cancelled for not paying its premium or state assessment if notice is given.

July 16, 2013

The New York Department of Financial Services on Monday approved a revised loss cost filing from the New York Compensation Insurance Rating Board (NYCIRB) with an effective date of Oct. 1, 2013.

The NYCIRB first filed an application on May 14, 2013, requesting a workers’ comp overall loss cost increase of 16.9 percent.

The Department of Financial Services disapproved the application in its Opinion and Decision on July 11 and invited the NYCIRB to refile. In its Opinion and Decision, the department stated its analysis indicates that an increase of no more than 9.5 percent would be reasonable.

On July 12, 2013, the NYCIRB refiled its application with the department, which was then approved by the department on July 15. The overall projected cost increase passed on to policyholders of approximately 2.8 percent consists of a 9.5 percent loss cost increase and the anticipated 2014 New York State assessment reductions.

Your clients’ workers compensation costs are rising.  Are you trying to show them that you are making an effort to reduce their costs?

The quickest and easiest way to ensure that your clients (especially those renewing after October 1st) have the best underwriting profile to enter this new hardening market is through workers compensation premium recovery. This service offers to knock down current and prior years’ experience modifications, obtain cash back returns, and ensure future savings for your clients to keep.  Knocking down experience mods will certainly help your clients with the new loss-cost increases and experience rating split point change. There are no out of pocket expenses for you or your clients and we pay first-year and renewal commissions to referring brokers.

July 11, 2013

PropertyCasualty360

The nation’s 20 state-run workers compensation funds showed strong growth for the second straight year, according to a new A.M. Best report.

State funds accounted for 44 percent of total net premiums written in 2012, the report says.

Net premiums written increased 7.1 percent in 2011 and 13.5 percent in 2012, reaching $6.9 billion last year–the highest level since 2008. The report says the increases are an outgrowth of a hardening market as the economy returns to a growth mode.

Rate increases accounted for some of the increase in NPW, but overall premium growth was only slightly higher than the 6.8 percent and 13.1 percent respective increases in the A.M. Best workers’ comp composite for 2012 and 2011.

Premium income rose for state funds in both years despite a precipitous decline in the California state fund, the report said.

Excluding State Compensation Insurance Fund of California (SCIFCA) premiums, the premium increase of the 19 other competitive state funds rose a 18.3 percent in 2012, compared to 11.7 percent in 2011–an indication state funds may be fulfilling their role as residual market providers to a greater degree as workers’ comp markets harden.

The report notes one emerging concern: the Internal Revenue Service’s Exempt Orga­nizations division is reviewing the tax-exempt status afforded state funds.

“While still in a preliminary and exploratory phase, any eventual IRS rulings in this regard could have significant impacts on affected state funds’ markets, business strategies and operations,” the report said.

One factor in premium growth is most of the funds predominately serve residual markets–small businesses, for example–while also competing with the private market. Tyypically during hardening markets, some businesses find it more difficult to afford or secure coverage in the voluntary market and turn to state funds.

The report noted that each fund tends to develop its own, unique characteristics, largely depending on its business profile and growth initiatives.

The report said some state funds maintain a steadfast role in the residual market and often contend with political pressure that can affect surplus and rate levels. Others have undergone transformations toward becoming private, mutual insurers. Some funds have taken to writing business beyond their state borders, the report said.

 The term “state funds” is used for the 20 U.S. competitive state compensation funds, the report said.

It does not include the monopolistic funds oper­ating in North Dakota, Ohio, Puerto Rico, Washington or Wyoming.

The report said that financial information for former state funds also has been excluded from the historical data presented here.

The report said that the pace of rate declines had been slowing since the second quarter of 2010, but rates continued to fall until the second quarter of 2011.

At that point, rate changes turned positive, and they have trended higher since. Initially, much of the premium increase was achieved by reduced use of scheduled credits within rate plans, rather than through direct increases in filed rates, the report said.

However, most companies had filed for and received approval of increased rates, which took effect in 2012.

Premiums grew for state funds despite the fact that the SCIFCA reported that premiums declined 11.2 percent in 2011 and 10.8 percent in 2012.

California was the only state fund to report such substantial double-digit declines in both years, the report said.

“A.M. Best believes these recent declines in SCIFCA’s premiums largely reflected the continued highly competitive workers’ comp market in California; the state’s higher than average unemployment rate; and the effects of the company’s internal restructuring initiatives over the past several years to improve operating effi­ciencies and underwriting results,” the report said.

SCIFCA’s depopulation continued in 2012, with its policies declining 10 percent rom the prior year.

The rise in the state fund market is not good news for brokers. Many employers are forced into the state fund due to high premiums and bad experience and brokers are the ones who take a major hit as they will not make commissions. If you have clients that you've lost to the state fund or you are at risk of losing to the state fund because of pricing, there is no better solution than offering them workers compensation premium recovery. Not only will your client see immediate refunds on current and prior years' policies, they will have a better underwriting profile to enter the renewal marketplace with, which will enable you to place the renewal workers comp policy back into the voluntary market and once again you'll continue earning commissions while keeping your client happy. Furthermore, you will earn first-year and renewal commissions with our workers compensation premium recovery service.

July 8, 2013

Business Insurance

Commercial property/casualty insurance rates increased 5% on average for policies that renewed in June, according to a report issued by Dallas-based electronic insurance exchange MarketScout on Friday.

Commercial automobile coverage and workers compensation each experienced rate increases of 6%. Commercial property, general liability, directors and officers liability and employment practices liability insurance each posted increases of 5%. No line reported an increase of less than 2%.

Among industry classes tracked by MarketScout, contracting, service and transportation reported the largest increases at 6% each, while coverage for public entities reported the smallest increase at 2%.

Accounts of all sizes reported increases with the smallest accounts reporting the largest increases at 6% while the largest accounts reported increases of only 2%.

“The market is steady right now,” said MarketScout CEO Richard Kerr in a statement discussing the June results. “There were no big surprises in July 1 treaty renewals and even the impact of Superstorm Sandy seems to have been forgotten by most property insurers.”

Brokers who offer value-added services to their clients and prospects continue to expand their book of business and make higher commissions with the higher rates in the hardening market. We have helped many brokers and their clients with our workers compensation premium recovery service, and we have also recently added CompEdge to ensure that your clients have the lowest possible experience upon renewal. We make brokers look like heroes to their clients and prospects and pay commissions on top of that.

Towers Watson

June 10, 2013

Insurance carriers continue to report increases in commercial insurance prices, almost 7% in aggregate during the first quarter of 2013, according to the Commercial Lines Insurance Pricing Survey (CLIPS) conducted by Towers Watson (NYSE, NASDAQ: TW), a global professional services company. The results of the current edition of this survey mark over two years of consecutive overall price increases and the fifth quarter of increases across every one of the lines surveyed. The survey compared pricing for coverage purchased during the first quarter of 2013 to that of the same quarter in 2012 as reported by participating carriers.

Overall price changes are consistent with the results of the two prior surveys, with pricing for each line of business increasing by at least 4%. Among the survey's key takeaways:

• Even with evidence of a slight deceleration in price gains, workers compensation and employment practices liability showed the largest price increases.
• Pricing increases for professional liability saw a moderate acceleration, which in turn pushed similar increases in aggregate specialty line price indicators.
• Small account pricing gains accelerated slightly, almost to the level of large accounts, for which price increases moderated during the first quarter. Mid-market account price changes remained relatively stable.
• Insureds purchasing property coverage in the first quarter saw price increases in the mid-single digits.

"Interestingly, pricing for property grew only modestly, with less movement than might have been expected considering losses related to Hurricane Sandy," said Tom Hettinger, Towers Watson's Property & Casualty sales and practice leader for the Americas. Hettinger also noted, "That is not surprising, as there is plenty of reinsurance capacity out there."

"Capacity has definitely increased for property reinsurance, as mainstream investors are joining specialists in the search for yields, specifically through alternative investments such as catastrophe bonds and collateralized reinsurance," said Bob Betz, Florida practice leader of Towers Watson's Brokerage business. "June renewals of Florida personal lines business are an example of additional capacity significantly lowering prices on a risk-adjusted basis. We see reductions of 15% to 20%, and even more in isolated cases."

Historical loss cost information reported by participating carriers points to a very preliminary improvement in loss ratios in the first quarter relative to the same period in 2012 (excluding any identified catastrophes), as earned price increases more than offset reported claim cost inflation. This builds on the estimated improvement of more than 2% between 2011 and 2012, which comes from both the earning of price increases and lower claim cost inflation.

As rates continue to climb, brokers will need a tool to show premium reductions to their clients. Apex Services offers a solution that has been proven to be the quickest and most effective way to reduce current and prior years' premiums, all while brokers earn first-year and renewal commissions. Workers compensation premium recovery helps you maintain your clients and win new business!

June 5, 2013

Business Insurance

Average U.S. property/casualty insurance rates rose 5% in May, with small and midsize accounts seeing the biggest increases, Dallas-based electronic insurance exchange MarketScout said Wednesday.

Commercial property, general liability and workers compensation lines saw the highest rate hikes last month, each at 6% year-over-year, according to MarketScout’s Market Barometer report. Commercial auto and umbrella/excess lines increased by 5% in May.

Average property/casualty rates for accounts up to $250,000 in premium increased by 5%, while large accounts of up to $1 million increased by 4% in May, MarketScout said. Jumbo accounts of more than $1 million saw rates increase by 3%.

“The commercial P&C market in the U.S. is continuing its steady trend of rate increases," MarketScout CEO Richard Kerr said in a statement. "There is ample capacity but underwriters continue to increase rates as appropriate.”

The trend in higher rates and premiums continued for employers nationwide in May. Although this means higher commissions for brokers, employers everywhere are struggling to pay higher premiums and might be disgruntled with their brokers. Brokers who offer workers compensation premium recovery to their clients and prospects are able to hold onto their current clients and win new business. Offering a value-added service and obtaining significant refunds on current prior policies shows employers that some brokers are willing to go above and beyond to keep their clients and add new accounts to their book of business. Outsourcing this service takes little to no work on the part of the employer or the broker; just refunds for the employer and commissions for the broker!

NCCI preliminary research challenges some long-standing negative perceptions about Professional Employment Organizations (PEOs).

Authored by NCCI Chief Economist Harry Shuford and presented at the 2013 Annual Issues Symposium, the report concludes that PEO claims experience as measured by loss ratios or claim costs relative to premium was no worse and was typically better than that of non-PEOs.

Workers compensation premium recovery offers brokers and PEO owners an effective tool to place more workers comp business on their workers comp policies.

If you’re a PEO in a state with a master policy, we can knock down the experience mod or obtain other credits, just like receiving refunds on an individual workers comp policy. Or, if you’re in a state like New York or New Jersey where each employer’s experience is used and the premium is pooled together for the discount, hiring a firm to reduce the experience mods of these poor risks may very well enable an immediate entry into the PEO’s workers comp policy for those employers with poor experience.

May 30, 2013

The New York State Workers' Compensation Board announced on May 28 efforts to promote PPD classifications to clear a backlog of claims awaiting a finding of permanent partial disability and is threatening fines and other actions against parties who drag out the process.  The new plan calls for WCB’s judges to evaluate seven criteria for awarding fees to claimants' attorneys at the time a worker is classified PPD and establishes the normal time frame for a worker to reach maximum medical improvement as two years from the date of injury.  Parties will have to provide medical evidence to document the need to delay declarations of MMI for more than two years under the PPD plan.  Robert Beloten, chairman of the WCB, said that attempts to delay PPD are “based on alleged new injuries or the possibility of surgery, when none exists.”

Beloten's bulletin casts blame across a wide spectrum of the workers' compensation system and concludes:

• Treating physicians ignored a post-reform requirement that they provide medical evidence needed for the classifications through Form C-4.3, the Doctor's Report of MMI/Permanent Impairment. Beloten said doctors ignored the requirement despite specific fees allowed for completion of the form and despite specific directives from the board requiring the forms to be completed.
• Private carriers have been the "slowest parties" in contested cases to push for classification. The board said insurers may have delayed the process because of a requirement that they deposit the present-day value of PPD claims into the state Aggregate Trust Fund.
• Claimants' attorneys have delayed the classification of their clients – and the imposition of duration caps – by contending that cases are in settlement discussions or that the injured workers have not reached MMI "many years after the injury."

Beloten said the board will dedicate some of the state's more than 90 workers' compensation judges to handling PPD classifications exclusively. He warned the board will fine attorneys for both carriers and claimants each time they fail to submit the required forms.
Board spokeswoman Rachel McEneny said each of the state's 29 hearing locations will include at least one PPD judge in a transition that began earlier this month. She said state law allows judges to levy fines of up to $250 each time a party delays conclusion of a contested workers' compensation case.

The New York Compensation Insurance Rating Board cited the delays as a significant driver behind its recommendation for an 11.5% increase in lost costs last year. Gov. Andrew Cuomo and state Financial Services Superintendent Benjamin Lawsky denied the increase. NYCIRB earlier this month asked Lawsky to increase loss costs by 16.9%, but has not made details of the cost-drivers public.

Beloten said that fees for PPD classifications should in no case be based solely on the amount of the award. The board will require the new PPD judges to query claimants on the quality of legal services they received when the claimants are present at PPD classification hearings.

It seems that carriers are better of agreeing to a Section 32 in these cases before they hit the Aggregate Trust Fund.  Once that happens, it seems that the carrier will continue to pay any future medical benefits and a flare-up a year or two later for a new back surgery could be costing the claim additional thousands of dollars.  Furthermore, a Section 32 will usually have less indemnity than the Aggregate Trust Fund deposit amount.  So carriers are probably delaying PPD.  Claimants’ attorneys are also probably following suit because on a Section 32, they are going to make 15% of the settlement, while on a PPD, they are going to make the PPD rate times 10.  So for a Section 32 of $80,000, the claimant’s attorney makes $12,000.  PPD around the moderate rate, say at $400 times 10 is $4,000.  Although, per the above there seems to be a new fee structure that fees will not be paid to claimants’ attorneys solely based on percentage of the award.  Also, the treating physician only makes money if he continues to treat.  The bottom line is that from a claims perspective, it is important for employers and carriers to try to secure Section 32’s as early as possible because the Aggregate Trust Fund has simply added hardships.

American Insurance Association spokesman Ben Tomchik said Wednesday the insurers group was reviewing the board bulletin and was not prepared to comment.

Workers’ Compensation Board’s bulletin is here.

Workers’ compensation premium recovery will help bring down the severe cost of these PPD claims.  As we all know, PPD claims have large dollar figures associated with them and ultimately drive up workers’ comp costs for employers.

May 24, 2013

According to NCCI, growth within the workers compensation residual market pool is continuing.  There was an $800,000 increase in premiums in 2012 after a $500,000 increase in 2011.  Overall growth is continuing so far in 2013. 

NCCI, which consists of 21 states, claims that the interest rate environment is the underlying cause for this increase.

Although the residual market has traditionally been mainly consisted of smaller contracting and construction accounts, there has been an influx of accounts paying premiums over $50,000 in the residual market.  This trend is expected to increase significantly if the federal terrorism backstop is not renewed in 2014 and underwriters decide not to write large risks concentrated in major cities such as New York and Chicago.

Employers, already dealing with a stagnant economy, will not be happy with a lack of options and higher premiums for their workers compensation insurance. The quickest and easiest way to reduce your clients’ and prospect’ experience mods and provide them with a better underwriting profile to enter the renewal marketplace is through workers compensation premium recovery.