How workers’ compensation insurers manipulate data to raise premiums!

In New York state, there is a discussion going on regarding workers’ compensation and the high cost of doing business in New York. This is a result of a request by insurance carriers to increase workers’ compensation rates earlier this year. It was estimated that the proposed increase would cost $500 million to New York employers. Does this matter to us Georgia workers’ comp lawyers?  Yes.

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The New York State Department of Financial Services didn’t agree with insurers, however, and not only rejected the rate increase, but actually cut employer costs.In addition to those costs being cut, New York employers began to question the reasoning behind the carriers’ request for increases; this year was the third one in a row that double-digit bumps were sought by insurers.

It turns out that the rationale behind the requests is this: Insurers base them on projected future cost increases, but without being required to verify any of the costs. All they do is submit them to the New York Compensation Insurance Review Board, which is an insurance industry group that then submits those unaudited costs to the Department of Financial Services.

It’s estimated that this practice has cost New York businesses one billion dollars over the prior three years because of the previous unaudited rate jumps. This is especially ridiculous when you consider the fact that, while these rate increases are being frivolously requested, the claim of insurers is that workers’ compensation costs so much to New York employers because of claims by injured workers. This claim is untrue.

Let’s look at the numbers: The National Council on Compensation Insurance reports that 2001 workers’ compensation claims were 1.6 percent of all employer costs. It reports that in 2011 workers’ comp claims had declined to 1.5 percent. According to data compiled by the New York Compensation Insurance Rating Board, between the years 1995 and 2008 worker’s compensation costs for employers were cut in half. There were slight increases from 2009 to 2011, but even so, today’s employer costs are still a third lower today than they were eighteen years ago.

The reason the workers’ compensation costs have declined over the past two decades is that changes and trends in the law have reduced employee access to benefits and have reduced claim costs overall. It can be argued that the cost of doing business in New York, then, is not increased employee payouts, but rather insurance company profits. Insurer profits are a percentage of their premiums, so carriers are inclined to keep high rates and push for increasing them as often as they can.

The interests of both workers and employers need to be protected against rate gouging by profit-minded insurance companies. That being said, while there were successful New York workers’ compensation reforms passed in 2007, the only one to be implemented thus far is a provision replacing NYCIRB with a transparent, accountable entity to set workers’ compensation insurance rates. For far too long the worker has been blamed for bilking the system, when in fact more oversight and regulation with regard to insurers is needed. Am I right? Of course I am.

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