Eliminating Friction

Governor Cuomo has started off 2013 with the swift passage of the SAFE Act in a whirl wind of activity in Albany. We hope that the same kind of attention will find its way down to the mid-section of the State of the State address, in which he proposed great reforms for workers’ compensation programs to bring $1.3 billion in savings to businesses. The Governors program has these high points:

• Provide savings to New York State’s employers;

• Eliminate unnecessary friction in the system;

• Alleviate, and ultimately resolve, the burden facing employers who are members of an insolvent Group Self-Insurance Trust (“GSIT”);

• Simplify and reduce assessments on employers;

• Promote system-wide transparency, efficiency, equity, and consistency; and

• Create more competition in the insurance marketplace.

This legislation seeks these benefits by, among other things, closing unnecessary funds, establishing a bonding program, and establishing a pass-through assessment process.

Governor Cuomo proposes to enable 10,000 businesses to reasonably settle their existing claim liabilities with the State and simultaneously protect future benefits of insured workers. As our readers well know, beginning in 2006, due to the “problems” in the group trust business, a large number of group self-insurance trusts began to default. Statutory changes in 2008 enhanced the Workers’ Compensation Board’s ability to pursue action against responsible parties. The 2011 Executive Budget effectively capped the potential for future defaults by closing the group self-insurance trust program to all but the healthiest GSITs. However, the defaulted trusts (and, as a result, the State) are still saddled with significant liabilities. The Governor’s proposed legislation would implement a bonding program and the proceeds of the bond sale will go to purchase assumption of liability policies for claims associated with defaulted GSITs. The State plans to offer more flexible repayment plans that will ultimately result in settlement and release for insolvent GSIT members. The legislation will provide immediate savings to these employers, capping employers’ outstanding liabilities and giving employers an opportunity to resolve their respective obligations, according to the Governor. The Governor’s proposal will combine all of the workers’ compensation assessments into one assessment and create a single process for calculating assessments irrespective of how an employer maintains workers’ compensation coverage. The assessment will be calculated based on the overall anticipated yearly expenses of the workers’ compensation system and will be assessed upon all employers based on an equitable and transparent formula. Additionally, the calculation of a single assessment rate will be more efficient for the State to administer and will lessen the carriers’ administrative burden of assessment collection and payment. This type of reform is long overdue and we applaud the Governor’s aggression toward problem solving… In this issue we present Ocean Harbor Insurance Company which also has ambition and is acting swiftly to expand its presence in several key state in the U.S. notably in New York. We came to know the company through Mike Mahoney of Complex Coverage and are impressed by this team’s muscular approach.…On another note, we are delighted to feature our lineup of columnists. Peter Bickford’s column “Insight” recently has drawn great interest and response from readers and Peter has taken it upon himself to reply in each individual instance. This is great service, part of our “promise” to our readership. We hope you will enjoy this issue and look forward to presenting a full feature on Workers’ Compensation Reform in our first February issue.