Workers' Compensation Coverage
The Players in the System - Who Does What
- New York State Workers' Compensation Board
- New York State Insurance Department
- Compensation Insurance Rating Board (CIRB)
- New York State Department of Labor
To understand the workers compensation system, an employer or employee must first understand all the parties that are responsible for the process.
The first major player, the Workers' Compensation Board (Board), was established to administer the New York State Workers' Compensation Law (WCL). It is responsible for the adjudication of claims and ensuring that employers provide the required coverage to their employees. The mission statement of the agency reads,
The mission of the Workers' Compensation Board is to equitably and fairly administer the provisions of the New York State Workers' Compensation Law, including Workers' Compensation Benefits, Disability Benefits, Volunteer Firefighters' Benefits, Volunteer Ambulance Workers' Benefits § Volunteer Civil Defense Workers' Benefits Law on behalf of our customers, New York's injured workers and their employers.
The Board administers the programs and laws of New York State in a fair and equitable fashion. The Board receives and processes claims and initially seeks to facilitate expedient agreements between injured workers and employers. When a consensus cannot be reached through administrative measures, it becomes necessary for the Board to conduct hearings before a Workers' Compensation Law Judge (Judge). Evidence and testimony are gathered and analyzed prior to the rendering of a decision by the Judge. While the decisions by Judges are binding, parties may seek administrative review of the Judge's decision to the Administrative Review Division. In such a case, a panel of three Board Commissioners will rule on the validity of the Judge's decision. Failing a unanimous decision by the panel, a mandatory full Board review by all thirteen Commissioners may be requested within 30 days of the filing date of the Board panel's decision. In addition, when the decision of the panel is unanimous, a party may seek discretionary full Board review. When a party files a discretionary full Board application, the Board has the option to grant or deny full Board review. The decision of the full Board may be further appealed to the State Appellate Division, Third Department (WCL §23).
The WCL requires that almost all employers in New York State maintain workers' compensation insurance coverage for their employees (WCL §3). Workers' Compensation Law also gives the Board statutory authority to ensure that employers obtain and maintain the required workers' compensation insurance (WCL §50). New York has a comprehensive system for ensuing that employers obtain and maintain the required workers' compensation insurance. The system includes a database to identify employers and their insurance coverage, investigators, educational outreach, an automated penalty process, an appeal process, outside collection agencies, and the issuance of judgments. In addition to these internal functions, the WCL provides for an external enforcement tool. A business must provide proof of workers' compensation compliance prior to receiving a permit, license or contract from a municipality or State agency (WCL §57).
The WCL, as amended by Chapter 6 of the Laws of 2007, allows for stop work orders to be issued when an employer has no coverage or fails to pay workers' compensation penalties (WCL §141-a). In addition, that 2007 Workers' Compensation Reform Legislation subjects employers to penalty (WCL §131) when they fail to keep proper or sufficient records regarding compensation and classification of workers.
The second major player, the NYS Insurance Department, is directly responsible for authorizing insurance carriers to write NYS workers' compensation insurance policies. The Insurance Department is also responsible for administering the underwriting rules for workers' compensation insurance in New York State. As part of this responsibility, the Insurance Department reviews the recommended revisions to workers' compensation rates for approval or disapproval each year. The Insurance Department has authorized another major player in the NYS workers' compensation system, the New York Compensation Insurance Rating Board (CIRB) to initially develop the revised workers' compensation insurance rates and to actually oversee the underwriting rules for workers' compensation insurance policies.
The New York Compensation Insurance Rating Board (CIRB) is a nonprofit, unincorporated association of insurance carriers, including the State Insurance Fund. In conjunction with the WCL, the Insurance Law provides for the Superintendent of Insurance to designate a statistical organization to collect the loss, premium and payroll data from each carrier, summarize this information and develop an adequate rate structure.
Since the enactment of the law, CIRB has been licensed as the official organization to collect data and develop workers' compensation rates. CIRB analyzes that data and recommends annual reductions or increases in premium rates to the Insurance Department.
In 2008, New York State moved to a loss cost system for workers' compensation rates. In a loss cost system, CIRB will continue to collect and aggregate industry data, but rather than file a manual rate with the NYS Insurance Department for approval, it will only submit the loss costs, which is that portion of the rate that does not include general expenses such as overhead, taxes, or profit. Rates, subject to NYS Insurance Department's approval, will then be determined using carrier-specific "Loss Cost Multipliers" that are filed by each carrier and reflect each carrier's individual underwriting skill and expense structure. This lost cost approach is currently used by a majority of states. It is anticipated that this rate-setting process will increase price competition among insurers.
CIRB also develops experience modification factors for employers with premiums in excess of $5,000; and establishes the rules and procedures, and classifications governing the underwriting of workers' compensation insurance and employer liability insurance.
For more information, please contact the Compensation Insurance Rating Board (CIRB) at 212-697-3535 or at www.nycirb.org .
Insurers are the fourth major player in the workers' compensation system and are comprised of private insurance carriers, the State Insurance Fund, self-insured employers and employers that are participating in group self-insurance.
Private Insurance Carriers
Private insurance carriers collect premiums from employers to pay for the claims and related medical expenses of employees who are injured on the job. Over 200 private insurance carriers are currently authorized by the Insurance Department to provide workers' compensation insurance to employers.
State Insurance Fund
The State Insurance Fund (SIF) is a not-for-profit agency of the State of New York that was established pursuant to the WCL in 1914 to provide a guaranteed source of workers' compensation insurance coverage at the lowest possible cost to employers within New York State (WCL §76 - 100). Despite its State agency status, SIF is a self-supporting insurance carrier that competes with private insurers. Just like any insurance carrier, SIF collects premiums from employers to pay for the claims and related medical expenses of employees who are injured on the job. The premiums are required by law to be fixed at the lowest possible rates. SIF must provide insurance to any employer seeking coverage, regardless of the employer's type of business, safety record or size. However, if an employer owes SIF money from a previous bill or account, SIF may deny coverage.
SIF is a totally separate and distinct entity from the NYS Workers' Compensation Board.
An employer qualifies as a self-insurer by furnishing to the Chair of the Board satisfactory proof of its financial ability to pay compensation. Employers who wish to self-insure may do so in one of two ways:
- by becoming an individual self-insurer or
- by becoming a member of a self-insured group.
Individual self-insurance is primarily used by larger employers who can meet the significant financial standards to self-insure in their own right. Every individual self-insurer must post with the Board a security deposit equal to their outstanding indemnity and medical obligations. These deposits can take the form of a surety bond, letter of credit, cash and/or certain types of securities. The amounts posted are updated every year. In the event that the employer defaults on its obligations the deposit will be used by the Board to ensure claimants receive the benefits to which they are entitled.
Joining a group is an alternative that allows smaller employers who may not meet the criteria for individual self-insurance to enjoy the privilege of self-insurance. Group self-insurers consist of employers performing related activities in a given industry that contractually agree to assume the workers' compensation liabilities of each associated member. Each group is controlled by a board of trustees, at least two-thirds of which must be representatives of employer members. In addition, most trustees will hire a group administrator and a licensed third party administrator to handle many of the day to day functions of running the group. Groups must maintain a trust fund dedicated to the payment of the workers' compensation obligations of the employer members.
A county, city, village, town, school district, fire district or other political subdivision of the State may also secure compensation to its employees by opting to self-insure. To do so, it must file with the Board a notice of election to self-insure along with a resolution from its governing body, which states that they have elected to provide workers' compensation benefits through self-insurance. Political subdivisions that elect to self-insure for workers' compensation are exempt from posting security deposit or maintaining dedicated trust funds. The basis for this exemption is that political subdivisions have the ability to utilize their taxing authority to guarantee the payment of their claims.
Under the Reform Legislation, the Department of Labor was assigned a number of responsibilities including developing the State's average weekly wage for purposes of computing maximum weekly workers' compensation benefits for accidents that occur after July 1, 2010. The Commissioner of Labor will also determine hardship safety net benefits for claimants that are over 80% disabled but have exhausted their benefit timeframe under the Reform Legislation for receiving Permanent Partial Disability payments.