2006-2007 NEW YORK STATE EXECUTIVE BUDGET
WORKERS’ COMPENSATION REFORM
ARTICLE VII LEGISLATION
MEMORANDUM IN SUPPORT

CONTENTS


MEMORANDUM IN SUPPORT

A BUDGET BILL submitted by the Governor

in Accordance with Article VII of the Constitution

AN ACT to amend the workers' compensation law, the executive law and the insurance law, in relation to compensation claims

Purpose:

This bill contains provisions needed to implement the Economic Development and Environmental Conservation portions of the 2006-07 Executive Budget.

Summary of Provisions:

Section 1 would amend Workers’ Compensation Law (WCL) § 10(1) to include new language which would make injuries incurred during the commission of a crime non-compensable.

Section 2 would amend WCL § 10 by adding a new subdivision 4 which would deem ineligible for benefits those persons incarcerated for a crime. Such persons would be eligible to re-apply to the Workers’ Compensation Board (“WCB”) for benefits upon their release.

Section 3 would amend WCL § 13(a) by adding dental care and prosthetic devices specifically to the list of covered treatments and covered devices and apparatus, respectively, which employers must provide to injured employees. The section would further expand the schedule of fees and services to be established by the WCB Chair to include, specifically, “all medical, dental, surgical, optometric or other attendance or treatment, nurse and hospital service, medicine, optometric services, crutches, eye-glasses, false teeth, artificial eyes, orthotics, prosthetic devices, functional assistive and adaptive devices and apparatus.”

Section 4 would amend WCL § 13 by adding a new subdivision (i), which would: (1) require employers and/or carriers to pay, within 45 days, the scheduled fee for prescription drugs in all cases, unless the liability of the employer for the cost of the prescribed medicine is not reasonably clear; and (2) where the liability of the employer for such prescribed medicines is not reasonably clear, require the carrier to pay any undisputed portion of the claim and also notify the claimant within 45 days of the claim that the claim is not being paid and the reasons, or the employer may request additional information reasonably needed to determine the employer or carrier’s liability. The section would establish a penalty for claims not paid by the employer in violation of this section. This section would also amend WCL §13 to authorize carriers, self-insureds and the New York State Insurance Fund (“NYSIF”) to contract with a pharmacy to supply prescription medicine to claimants and require claimants to use such pharmacies, except in the case of a medical emergency. Carriers and employers that require the use of the pharmacy with which it contracts would be required to notify claimants of the requirement, the name of the pharmacy, its locations, how to obtain prescription medicines through the mail, Internet, telephone or other means, and any other necessary information. However, under this section, a claimant may obtain prescribed medicines from a pharmacy of his/her choice when the pharmacy or pharmacies that a carrier contracts with does not offer mail order service and does not have a physical location within a reasonable distance from the claimant.

Section 5 would amend WCL § 13-a by raising from $500 to $1,000 the maximum cost of specialist treatments for which an employer is automatically liable without prior authorization from the carrier, NYSIF or employer.

Section 6 would amend WCL § 13-a to add a new subdivision 7 authorizing carriers, self-insureds and NYSIF to contract with a network or networks to perform diagnostic tests, x-ray examinations, magnetic resonance imaging, or other radiological examinations or tests of claimants and require claimants to use a provider or facility within the network with which it contracts, except in the case of emergency. Carriers, self-insured employers and NYSIF that require the use of such network affiliated providers or facilities would be required to notify claimants and their providers at specified times that they require the use of a provider or facility within the network with which they contract. Results of the special diagnostic test, x-ray examination, magnetic resonance imaging or other radiological test or exam would be required to be provided to the physician who requested the test or exam immediately upon completion of the report.

Section 7 would amend WCL § 13-d(2) by expanding the authority of the WCB Chair to remove physicians found guilty of professional misconduct or exceeding the limits of professional competence from the list of physicians authorized to provide medical care under the WCL.

Section 8 would amend WCL § 13-d by adding a new subdivision 5 which would allow the WCB Chair to temporarily suspend or limit the practice of any physician found after investigation by the Department of Health to be guilty of professional misconduct or incompetence.

Section 9 would amend WCL § 13-j to provide that insurance carriers are not prohibited from participating in a claimant’s care to the extent they require the use of a pharmacy or diagnostic or radiological network with which it has contracted.

Section 10 would add new section 13-o to the WCL, to direct the WCB Chair to adopt a pharmaceutical fee schedule establishing maximum pharmaceutical fees. Further, this section would allow mail order supply, and provide for use of generic drugs where appropriate. Under this section, the schedule may be modified annually on April 1.

Section 11 would amend WCL § 15(3) to provide that awards which do not relate to actual lost time from employment would be paid at one-half the maximum weekly benefit rate applicable to such claims and to establish a system of tiered benefit levels for those claimants who have been classified as permanently partially disabled.

Section 12 would amend WCL § 15(5-a) to eliminate presumptions that the wage earning capacity of a partially disabled claimant who has no actual earnings cannot exceed 75% of such injured employee’s former full time earnings. The section would allow the WCB or any party in interest to make a motion to determine wage earning capacity.

Section 13 would amend WCL § 15(6) to provide for an increase in maximum weekly wage loss benefits as follows: (1) $425 on or after January 1, 2006; (2) $450 on or after January 1, 2007; (3) $475 on or after January 1, 2008; and (4) $500 on or after January 1, 2009. The current weekly maximum of $400 per week became effective with accidents occurring on or after July 1, 1992.

Section 14 would amend WCL § 15(8)(f) to permit the WCB to withhold Second Injury Fund reimbursements from any carrier or self-insured employer that has any unpaid obligations that are due under WCL §§ 15(8), 25-a or 151. Another new provision would require carriers and self-insured employers to submit their reimbursement claims within one year of the payment of the benefit or within one year after the WCB has determined the carrier or employer is entitled to reimbursement in a case in which such entitlement was contested, whichever date is later.

Section 15 would amend WCL § 15(8) (h) to reduce Second Injury Fund reserve assessments from 150% to 115% of the amount of total prior year’s disbursements from the Fund. Such assessments would continue to be levied annually upon all self-insurers, NYSIF, and private insurance carriers.

Section 16 would add new paragraph (m) to WCL § 15(8) to require payment of a filing fee of $250 when any insurance carrier, self-insurer or NYSIF seeks reimbursement from the Special Disability Fund, of which only $50 will be retained if such Fund actually assumes liability after the claim has been made, otherwise such fee is retained to reduce assessments by such fund on premiums.

Section 17 would amend WCL § 16(5) to increase the maximum death benefits to be consistent with the proposed amendments to maximum wage loss levels in the new WCL § 15 (6).

Section 18 would amend WCL § 20(1) to provide that the WCB and its Chair shall order a hearing only when there is an issue to be resolved and it cannot be resolved by conciliation or motion calendar in accordance with WCL § 25(2-b)(b).

Section 19 would amend WCL § 20 to add a new subdivision 4 to require that claimants provide the WCB and any insurance carrier, self-insured employer or NYSIF his/her current residence and mailing address, upon request, and notify the WCB and such carrier, self-insured employer or NYSIF of any change in such residence address within 30 days.

Section 20 would amend WCL § 21-a (1) (2) & (3) explicitly to authorize employers to initiate temporary payments for prescribed medicine for injured employees in contested cases without their admitting liability.

Section 21 would amend WCL § 23 pertaining to appeals to prescribe the period within which a request for discretionary review by the full WCB can be made and that a request for discretionary review by the full WCB does not stay the payment of compensation made by an award or decision. This section would clarify the medical costs which an employer or insurance carrier must continue to pay during the pendency of the appeal process, increase the penalty for a frivolous appeal by a carrier to $500 and authorize the imposition of a $500 penalty for the filing of a frivolous appeal by a claimant’s attorney or licensed representative.

Section 22 would amend WCL § 25 (2-a)(a) to reduce from 60 to 45 days the date by which the WCB must schedule a pre-hearing conference on a controverted claim and require the WCB to have a medical report referencing an injury before scheduling the conference. The 45 days would run from the date the WCB received the notice of controversy.

Section 23 would amend WCL § 25(2-b)(b) to allow the WCB to review all claims for possible transfer to the conciliation process. Existing law allows such transfer only in cases where the expected duration of benefits is 52 weeks or less.

Section 24 would amend WCL § 25 (2-c) to allow manufacturing companies with union employees to participate in the WCB’s alternative dispute resolution program in which the parties provide for their own claim adjudication process via the collective bargaining agreement.

Section 25 would amend WCL § 25 (3)(d) to reduce from two years to one year the period after which the WCB Chair may order expedited proceedings to resolve any claim. In addition, it would specifically authorize the transfer into the expedited part of claims in which a notice of controversy has been filed.

Section 26 would amend WCL § 26 to make clear that the WCB Chair may grant consent to file a judgment when the employer fails to make full payment of an award for medical care issued by the WCB or its Chair pursuant to WCL § 13-g and that the costs for collecting on such judgment shall be borne by the employer.

Section 27 would amend WCL § 26-a (2)(b) to increase the penalty on employers that fail to secure compensation for an injured employee from the variable amount prescribed under current law to a fixed sum of $5,000.

Section 28 would amend WCL § 27(4) to require that payments into the Aggregate Trust Fund (ATF) on claims for death benefits be based on the assumption that any child between the age of 18 and 23 years will continue to be enrolled as a full-time student in an accredited educational institution and thereby retain eligibility for benefits, and to provide for any appropriate refund of such payment after all such children have reached the age of 23 years and to make various interest provisions consistent with the 3.5 % discount rate provided by this bill.

Section 29 would amend WCL § 27(5) to provide that payments into the ATF be discounted based on an interest rate of 3.5 % on claims for accidents occurring on and after January 1, 2001.

Section 30 would amend WCL § 27(7) to require reserves set for ATF deposits be discounted at 3.5 %.

Section 31 would amend WCL § 27 to add a new subdivision 8 to provide that the carrier or self-insured employer that paid the present value of an award into the ATF would not be entitled to a refund of any portion of the deposit in the event that the ATF enters a settlement agreement with the claimant pursuant to the new authority that would be granted by section 32 of the bill.

Section 32 would amend WCL § 32 to permit the ATF to enter into settlement agreements pertaining to payment of workers’ compensation benefits. Such agreements would be subject to WCB approval in the same manner as agreements permitted under current laws. This section would also require every insurance carrier, self-insurer and NYSIF to offer each claimant the opportunity to enter into a settlement agreement within two years of the later of the date the claim was indexed by the WCB or within six months after the claimant is classified with a permanent total disability and/or a permanent partial disability, whichever is later. In death cases, such offers must be made within six months after the entitlement of all beneficiaries is established. In addition, the section would specifically permit parties to agree that compensation and benefits under such agreements could be provided through the purchase of an annuity contract. Such annuity contracts would be permitted only if they were purchased from an insurer authorized to issue annuity contracts in New York State that has a strong or excellent financial rating. Upon approval of such an annuity contract, the liability of the insurance carrier, self-insurer or NYSIF would be extinguished to the extent the Life Insurance Company Guaranty Corporation of New York (Insurance Law Article 77) assures payment if the insurer that issued the annuity contract becomes impaired or insolvent.

Section 33 would amend WCL § 52(1)(a) to increase the misdemeanor monetary penalty for failing to secure the payment of compensation from $1,000 to $5,000.

Section 34 would amend WCL § 52(1)(b) to increase the monetary penalty for a person convicted a second time within five years of failing to secure the payment of compensation to $2,000 to $10,000 from $1,000 to $5,000 and to $15,000 from $7,500 for third or subsequent violations.

Section 35 would amend WCL § 52(5) to authorize a monetary penalty of $5,000 in addition to the existing penalties to be imposed by the WCB Chair for failing to secure the payment of compensation.

Section 36 would add a new subdivision 6 to WCL § 52 to provide that the president, vice-president, secretary and treasurer of a corporation would be jointly and severally liable for insurance obligations due and owing to a workers’ compensation insurer or a group self-insurer, including NYSIF.

Section 37 would amend WCL § 54 to permit multiple compensation insurance carriers to enter into risk sharing plans with respect to an employer’s risks.

Section 38 would add a new subdivision 9 to WCL § 54 to require that certificates of insurance specify any corporate officer, partner of a partnership or self-employed person who is not covered under the policy.

Section 39 would add a new subdivision 10 to WCL § 54 to permit a workers’ compensation insurer, including NYSIF, to refuse to issue a policy to any employer that fails to provide its federal employer identification number as defined in Tax Law § 10(a)(3) or, if the employer is an individual and has not obtained such a number, that employer’s social security number.

Section 40 would add a new subdivision 11 to WCL § 54 to permit a workers’ compensation insurer, including NYSIF, to refuse to issue a policy to any person or entity owned or controlled, or the majority interest of which is owned or controlled, directly or indirectly, by a person convicted of certain felonies and misdemeanors involving insurance fraud.

Section 41 would amend WCL § 54-b to allow the WCB Chair to grant consent to file a judgment for unpaid awards of compensation and awards for medical care issued pursuant to WCL § 13-g against carriers and self-insured employers.

Section 42 would add a new section 54-c to the WCL to require workers’ compensation insurers, including NYSIF, to verify whether coverage exists when presented with a certificate of insurance or other proof of insurance coverage.

Section 43 would amend WCL § 87(1) to allow NYSIF to invest up to ten percent of its surplus and reserve funds in certain securities.

Section 44 amends WCL § 110(2) to require employers to include the injured employee’s current residence and mailing address, date of birth and social security number in its injury report to the WCB and its insurance carrier. This section also would require employers to transmit such report to the insurance carrier via fax or computer within three business days of receipt by the employer of the notice of such accident and to file with the WCB within five business days of receipt of notice.

Section 45 would amend WCL § 122 to permit the WCB to utilize methods in addition to stenographic recording to record its hearings and to have these recordings received as evidence.

Section 46 would add new subdivisions 4 and 5 to WCL § 132 to permit insurance carriers to require statements to be signed by claimants affirming that the conditions and circumstances, which entitle them to the benefits, continue. Similar statements would require health care providers to certify that they have actually performed claimed services.

Section 47 would add new section 133-a to the WCL to require claimants convicted of a crime causally related to an injury for which benefits were received to make restitution to the employer or carrier.

Section 48 would amend subdivision 3 of WCL § 136 to require the Fraud Inspector General to coordinate investigations of possible workers’ compensation fraud with the Insurance Fraud Bureau of the Department of Insurance and any frauds investigation unit of NYSIF and provide a report to the WCB Chair regarding the coordination efforts. This section would also authorize the Fraud Inspector General to appoint fraud prosecutors and to prosecute fraud cases in any court in New York State and to present cases to grand juries.

Section 49 would amend subdivision 5 of WCL § 136 to provide that it is not public disclosure for the Fraud Inspector General to disclose information in order to coordinate investigations with the Department of Insurance and NYSIF and to report to the WCB Chair.

Section 50 would add a new section 138 to the WCL to require the WCB to issue annual performance reports for workers' compensation carriers, self-insurers, NYSIF, third party administrators, group administrators and self-insured trusts.

Section 51 would add a new section 139 to the WCL to require the WCB Chair to promulgate objective medical criteria to determine functional impairments, after consultation with a committee of medical consultants.

Section 52 would add a new section 141-a to the WCL to authorize the WCB Chair to institute programs designed to encourage WCB constituents to use the most advanced technology consistent with that of the WCB in order to facilitate more effective communications.

Section 53 would amend subdivision 2 of WCL § 204 to increase the maximum weekly benefit payable to a disabled employee over three years to $340 from the current maximum of $170. The current benefit level has not been increased since 1989.

Section 54 would amend WCL § 351 to authorize NYSIF to contract with a preferred provider organization for the delivery of workers' compensation benefits.

Section 55 would amend WCL § 354 to: (1) reduce the required number of medical specialty providers from which an employee may choose from five to two and reduce the number of hospitals from which an employee may choose from three to two; and (2) authorize the Commissioner of Health to waive these requirements in geographical areas where the preferred provider organization cannot meet these requirements.

Section 56 would add new section 356 to the WCL to establish a Pilot Program to encourage the voluntary delivery of compensation and medical benefits to injured workers in undisputed cases without intervention by the WCB, but subject to the WCB’s supervision.

Section 57 would add a new section 170-b to the Executive Law to confer immunity from any civil action on a government agency that shares information or evidence showing that a person may have committed fraud or other violation of law with another government agency which has authority to investigate such fraud or violation of law.

Section 58 would add a new subdivision (d) to Insurance Law § 402 to require the Insurance Department’s Insurance Frauds Bureau, including the Unit for Workers’ Compensation Insurance Frauds Investigations within the Insurance Frauds Bureau, to coordinate investigations of possible workers’ compensation fraud with the Workers’ Compensation Fraud Inspector General and any NYSIF frauds investigation unit.

Section 59 would amend Insurance Law § 406 to extend immunity from civil liability to persons: (1) furnishing information in reports to any frauds investigation unit of NYSIF and the Workers’ Compensation Fraud Inspector General; and (2) assisting investigations by the Insurance Frauds Bureau, any frauds unit of the NYSIF or the Workers’ Compensation Fraud Inspector General. This section would also extend such immunity to agents or employees of the Insurance Frauds Bureau, NYSIF and Workers’ Compensation Fraud Inspector General when carrying out their duties with respect to the detection, prevention and prosecution of fraud.

Section 60 would add a new subdivision (h) to Insurance Law § 409 to require any NYSIF frauds investigation unit to coordinate investigations of possible workers’ compensation fraud with the Workers’ Compensation Fraud Inspector General and the Insurance Frauds Bureau of the Department of Insurance.

Section 61 would amend Insurance Law § 1108(c) to provide specifically that Insurance Law § 3450 applies to NYSIF’s policies.

Section 62 would amend Insurance Law § 2305(b) to require that rate filings shall separately identify each insurer’s use of waiver agreements entered into pursuant to WCL § 32 and calculate any savings derived therefrom. In addition, this section would require each insurer to establish a program approved by the Insurance Superintendent in which the insurer must make a settlement offer to the claimant.

Section 63 would amend Insurance Law § 2318 to permit risk sharing plans for workers’ compensation insurance.

Section 64 would add a new section 3450 to the Insurance Law to provide minimum coverage limits on employers’ liability insurance of $100,000 for bodily injury to one or more employees in any one accident, $100,000 for bodily injury by disease to any one employee and $500,000 for bodily injury by disease during a single policy period to all employees. Bodily injury is defined to include death. Carriers would not be prohibited from offering additional coverage in return for an additional premium.

Section 65 would amend Insurance Law § 3215(g) to provide that only the existing provisions of such section do not apply to group life insurance policies or group annuity contracts.

Section 66 would add a new subsection (h) to Insurance Law § 3215 to authorize group annuity contracts to provide disability benefits that supplement the maximum weekly compensation for disability contained in WCL § 15 (6)(a).

add a new subsection (e) to Insurance Law § 3220 to authorize group life insurance policies to provide death benefits that supplement the maximum weekly death benefit provided under WCL § 16.

Section 68 would authorize the Superintendent of Insurance and the WCB Chair to promulgate regulations to implement this act, in consultation with one another.

Section 69 would make severable any provision of this act found by any court of competent jurisdiction to be invalid.

Section 70 provides various effective dates for the bill.

Existing Law:

Current law contains various provisions which add unnecessary cost and delay to the workers’ compensation system. It also provides for a lower maximum benefit rate than envisioned by the bill.

Statement in Support:

This bill would provide a comprehensive, thorough and balanced set of reforms that would dramatically reduce the manual premium rates for compensation coverage by an average of 21.4% in the first year and 15% thereafter, while increasing workers’ compensation benefits for injured workers and death benefits for their beneficiaries by 25%, doubling disability benefits to workers injured off the job, streamlining the claim process and reducing waiting periods. The expanded use of alternative dispute resolution, shortened claim timeframes and benefits limits will help cut bureaucratic red tape for both employers and injured workers.

This bill would build on the historic reforms Governor Pataki fought to achieve in 1996 and which reduced premiums and increased administrative efficiency. The end result of that effort was a 25% reduction in workers’ compensation premiums and faster disposition of claims for injured workers

Under this bill, a system of tiered benefit levels would be established for injuries classified as permanent partial disabilities. At present, an employee who injures an arm, leg, hand, foot, eye, thumb, finger or toe, is entitled to a prescribed duration of weekly benefits. For example, under current law, an employee may receive a maximum of 312 weeks of benefits for injury to the arm. This bill would enact a similar schedule coordinating the duration of benefits with a worker’s degree of disability for all other types of injuries that are not now enumerated in statute. The New York Compensation Insurance Rating Board estimates that such a system would save the system more than $890 million. It will also impart additional certainty with regard to benefits for both injured workers and employers. In addition, this bill would provide that currently existing schedule awards which do not relate to actual lost time from employment would be paid at one-half the maximum weekly benefit rate applicable to such claims.

The proposal also recognizes the need to provide a workers’ compensation benefits increase to injured workers by increasing the maximum benefit rate in stages from $400 per week to $500 per week. This represents a 25% increase in the maximum benefit level. The bill would authorize the first workers’ compensation benefits increase since 1992. In addition, the bill would double the maximum benefit rate for disability benefits for workers’ injured off the job. The proposal would increase the maximum benefit rate from $170 to $340, which has not been raised since 1989.

The bill also would cut more red tape and accelerate the delivery of benefits for both injured workers and employers. For controverted claims, the bill would shorten the timeframe for the initial pre-hearing conference from 60 to 45 days. Additionally, the bill would expand the extremely successful conciliation process to include all claims, regardless of benefit duration. The experience of the 1996 reforms has shown that the conciliation process works. It greatly expedites the claims resolution process, delivering benefits to injured workers faster than ever before. In fact, according to the WCB, over 92% of the cases now referred to conciliation are settled in the conciliation process. This bill would build on that record of success. The bill also would allow the WCB Chair to direct claims pending for one year to the expedited hearing calendar, rather than the two years required under current law, and when the claim is controverted.

The bill would also enable claimants to receive non-emergency medical procedures costing less than $1,000 without first seeking insurer authorization. Currently injured workers must seek authorization before any non-emergency procedure costing more than $500. This provision is important as many routine tests cost more than $500, resulting in delays for claimants in receiving treatment as they wait to obtain authorization. The legislation would expand the successful “payment without prejudice” provision to include prescription medicines. Under this program, insurers may provide benefits for up to one year while a case is litigated, without admitting liability while a case is litigated.

Further, this bill would reduce assessments for the Second Injury Fund by more than $190 million by adjusting the calculation used to determine the assessment from 150% of the previous year’s disbursements to 115%. Assessments for the Second Injury Fund would be further reduced by initiating a $250 filing fee for carriers, self-insured employer or NYSIF seeking reimbursement from the Fund, of which $200 is returnable if the carrier/employer/NYSIF is successful in its claim for reimbursement. Finally, the bill would require a carrier, self-insured employer or NYSIF to have paid all currently due assessments before receiving any reimbursements from the Second Injury Fund.

Several provisions of the bill are designed to increase the ease and efficiency of resolving claims by allowing parties of interest to resolve disputes on their own. The bill would introduce a new pilot program aimed at delivering benefits in undisputed cases without WCB intervention. In addition the bill would enable employers and unionized workers in the manufacturing industry to develop their own workers’ compensation claims adjudication process as part of their collective bargaining agreements, provided that such arrangements are otherwise consistent with the law. This would allow employers and employee to tailor a workers’ compensation plan that is unique to their situation.

Technological upgrades by the WCB in the past few years have created a fully automated exchange of information among the parties to WCB proceedings, greatly reducing claim processing times. This bill would extend those efficiencies to the private sector by authorizing the WCB to institute programs to encourage technological integration.

In an effort to reduce costs, the bill would require all insurance carriers, NYSIF and self-insureds to offer claimants the opportunity to enter into an agreement settling upon and determining the compensation and other benefits due in the case of disability within two years after the date the claim was indexed or six months after the claimant is classified with a permanent disability, whichever is later, and, in the case of death, within six months after entitlement to benefits is established for all beneficiaries. The proposal also specifically would allow for the use of annuities.

The bill also would address fraud in the workers’ compensation system. Fraudulent workers’ compensation claims increase the cost of coverage to all in the system, including employers, insurers and ultimately, injured workers. This bill would attack fraud by: (1) eliminating benefits paid to workers whose injuries are the result of the commission of a crime; (2) terminating benefits for employees convicted and incarcerated for the commission of a crime; (3) requiring claimants convicted of crimes causally related to their injuries to pay restitution of any benefits paid by their employer or carrier; (4) holding corporate officers of companies jointly and severally personally liable for failure to maintain adequate workers’ compensation coverage for their employees; and (5) authorizing the Fraud Inspector General to prosecute fraud in any court in New York and to present cases to a grand jury. In addition, this bill would seek to improve the efforts of the individual fraud offices within the WCB, Insurance Department and NYSIF by directing that they better and more intentionally coordinate their efforts.

Current law does not prevent a person convicted of fraud from obtaining an insurance policy from NYSIF and victimizing NYSIF and its other policyholders repeatedly. NYSIF may only refuse coverage to an employer that owes a balance on a prior policy and may only cancel a policy for unpaid premium. NYSIF may not refuse coverage to an employer on the basis that he or she has been previously convicted of fraud. Losses due to fraud are ultimately borne by NYSIF’s other policyholders in the form of higher premiums. This bill would permit NYSIF and other workers’ compensation insurers to refuse to issue a workers’ compensation insurance policy to any person who has been convicted of a felony within the past ten years or a misdemeanor within the past five years involving fraud either in procuring or maintaining coverage at less than the proper rate or in obtaining benefits. This would both prevent fraud committed by repeat offenders and also create a strong deterrent against insurance fraud.

Other measures that seek to rein in costs include: (1) the establishment of a fee schedule for pharmaceuticals; (2) authorizing carriers, self-insured employers and NYSIF to contract with a pharmacy or pharmacies to provide medicines to claimants and requiring that claimants obtain their medicines from such pharmacy or pharmacies; (3) authorizing carriers, self-insured employers and NYSIF to contract with a network or networks to perform diagnostic tests, x-ray examinations, magnetic resonance imaging or other radiological examinations or tests for claimants and requiring claimants to use such providers or facilities; (4) the establishment of a schedule of durable goods fees, including an extension of coverage for orthotic and prosthetic devices and wheelchair apparatus; and (5) authorization for NYSIF to utilize preferred provider organizations.

In an effort to better enforce statutory requirements that every employer must maintain workers’ compensation coverage of its employees, the WCB has instituted a new electronic system for insurers to report proof of coverage, proof of cancellation and proof of reinstatement for the employers they insure. As part of this effort, the WCB now requires each of these electronic reports to contain the employer’s federal employer identification number (i.e., federal tax identification number), or if the employer has no such number, his or her social security number. Federal employer identification numbers are issued upon request by the Internal Revenue Service. This bill would provide insurers with an enforcement mechanism to require policyholders and applicants for insurance to provide these key identifiers mandated by the WCB in order to obtain insurance coverage. Without this legislation, an insurer might be forced to write a policy for an employer that refuses to provide its federal employer identification number and not be able to properly cancel that policy later on because the WCB does not recognize the cancellation without this identifier.

Budget Implications:

The New York Compensation Insurance Rating Board has estimated that this proposal will cut manual premium rates by an average of 21.4%, or nearly $1 billion in the first year and 15% thereafter when the impact of the benefit increases become a factor.

Effective Date

This bill takes effect immediately.

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