All posts by Lev Ginsburg

New report highlights New York’s woefully uncompetitive Workers’ Comp rates

Earlier this week the Oregon Department of Consumer and Business Services released an analysis of workers’ comp rates across the country. Not surprisingly, New York, with a cost rate of $2.83 per $100  in payroll (almost a dollar more than the median rate),  is near the bottom of the pack. In fact, our rate went from the fourth highest in the nation to the third highest.

From the Insurance Journal: “The authors of the report compared each state’s rates to the national median rate of $1.84 per $100 of payroll, which is a drop of less than 1 percent from the $1.85 median in the last report.

Rates ranged from a low of 89 cents in North Dakota to a high of $3.24 in California. California’s rates were 188 percent above the national median, according to the report.

The report is based on methods that put each state’s workers’ comp rates on a comparable basis by using a constant set of risk classifications.

The study used classification codes from the National Council on Compensation Insurance. To control for differences in industry distributions, each state’s rates were weighted by 2010 to 2012 Oregon payroll to obtain an average manual rate for that state.”

Analysis of workers’ comp rates across the country

While each study of this nature computes costs differently, one thing is for certain, New York’s move from fourth most expensive in the nation to now third at $2.83 per $100 in payroll, paints a picture of a state with an enormously expensive comp system that is unquestionably detrimental to job growth and economic development.

The time for comprehensive workers’ compensation reform in NYS is now!

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Hard to find logic in DFS move

Much has been made recently about Howard Zemsky, the chief executive of Empire State Development, and his recent defense of Start-Up New York’s advertising campaign, which he said was “…paying dividends to New Yorkers in more intangible ways, including reversing…the state’s decades-old reputation as a place unfriendly to businesses.” Millions of dollars in advertising notwithstanding, we are very concerned with communications from other members of the administration, whose recent activities send a very chilling message to employers in New York.

In a recent letter regarding Anthem’s proposed acquisition of Cigna, Superintendent of Financial Services (DFS), Maria T. Vullo, took some unprecedented steps that highlighted the department’s inconsistent philosophies regarding the cost of healthcare in New York. Moreover, the letter sends a very strong and negative message to employers desiring to expand operations in New York, which is especially disconcerting given the significant longstanding economic presence these businesses already have in the state. Such actions should concern any of us trying to do business in New York.

As a representative of New York’s employers, I find it especially troubling that DFS dedicated much of their professed concern discussing the future market share of the commercial self-insured market. These are companies that opt to insure their employees out-of-pocket, rather than purchase insurance. Such insurance arrangements are typically entered into by sophisticated businesses in a very competitive and price sensitive market, and this is a market already regulated by the federal government through ERISA. While tensions between the state and the federal government over ERISA plans are not new, this letter signals a new attempt by a state agency to regulate employers in matters that fall far out of its jurisdiction.

Also deeply concerning is the DFS’ confusing logic on controlling the costs of healthcare for consumers in the state.  DFS simply assumes that a carrier’s increased market share will somehow have a negative impact on the value-based payment model being promoted by the state, leading to higher costs for consumers, despite the fact that there is no evidence to support such an assumption.

This logic is flawed in several ways. The letter says that competition in the health insurance industry is needed so that providers (doctors, hospitals, etc.) can negotiate with various insurers to maximize their income. Perversely, this will naturally lead to an increase in health care premiums, an issue to which the DFS should be particularly sensitive. The fact that increasing the income of healthcare providers is not part of the mission of the Department of Financial Services aside, this statement simply misses the point. While the verdict on the cost-savings of the value-based payment model is not yet in, such a model never envisioned a marketplace where healthcare providers are given endless leverage to negotiate universally higher fees.

Further, the letter fully ignores the reality of healthcare provider mergers and acquisitions in the state. Last year alone there were 940 healthcare service transactions in New York, up from about 480 in 2010. This increase is at an unprecedented pace in New York; one which is likely to only accelerate. Numerous recent studies show that such mergers create upward pressure on healthcare costs. If the Department of Financial Services is concerned with the cost implications of diminished competition, why isn’t this side of the equation being considered?

Employers in New York are saddled with some of the very highest costs of doing business in the nation. Everything from property taxes to workers’ compensation costs to the price of health coverage. In order to change New York’s poor business reputation, we need more than advertisements; we need policies that work to lower these costs for employers. We need consistency in policy across the state’s many regulatory agencies and we need regulators that stay within the jurisdictional limits set by law. It’s time that all of New York’s regulating agencies get on board to building a better economy for all of us.

Analysis highlights flaw in medical mergers

Today the New York Times took a look at medical practice and hospital mergers to help determine if the quality of care is worth the increases in costs. The analysis asserts that the use of what is known as an integrated delivery system (I.D.S.) is spreading but, according to the commentary, “…the evidence suggests that an I.D.S. doesn’t always improve patient care and keep costs down…”

The Times piece goes on to say, “Other research that examined 15 nationally prominent integrated delivery systems found no meaningful differences in the quality of care provided by their flagship hospitals, compared with their main competitors. And it turned out that the I.D.S. hospitals were more costly.”

Hospital and healthcare system mergers and acquisitions were supposed to create efficiencies and bring costs down. However, as this piece outlines, multiple recent studies have concluded that consolidation of medical providers leads instead to higher prices for patients.

Policymakers need to concentrate on legislative and regulatory solutions that ensure decreases in healthcare costs, instead of relying on methods that do the opposite. This is why The Business Council opposes measures such as S.4417-A (Murphy) / A.2888-A (Abinanti), which would exclude the Westchester Health Care Corporation from state antitrust laws in its contracts and arrangements with multiple providers.

The Comp is too #$@% high

This morning, the Albany Times Union reported something that employers around the state have known for far too long, workers’ compensation costs are terribly high and continue to rise. New York consistently ranks within the top four most expensive states in the nation for comp costs. While the article quotes the administration as saying that they are open to ideas on cost-controlling reform, The Business Council has endlessly advocated to the board and the administration not only the need for reform, but the specific remedies that would cut costs while guaranteeing the best care for injured workers.

From the article: “Despite a recent drop following the 2007 reforms, costs quickly went back up and are now 20 percent higher than before the changes. And while the average workers’ compensation cost per employee was 40 percent higher than the national average before 2007, it is now projected to be even higher at 2.5 times the national average.

On average, the cost of sustaining the system, which is financed largely by assessments on employers, will run $1,000 per employee each year. What happened? While there are lots of factors, critics like Ginsburg place much of the blame on the way claimant lawyers have been able to use the reforms to their advantage. One of the big changes was an increase in payments to injured workers.

While they used to be capped at $400 per week, that was raised to $840. In exchange, workers gave up lifetime payments and instead get money for a fixed period of time which maxes out at 10 years, with some exceptions. But the timetable doesn’t start until a case is fully resolved, or the injury is “scheduled” in workers comp parlance. Payments, however go out during this negotiating period and these can easily run for years due to the various appeals mechanisms in place. Final determinations can now take six or more years.

Unfortunately, the demands of the special interests of unions and trial lawyers have ruled the day. It appears that, for now, their zealous protection of the status quo (which earns them hundreds of millions of dollars annually), will continue to balloon costs until lawmakers decide that enough is enough.

Report: State errors led to insurer’s collapse

Today the Empire Center released a report that concludes that the recent collapse of Health Republic (the health insurance co-op established under the ACA) which disrupted coverage for 215,000 New Yorkers, was a result, in large-part, to failures by the state and the Department of Financial Services (DFS). The report states that DFS took no obvious steps to address serious and glaring financial problems at Health Republic and instead used its regulatory power of prior-approval of health premiums to further lower Health Republic’s inadequate premiums.

Consistent with the position that The Business Council has often opined, the report concludes that DFS needs to concentrate more on plan solvency. We believe the goal of making health coverage more affordable is best achieved by the removal of high taxes and unfunded mandates, rather than the imposition of price controls through a politicized prior-approval regime. The Empire Center’s report can be found The Empire Center’s report can be found here.

New York State gets healthier

In a fascinating and thorough state-by-state study of public health, conducted by UnitedHealth Foundation (a charitable foundation of The Business Council member UnitedHealth) and the American Public Health Association, New York State climbs in the rankings to #13.  According to the report, New York adults are becoming a bit more physically active and our state’s obesity figures have slightly decreased.

While there is certainly room for improvement, New York’s climbing in the ranks represents a move in the right direction for all New Yorkers, especially employers who are always looking to help better the health of their employees. The study can be found here.