CAMBRIDGE, Mass.–(BUSINESS WIRE)–Some of the 2007 reforms made to New York State’s workers’ compensation system are beginning to have an impact, while the effects of others are still developing, according to an ongoing study of the reforms by the Cambridge, Mass.-based Workers Compensation Research Institute (WCRI).
The WCRI study, Baseline Trends for Evaluating the Impact of the 2007 Reforms in New York, is the third report in a series that will monitor the reforms to identify objectives that are being met, objectives that are not being met, and any unintended consequences that have emerged.
The reforms increased the maximum statutory weekly benefits from $400 to $600 in three annual steps, beginning in 2007. WCRI reported that the first annual step, which increased maximum statutory weekly benefits from $400 to $500 beginning in July 2007, produced a 14 percent increase in the average temporary total disability benefit rate from $336 to $383.
This and other scheduled benefit increases might be expected to result in changes in a number of measures, including incurred indemnity benefits per claim, paid indemnity benefits per claim, paid indemnity benefits per temporary disability claim, the average temporary total disability benefit rate, and the percentage of injured workers whose benefits were constrained by the maximum.
The study observed that the percentage of workers whose benefits were constrained by the maximum benefit fell from 48 percent prior to the increase in maximum statutory weekly benefits, to 35 percent after the increase.
The study also found that incurred indemnity benefits—payments for lost wages—per indemnity claim rose 8.2 percent from 2006 to 2007, compared to 4.9 percent for paid indemnity benefits per claim.
This likely reflected expectations of the impact of the increase in the benefit maximum and perhaps other reform provisions, which were not yet observed to the same extent in paid data because of the effective date of the changes.
Another benefit provision of the reforms limited the number of weeks of permanent partial disability (PPD) wage replacement benefits to a maximum of 10 years, ranging from 225 percent to 525 weeks, depending on the worker’s disability and loss of wage-earning capacity.
Although this decrease in the PPD wage replacement schedule is expected to result in large savings for the New York system, it will be several years before significant changes can be observed, the study said. The reason is that it takes several years for PPD benefits to be determined and for the cap to be imposed.
The pharmacy fee schedule instituted by the reforms resulted in immediate savings. The study found that the new schedule, based on the average wholesale price in July 2008, generated a decrease of 17 percent to 31 percent in the average price paid per pill for common prescription drugs.
An earlier WCRI study said that prior to the implementation of the new pharmaceutical fee schedule, the average prescription payment per claim with a prescription in New York was 35 percent higher than the median of the 16 states in the study.
The study noted that medical treatment guidelines mandated by the 2007 reforms to improve the quality of treatment and help control medical costs were in the process of being implemented. For example, implementation of guidelines for testing and treatment of shoulder, cervical spine, knee, and middle and lower back injuries, originally set for October 2010, has been delayed until December 2010 to allow for more time for training.
The 2007 reforms included a combination of statutory and administrative changes aimed at reducing delays in resolving controverted cases and in workers receiving benefits. The key objective was to reduce the timeframe from dispute of a claim to establishment or denial of a claim to 90 days. The implementation date was January 1, 2009.
When the changes are fully implemented, the study said a reduction in the timeframes related to the resolution of controverted claims might be expected. Indirectly, these changes could impact litigation rates and costs.
The portion of indemnity claims at 12 months experience with payments to defense attorneys rose from 13.6 percent in 2003 to 22 percent in 2007. It is uncertain if the reforms were a factor in this increase since this growth began prior to the passage of the 2007 reforms, the study said.
The Workers Compensation Research Institute is a nonpartisan, not-for-profit membership organization conducting public policy research on workers’ compensation, health care, and disability issues. Its members include employers, insurers, governmental entities, insurance regulators and state administrative agencies in the U.S., Canada, Australia and New Zealand, as well as several state labor organizations.
To order this report, visit the WCRI website: www.wcrinet.org.
Workers Compensation Research Institute
Richard A. Victor, 617-661-9274