Review of Workers Compensation Costs in New York

The cost and frequency of workers compensation (WC) claims vary greatly between the different states.

Each individual state, or jurisdiction, has its own WC benefit structure, administrative system, and governing statutes. Compensation rates, maximum and minimum weekly benefits, automatic adjustments to maximum and minimum benefits, system utilization, industry mix, administrative efficiency, constraints on medical care, and general cost of living levels all vary, potentially significantly, by jurisdiction and represent a sample cross section of items that directly impact claim incidence and costs.

This paper examines and discusses metrics specific to the State of New York (NY). NY is a unique jurisdiction, in that following a period of accelerating WC costs (benefits; claim related expenses; and assessments) in NY from 2000 to 2007, the state enacted legislation in 2007 with the expectation of materially reducing costs. Rather than reducing costs, the 2007 legislation ultimately led to higher costs that now greatly exceed pre-legislation levels. Duringthe period from 2006 (the year prior to the legislation) through 2012:

  • The incidence of lost time (LT) claims in NY decreased by a modest 7%. The countrywide incidence of LT claims declined by 19% during the same period of time.
  • The average benefit cost of a LT claim in NY increased by 48%. The average countrywide benefit cost of a LT claim increased by 12% during the same period of time. Note that current forecasts place the average benefit cost of a LT claim in NY at approximately $100,000 in 2016. This is prior to consideration of claim related expenses and NY State assessments.
  • The average cost of claim related expenses in NY increased 41% from $5,153 per claim in 2006 to $7,266 per claim in 2012. Countrywide, the cost of claim related expenses increased by 34%, from $4,278 in 2006 to $5,732 in 2012. Though the percentage increase in NY claim related expenses during this period was only marginally greater than countrywide metrics, the absolute cost of claim related expenses has been and remains materially greater in NY.
  • Collected assessments in NY required to provide for the cost of claims in state managed claim related funds (15-8 and 25-A, discussed later in this paper) increased from approximately $600 million in 2007 to approximately $950 million in 2013.

Oliver Wyman’s analysis indicates that current costs in NY are among the highest in the United States.

Review of Workers Compensation Costs in New York