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April 27_ 2007 Honorable Eliot Spitzer State of New York State by jianghongl


									                                        STATE OF NEW YORK
                                      INSURANCE DEPARTMENT
                                         25 BEAVER STREET
                                     NEW YORK, NEW YORK 10004

Eliot Spitzer                                                                            Eric R. Dinallo
 Governor                                                                                Superintendent
                                          April 27, 2007

Honorable Eliot Spitzer
State of New York
State Capitol
Albany, New York 12224

Dear Governor Spitzer:

Pursuant to your March 13, 2007 letter in which you asked the Department of Insurance to lead an effort
to improve the workers’ compensation system in our state, in consultation with the Department of Labor
and the Workers’ Compensation Board, I am writing to provide a status report on our plans to (1) design
a system to collect relevant data for setting fair and affordable rates; (2) develop a streamlined
adjudication process for resolving disputed claims; and (3) develop impairment and treatment guidelines
for medical professionals.

I am pleased to report that we have made substantial progress in preparing a plan for each of these
assigned areas. Each plan is discussed below.

1.       Data Collection

The Department has developed a plan to gather indemnity and medical data, labor market data, and rate
data, which can be used to establish benchmarks, monitor the rate at which injured employees return to
work, and evaluate the affordability and fairness of rates.

Indemnity and Medical Data: Since 2000, the Workers’ Compensation Board has maintained a detailed
electronic case file for each claim, which contains certain personal and occupational information of a
claimant, including whether he or she has received any indemnity payments, awards or settlements.
However, the Workers’ Compensation Board’s electronic file does not contain any detailed data on
medical costs, medical utilization or a claimant’s health status. This information is maintained by the
insurance carriers. Accordingly, the Department will request every workers’ compensation insurance
carrier licensed in New York to provide to a designated data collection agent detailed information on the
cost of all drugs, medical procedures and equipment provided to each claimant. The Department, with
the assistance of the Department of Labor and the Workers’ Compensation Board, will develop a
method to collect the relevant data from the files of the Workers’ Compensation Board and insurance
carriers and electronically transfer the data to a designated data collection agent.

Governor Eliot Spitzer
April 27, 2007
Page 2

Labor Market Data: There is universal agreement that an injured employee who returns to work as
quickly possible is less likely to suffer a significant long-term earnings loss, which, in turn reduces the
cost of the workers’ compensation system. However, there is no specific data on the rate at which
injured employees return to work. The best way to determine this rate is to compare data maintained by
the Workers’ Compensation Board and insurance carriers with the data maintained by the state’s
Unemployment Insurance System (“UIS”). The UIS receives quarterly reports from employers that
contain the Social Security number of each covered employee. A comparison of the data submitted by
the employer to the UIS and the data maintained by the Workers’ Compensation Board and insurance
carriers would provide a good statistical picture of the rate at which injured employees return to work.
This comparison, in addition to providing wage information that would allow the timely resolution of
appropriate benefit rates, would assist in identifying employers that are either failing to obtain sufficient
workers’ compensation coverage or who are fraudulently misclassifying employees.

In view of the foregoing, the Department will develop a method for comparing the data maintained by
the Workers’ Compensation Board and the insurance carriers with the data maintained by the UIS.

In addition, the Department of Labor is currently meeting with experts across the country, consulting
with top academics, evaluating relevant research, and gathering information from New York and other
states to determine the best practices for facilitating an injured employee’s return to his or her previous
job, to a modified job, or to new employment following vocational rehabilitation training. In
consultation with New York business and labor representatives, the Department of Labor will create a
vocational rehabilitation program that assists an injured employee’s return to work.

Rate Data: Any careful review of rates requires comprehensive data on each insurance carrier’s losses
and costs. This data should include aggregate financial data for each insurance carrier reflecting total
premiums, paid losses and claim reserves during the policy and accident years, expense data detailing
the insurance carrier’s overhead and administrative costs, as well as data showing premiums and losses
for individual policies. Unemployment insurance and wage data obtained from the Labor Department
will also assist in determining the level and scope of coverage that would have a positive effect on rates.
The Department will determine the appropriate data collection agent to gather and maintain this

By developing the aforementioned data collection systems, the Department anticipates that it will be
able to provide the specific system information you have requested by March 1, 2008.

2.      Streamlined Adjudication Procedures

Many employers dispute an employee’s claim to workers’ compensation benefits. In 2006, about
150,000 new workers’ compensation claims were filed in New York. Nearly 25,000 of these claims
were disputed by the employer. Employees prevailed in 41% of these disputed cases. While a disputed
case is pending, an injured employee does not receive indemnity benefits and has limited access to
medical benefits. Your letter recognizes that the system should be redesigned to reduce this financial
and physical hardship on injured employees.

Currently, it takes about 240 days to resolve a disputed case. To understand the causes of delays in
adjudicating disputed cases, the Department has interviewed lawyers for both claimants and employers,
judges at the Board, and members of the MIS/Research unit at the Workers’ Compensation Board. The
Department’s staff has also audited hearings of disputed cases.

Governor Eliot Spitzer
April 27, 2007
Page 3

Based on the information obtained, the Department is considering several administrative rules and
regulations that would allow judges to rule on cases where the legal and factual issues are
straightforward. For example, the Department is considering procedures to minimize the number of
hearings on cases involving undisputed factual issues and identify those cases that can be decided
expeditiously without the taking of live testimony. In addition, the Department is considering
regulations that require the completion of discovery before the scheduled hearing date, and forbid the
repeated adjournment of hearing dates due to the unavailability of witnesses. We are also taking a close
look at complex cases in an effort to determine how to speed up their resolution during both the
discovery and hearing phases.

Finally, we are considering the streamlining of adjudication procedures with the goal of improving the
rate at which injured employees return to work. The Labor Department is consulting with researchers,
employers, labor organizations, injured employees and the workers’ compensation systems of other
states to identify incentives and alternatives that should be included in the streamlined docket to
encourage an injured employee’s return to work.

By June 1, 2007, the Department will send a set of proposals to the Chair of the Workers’ Compensation
Board designed to reduce unnecessary delays in disputed cases.

3.      Medical Guidelines

The Department is currently working on drafting medical guidelines, which are comprised of
impairment guidelines and treatment guidelines.

Impairment Guidelines: These guidelines are designed to assist a medical professional in determining
the loss of function of an organ or a body part by an injured employee. Ratings derived through the use
of impairment guidelines are important in deciding whether an employee has suffered a compensable
permanent partial disability under New York law. The development of impairment guidelines that
minimize differences in ratings between examiners is an important step in reducing frictional costs
within the workers’ compensation system.

As your letter recognized, many believe that New York’s impairment guidelines do not accomplish this
result and produce ratings that provide little guidance to judges. Indeed, the need to develop objective
guidelines has become even more pressing in light of the new legislation, which requires judges to make
precise disability findings along a much broader range of disability percentages than under the previous

Treatment Guidelines: These guidelines create a system for evaluating and treating common
occupational injuries. Their purpose is to reduce disputes that may lead to delaying important medical
care for injured employees and assure that appropriate medical care is given at reasonable cost. In
contrast to many other states, New York currently lacks treatment guidelines that would help to achieve
these goals.

Treatment guidelines also impact the recovery of an injured or ill employee and the likelihood that the
employee will safely and timely return to his or her previous job. Successful return-to-work outcomes
require the coordination and collaboration of the injured employee, the employer, and the medical

Governor Eliot Spitzer
April 27, 2007
Page 4

community. Treatment guidelines should address the claimant’s individual and occupational
rehabilitation and return to work from the first visit.

Since the issuance of your letter, the Department has been collecting both impairment and treatment
guidelines used in other states and assessing whether any of them would be appropriate models for New
York. In order to understand the strengths and weaknesses of various guidelines used in other states and
the effects of these guidelines in practice, we have had extensive discussions with individuals who have
both drafted and evaluated them. We are also continuing to reach out to representatives of the medical
community in New York to solicit their input and suggestions.

The Department anticipates that in consultation with its advisors a final decision about the process for
producing these guidelines will be made in June. Thereafter, the guideline drafting process will begin so
that guidelines can be produced by December 1, 2007.

The tasks that you have set for the Department are extremely important. Collecting more information
about the workers’ compensation system is imperative. Workers’ claims for compensation need to be
adjudicated in a fair and timely fashion. Further, system costs cannot be controlled unless judges and
medical professionals are given clear and authoritative guidance. In the coming months, the
Department looks forward to working with you, the Labor Department, the Workers’ Compensation
Board and other interested parties to achieve significant regulatory reforms. Thank you for the trust you
have reposed in the Department, the Department of Labor and the Workers’ Compensation Board to
undertake these important initiatives.


Eric R. Dinallo

cc:     Patricia Smith, Esq.
        Donna Ferrara, Esq.


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