The 18.8 percent surcharge New York adds to workers’ compensation costs is five times the average surcharge levied in other states, according to the Workers’ Compensation Policy Institute, which released its annual study today.
New York’s assessment is more than double what the charge is in Minnesota, the state with the second-highest surcharge, the report said. Minnesota’s assessment is 8.3 percent.
Thirty-two states charge these assessments on workers’ compensation premiums to fund the system. The average surcharge is 3.8 percent, the Workers’ Compensation Policy Institute found.
“This tax continues to burden all employers —and municipal employers feel this mandate intensely as they continue to struggle to provide essential services and contain taxes,” said Paul Jahn, executive director of the institute, research affiliate of the Public Employer Risk Management Association. “This pressure was recently intensified by the 2 percent property tax cap.”
The Legislature adopted and the governor signed the Workers’ Compensation Reform Act in 2007 to reduce the system’s burden on employers. The surcharge increased 10.4 percent and 27.5 percent in the first two of the last three years. It dropped 6.9 percent in the third. Nationwide, assessments dropped an average of 9.5 percent nationwide in 2012, the report said.
Gov. Andrew Cuomo touted the decrease—the first since 2008—for 2012 in a July news release. The New York Compensation Insurance Rating Board, a non-governmental rate service organization, had recommended an increase in its annual loss cost filing. The Cuomo administration deemed the increase unnecessary. “With the new measures implemented by the state, and our continued work together with the business and labor communities, we will remain on track to create a system that works better for both employers and employees,” Cuomo said in a statement at the time.
The Workers’ Compensation Policy Institute report said the 18.8 percent rate is the second highest the surcharge has been since the law took effect (the highest was 20.2 percent and the lowest was 13.4 percent). The assessment was 18.6 percent of premium before the law.
The report said municipalities are constrained by the 2 percent property-tax cap, and unfunded mandates and pension costs, for example, continue to increase. Actuarial experts are concerned that the state’s workers’ compensation system continues to be significantly underfunded.