When New York’s 2017 budget recently passed — bringing some significant changes to the state’s Workers’ Compensation Law with it — a great deal of misinformation as to how those changes would impact employers and insurers followed in its wake.

Importantly, the passage of reforms as part of the budget did not include Senate Bills S4014, S4554, S4520, or S4345. Rather, changes were made as part of the budget bill S2009, and they are substantially different from these prior bills.

Goldberg Segalla’s Workers’ Compensation team dug deep into the reforms to provide you with the following summary of the changes and their likely impact on and practical application to workers’ compensation.

Unless otherwise noted, all provisions take effect immediately for all cases.

Most Important Provisions for Insurers and Self-Insured Employers

Claimants no longer have to document labor market attachment if they are classified with a PPD.

First and foremost, this section states unequivocally that permanently partially disabled (PPD) claimants no longer need to demonstrate labor market attachment so long as they are entitled to benefits at the time of classification. This is pretty straightforward in its implication and appears to apply immediately and retroactively based on the language of the law: There is no more labor market attachment (LMA) requirement for classified claimants.

Given one of the other modifications, which provides credit for benefits paid after a number of weeks of temporary partial disability, the goal of this legislation appears to be twofold: first, to eliminate litigation on the issue of LMA for classified claimants; second, to incentivize classification for temporarily disabled claimants — unlike the 2007 reforms, which made it more advantageous for claimants to stall as long as possible to delay caps.

The impact of this change will likely be widespread and there are likely to be some unintended consequences. The biggest impact in the immediate sense will be that claimants’ attorneys will be filing RFA-1s to restore claimants’ benefits that were previously suspended for a lack of labor market attachment.

It is unclear how the New York Workers’ Compensation Board will interpret this change in conjunction with prior precedent (namely the Bacci case) as it relates to claimants who aren’t entitled to benefits at the time of classification due to a lack of attachment. Be on the lookout for litigation and appeals on this nuance. If the Board upholds Bacci as it relates to the requirement that a claimant remain attached to be entitled to awards even when attachment subsequently becomes moot, then defendants should be pushing harder on attachment up until classification to try to suspend beforehand. This would require the claimant to re-attach to become entitled to classification awards.

For cases with dates of accident or disablement after April 9, 2017, temporary partial benefits in excess of 130 weeks count against the cap at classification.

If a claimant is out of work after more than 130 weeks of temporary partial disability (TPD), the carrier will get a credit for all weeks of disability thereafter (apparently including temporary total disability) against the weeks on the cap. These are to be considered “benefit weeks” under the cap. These payments get “reduced” to a number of weeks which the carrier gets credit for.

If 130 weeks of TPD benefits have been paid and the claimant is able to produce evidence that she is not at maximum medical improvement (MMI), then the carrier does not get a credit for the additional weeks until there is a finding that the claimant is at MMI. Essentially when a claimant hits the TPD cap and permanency becomes an issue, if the claimant has medical evidence that there is no MMI and if the carrier can’t prove that she is at MMI, then no credit against the cap is accrued until a subsequent finding of MMI. This applies only once “permanency is an issue.”

The clear intent here is to motivate claimants to move toward classification, and if they don’t, the number of weeks of PPD benefits payable is reduced.

Of note is the carrier’s burden to prove the claimant is at MMI. It is not the claimant’s burden to show that they are not at MMI. You are specifically afforded the opportunity to obtain an independent medical exam (IME) and to be heard on the issue. The moral of the story is to make permanency an issue and prove MMI as soon as you can in most cases. The statute appears worded to only provide credit for weeks after MMI if a prior finding of no MMI has been made. Since this applies only once permanency is an issue, it may be advantageous in certain claims to delay permanency until a very strong case for MMI can be made. As written, it appears that prior evidence of no MMI is not considered.

This gives us an approximate deadline for caps to go into effect but will certainly lead to a deluge of litigation over MMI as claimants’ counsel attempt to have weeks excluded from the cap.

Given that this only applies to new cases, this won’t be an issue until at least six months after the governor signs it into law.

The Chair must issue new permanent disability guidelines by September 1 and enact them before January 1, 2018.

A new provision (15(3)(x)) forces the Board (with the advice of labor, business and medical providers, et al.) to issue new disability determination guidelines as it relates to sections 15 (3) (a) – (v). These sections relate to awards of schedule loss of use and statutory disabilities for losses relating to vision, hearing and losses of “members” of the body.

If the Chair does not do this in time, then the Chair has to adopt the proposed guidelines from September 1, 2017, as noted above OR the guidelines apparently to be proposed by “the Board’s consultant.”

If all else fails, the Chair adopts whichever guidelines he chooses and they stay in effect for 90 days or until new guidelines are adopted through the aforementioned process (whichever is first).

The 2012 guidelines (only those relating to 15(3)(a-v)) will automatically be repealed.

The Board will have train the judges and staff on the new guidelines.

The impact of this can’t be known until we see proposed guidelines, but they will include new schedule loss of use guidelines and perhaps even some more guidance on the calculation of impairment and loss of wage-earning capacity (LWEC) in PPD cases.

The Chair has to implement a prescription drug formulary by December 31, 2017.

This new section (13-p) directs the Chair of the Board to issue a new drug formulary. Essentially, the Chair has to divide drugs into categories:

1. Preferred and pre-approved — with an emphasis on quality and cost

2. Not-preferred and not pre-approved — which require prior approval

This has to include at least these following things:

• A pharmacy reimbursement strategy

• Administration of a prescription rebate program for formulary drugs

• A program to implement the pre-approval process noted above

• Drug utilization review

• Limitation on prescription of compound medications and compounded topical preparations

This also requires that the Chair implement a review process to change or modify the regulations that he promulgates to accomplish this —essentially allowing the formulary to grow and change with research, cost, and medical best practices.

The claimant can request a hearing be held if no controversy has been filed and no payments were made.

Section 25(2)(a) has been amended to include a provision that if a claim is filed by a claimant with medical evidence of a compensation injury, the claimant is disabled or not working, and the claimant is otherwise entitled to awards, the claimant can request that a hearing gets held within 45 days of her request. This requires also that the employer hasn’t controverted the claim and that efforts have been made to resolve this with the employer and nothing has been resolved.

There appears to be nothing in the provision actually making the Board schedule the hearing in 45 days. In any case, this doesn’t practically change much. All that needs to be done to avoid this is file a notice of controversy or a justifiable reason for non-payment in cases with documented disability.

Sections 35(3) and (4) have been amended. This affects safety net provisions and hardship redetermination.

Section 35(3) has been amended to reduce the threshold for redetermination under hardship from 80 percent to 75 percent. This section is otherwise unchanged (a claimant whose LWEC is greater than 75 percent may apply within the year before the cap runs for consideration of whether they are totally industrially disabled).

Section 35(4) modifies slightly how the Board and the Department of Labor report on PPD cases.

Section 23 has been amended to allow for full Board de jure review of Board Panel decisions reducing LWEC below 75 percent.

With few exceptions, review of a Board Panel decision by the full Board is discretionary, essentially giving the Board the choice of which cases it reviews.

This revision adds a new exception. The full Board will now review all applications for review in which the Board Panel reduced a claimant’s loss of wage earning capacity below the threshold (75 percent) for hardship redetermination.

The Chair can enact a performance standard for compliance of carriers/self-insured employers and enforce penalties if carriers/employers fail to meet that standard.

There is a new section 25(3)(g) allowing the Chair to enact penalties against carriers/employers for non-compliance. Such penalties are payable to the Board or Chair. The penalty is negotiable and is based on the number of violations. The carrier gets credit for individual penalties already paid for violations that are included in the overall penalty.

This is subject to review under section 23 (i.e., the Board Panel, etc.). If you fail to pay the penalty, then an additional 20 percent penalty is payable above and beyond the initial penalty. The deadline for payment of penalties is 10 days. Carriers and licensed representatives have to pay their own penalties and cannot pass the cost on to the employers.

Caps do not run from the date of accident.

This change was not enacted, despite what has been indicated elsewhere.

Lump-sum payment of schedule losses of use (SLUs) are not limited to disabilities in excess of 85 percent. 

 This change also was not enacted.

Other Provisions

The Chair has to conduct a review of IMEs and establish a committee to meet quarterly to ensure fairness, quality, and improving methods of combating fraud.

The Chair is given timelines to review IMEs for compliance and quality, and is also directed to produce data on abuse and fraud. The Chair is then supposed to propose new methods of assigning IMEs. The suggestions given are rotating providers, panels, and statewide networks, but these appear to only be suggestions.

It appears the goal here is to try to ensure that we get higher-quality IMEs and that IMEs and the Board are more vigilant when it comes to fraud.

The Board can fold Special Funds and the Uninsured Employers Fund into the liquidation bureau.

Section 50(3) is amended apparently to allow the chair to assume workers’ compensation liability on behalf of Special Funds (15(8), 15(9), and 25-a) and the Uninsured Employers’ Fund. This appears to allow the Board to absorb Special Funds and the UEF into the Liquidation Bureau.

If a group self-insurance plan cannot show that it is properly funded, then the amount of underfunding will be considered unfunded claims.

The Chair and Waiver Agreement Management Office (WAMO) may contract for administration with insurance carriers, NYSIF, or third-party administrators to manage or assume WAMO’s files.

This includes management, administration, and settlement authority. This includes numerous limitations and provisions for this.

The Board CANNOT disallow claims for mental stress from police, firefighters, EMTs, paramedics, or other people certified to provide emergency medical care because the stress they face is not greater than in the normal work environment.

The Board can’t deny stress claims for these classes of workers on the usual grounds. This essentially acknowledges that these classes of workers already face stress above and beyond the usual work environment due to the nature of their work.

The minimum balance of the Special Funds is reduced from 10 percent of the total assessment to 5 percent of the total assessment. 

For more information on the practical implications of this development, please contact:

• Mark A. Hauck (585.295.8323; mhauck@goldbergsegalla.com)
• Damon M. Gruber (716.566.5491; dgruber@goldbergsegalla.com)
• Sean J. McKinley (516.281.9833; smckinley@goldbergsegalla.com)
• Or another member of Goldberg Segalla’s Workers’ Compensation Practice Group