NCCI continues to support PEO's with its new designed webpage

Insurance Brokers should know that the< National Council on Compensation Insurance ("NCCI") revised its webpage on employee leasing providing relevant and concise information on the broader Professional Employer Organizations ("PEO").  In the past its employee leasing page was limited.   The name change from employee leasing to Professional Employer Organization provides a more focused approach.   "NCCI's webpage revision provides a practitioner with a one-stop resource for information and greatly expedites topic research and a place to find the proper forms" stated Greg Walker from SMP Consulting Group.

The site can be found at NCCI.

SMP Consulting Group provides premium recovery audit services for workers compensation, PEO's and subrogation claims.  For further information www.smpconsultinggrou.com.

Providing voluntary accident and disability reduces workers compensation claims

Lieberman Research Worldwide surveyed 600 small business for Aflac and concluded that companies who provide voluntary accident and disability insurance experience a reduction in workers compensation claims.  (Insurance Business).

One may conclude from the survey results that an employee will file a claim with  his/her accident and disability insurance provider rather then file a worker's compensation claim.

Why should employers pay attention?  

One of the variables for calculating the worker's compensation premium is the calculation of the experience modification.  The more claims a company submits the higher the "MOD rate".  The higher the MOD rate the higher the premiums.

Claims that are filed through the voluntary accident and disability insurance provider do not go into the MOD calculation.  The savings can be significant.

More importantly voluntary accident and disability insurance is generally paid by the employee.  Small and medium size businesses should encourage their workforce to sign-up.

SMP Consulting Group is the leading provider of workers compensation audits finding misclassifications and erroneous calculations for its clients.  We only work on a continent basis without upfront fees.  We only share in the savings.  For more information visit our website at www.smpconsultinggroup.com.

New York State Grand Jury focusses on Employee Classification Codes. Misclassifications are subject to severe penalties.

DA VANCE: GRAND JURY RECOMMENDS SIGNIFICANT CHANGES TO PREVENT WORKERS’ COMPENSATION INSURANCE FRAUD

 Manhattan District Attorney Cyrus R. Vance, Jr. today announced that a New York State Supreme Court Grand Jury has issued a report examining the vulnerability of New York’s workers’ compensation insurance system to fraud and misuse. The Grand Jury’s report stemmed from investigations by the District Attorney’s Money Laundering and Tax Crimes Unit into false information provided to the New York State Insurance Fund in connection with applications for, and audits of, workers’ compensation policies.

“Workers’ compensation insurance provides critical protection to both workers and their employers,” said District Attorney Vance. “The widespread premium fraud detailed by this Grand Jury Report is deeply troubling and underscores the critical need to reform the workers’ compensation system. My Office’s Tax Fraud and Money Laundering Unit will continue to pursue those who cheat the system, but the best protection for New York’s workers is a system that is itself protected from fraud and abuse.”

New York’s Workers’ Compensation Law dates back more than 100 years, and is closely associated with the tragic Triangle Shirtwaist Factory fire of March 25, 1911. The fire, which was the largest workplace tragedy of the time, killed 146 people when a fire broke out in a crowded Greenwich Village garment factory. With insufficient means of warning or escape, most of those who died were young immigrant workers. Those who survived had no workers’ compensation law to protect them, and while some recovered nominal payments through civil law suits against the factory’s owners, most were left with no way to recover medical expenses or lost wages.

Today, New York’s Workers’ Compensation Law provides a needed safety net for employees who are injured in the work place, while also protecting employers from law suits that could lead to economic ruin. Workers’ compensation insurance in New York is approximately a $6 billion per year business, with nearly 40 percent of the workers’ compensation market handled by the New York State Insurance Fund. 

The Manhattan District Attorney’s Office investigated incidents of insurance premium fraud that give wrongdoers an improper competitive advantage over law-abiding businesses, and deprived vulnerable workers of needed protections and benefits, while also costing New York State and City substantial revenue.  

New York law requires every employer obtain worker’s compensation insurance. An individual employer’s premium is based on each covered employee’s job classification, as determined by the New York Compensation Rating Board. A rate for a relatively safe job may be as low as two cents for each $100 of payroll, whereas the rate for a more inherently dangerous job could be as much as $35 for each $100 of payroll. This system, which requires employer self-reporting, is easily abused by unscrupulous employers who misclassify employees. Employers can easily lie about what work a particular employee performs, for example, reporting a roofer as a clerical worker, and thus paying a significantly lower premium. More egregious is fraud where an employer misclassifies a worker, who is required to be insured under the system, as an independent contractor, who is rather an employee. 

Taking into account a June 2013 report of the Fiscal Policy Institute and other estimates, New York City’s construction industry in 2011 cost the City and State approximately $500 million based on worker misclassifications. The largest component of the loss was unpaid workers’ compensation premiums, with personal income tax, withholding, unemployment insurance, and various other business taxes accounting for the remainder.

Premium fraud affords wrongdoers an improper competitive advantage over all law-abiding businesses, makes workers vulnerable by depriving them of important protections and benefits, and deprives New York State and New York City of substantial revenue. Every lost dollar must be made up by a dollar increase somewhere else, usually by a cost-shifting phenomenon that affects us all. Every law-abiding employer is a victim of this criminal conduct, as is every hard-working employee, every consumer, and every honest taxpayer.

Since 2013, the Manhattan District Attorney’s Money Laundering and Tax Crimes Unit recovered approximately $4.8 million from criminal defendants who pleaded guilty to defrauding New York State by violating the Workers’ Compensation Law. Overall, premium fraud generates an unfair business environment in which honest business owners cannot compete with rogue employers and are either forced out of the market or dissuaded from entering it in the first place. This Grand Jury was empaneled to make recommendations to stem the tide of abuse.

The recommendations proposed by the Grand Jury, designed to assist in early detection of premium fraud, improve compliance and enforcement efforts, deter cheating, and ensure fair and equitable treatment of all policyholders, fall into four general categories: 

• Increased Penalties to ensure that sentences are proportionate to the magnitude of the fraud. Under current law, a defendant faces no more than a class E felony whether the amount of the fraud is $1,000 or $100,000. The Grand Jury recommends:
  • Gradating the Workers’ Compensation Law and relevant criminal statutes based on monetary thresholds;
  • Amend relevant provisions of the Penal Law, such as the money-laundering statutes and the enterprise-corruption statute, to include Workers’ Compensation Law felonies as possible predicate felonies.
• Increased Transparency by overhauling the application process used by employers and the audit procedure of the policyholder.
  • Design a uniform workers’ compensation insurance application that will be submitted electronically to the Workers’ Compensation Board;
  • Require vigorous audits by all insurance carriers, ensuring that employers pay the correct premium; and
  • Issue every employee a Workers’ Compensation Insurance card for the employee to present when seeking medical services or prescription drugs in connection with a job-related injury or illness.
• Broader Data Collection and Collaboration to increase dissemination of information in the hands of those charged with investigating and prosecuting fraud.
  • Create an integrated database to combat workers’ compensation insurance fraud, including all application, audit reports, and certificates of insurance; and
  • Create a real-time database of information from commercial check cashers available to the Workers’ Compensation Board.
• Broader Education for employees and the community at large about the workers’ compensation system and its value to the public, so that everyone is better able to protect the system from fraud.  
  • Employers should know their obligations under the system;
  • Community recognition about the negative effects of premium fraud; and
  • Employees should be encouraged to invoke their rights under the system.

Assistant District Attorney Gilda Mariani, Chief of the Money Laundering and Tax Crimes Unit, presented the investigation to the Grand Jury, under the supervision of Executive Assistant District Attorney David Szuchman, Chief of the Investigation Division. Assistant District Attorney Amyjane Rettew, Appellate Counsel to the Investigation Division, and Eleanor Rettew, Paralegal in the Money Laundering and Tax Crimes Unit, assisted with the report.

District Attorney Vance thanked the following for their assistance in the investigation: New York City Mayor’s Office of Data Analytics, New York State Insurance Fund, New York State Department of Labor, and the New York City and State Departments of Taxation and Finance for their assistance in the investigation.

 SMP Consulting Group focusses on Workers Compensation Employee Classification Codes.  For more information www.smpconsultinggroup.com

Plastics Industry executives that pay attention to cost will pay attention their workers compensation premiums

Plastic Industry Executives that are mindful of cost will closely monitor their workers compensation premiums.  The cost savings can be significant for those that pay attention.

Workers Compensation premium are set according to your company's Employee Classification Codes.  The insurance underwrites use these codes to assign risk to the various jobs.

For example:

Employee Classification Code 4452 is applied to to the machining of plastic products developed from raw materials in the form of sheets, rods and tubes. It includes machining, bending buffing and polishing. This code also applies to vacuum forming of products where the plastic is heated and pulled into molds that form the product Heated plastic can also be applied to molds and the product would fall under this category.

Employee Classification code 4459 Applies to the manufacturing of plastic sheets,rods and tubes using the extrusion process. This involves the grinding and mixing of ingredients that produce pellets, granules or liquid dispersions that are processed into sheets, rods and tubes that are run through dies on machines under pressure to shape and produce the product.

There are also several other codes that your state may use in such as 4484, 4475, and 4476. Code 4484 is used in some state for compression and injection molding so you would have to check on your states special classes.

Why Employee Classification Codes matter?

If you have your employees in the wrong code your premium may be higher then it should.  The table below illustrates the difference.

                                  4452                            4459
Connecticut              $10.22                         $ 5.65
Idaho                        $  4.71                         $ 3.59
Illinois                      $  7.87                         $ 7.81

Per $100 of payroll

If you have operations in Connecticut your difference is substantial.   You can see from the above table that the difference in Illinois is marginal.   Depending on your state and your code the premiums you pay will vary.

What should you do?  First, you should take a look at your payroll runs to see how employees are classified.  Use the definitional codes provided by your State's Worker Compensation Bureau.  The NCCI coordinates it for twenty-three states so you may start there.

Alternatively, you can hire a professional that specializes in Workers Compensation Audits.  The most reputable firms do not charge an upfront fee.  Typically they will go back three years and do it for fifty-percent of the savings.  Your portion of the savings are furnished to you directly and you enjoy the benefit of lower costs for the next several years.

This article was written by Greg Walker at SMP Consulting Group.  SMP's specializes in workers comp audits (www.smpconsultinggroup.com).  Gwalker@smpconsultinggroup.com