GOVERNMENT
3 villages rue picking self-insured workers’ comp
If it sounds too good to be true, it probably is.
That axiom is proving painfully accurate for thousands of small-to medium-sized employers across New York State — including the village governments of Lancaster, Kenmore and Sloan — who suddenly find themselves paying dearly for choosing the wrong insurer to handle their workers’ compensation needs.
All three unknowingly joined a financially troubled “group self-insured trust,” thinking it would save a significant amount of money.
Little did they realize the promised savings — some as high as 20 to 40 percent — were unrealistic and would be partly to blame for the insurer going bust and voluntarily surrendering its state license to sell workers’ compensation insurance last spring.
Even worse, those thousands of employers in the government, education, health care and manufacturing industries are now on the hook to pay unexpected bills from the state totaling “thousands to hundreds of thousands” of dollars, according to Brian M. Keegan, state Workers Compensation Board spokesman.
For Sloan, Lancaster and Kenmore, this has meant being slapped, so far, with bills ranging from $3,000 to $31,684.
“Our rule of thumb is we try to save our trust members 15 percent,” said Kevin Gregory, president of a Buffalo-based insurer called NCAComp, which manages three group self-insured trust funds.
Gregory also has been hired by New York state to help clean up part of the mess left behind by a Poughkeepsie insurer that ran eight of 12 trusts that went belly-up earlier this year — including the one that serviced the three local villages.
“If you get someone offering you 25 percent savings or more, you ought to be raising your eyebrows,” said Gregory, who observed that 40 percent savings were “commonly” offered to employers who bought into Public Entity Trust of New York (PETNY), one of eight now-defunct trusts formerly managed by a Poughkeepsie insurance company called Comprehensive Risk Management LLC, or CRM.
Earlier this year, the workers’ compensation board charged Poughkeepsie’s CRM with mismanaging its funds and submitting false information.
CRM blames a bad business climate and maintains it did nothing wrong, according to investigative reports by the Poughkeepsie Journal’s Mary Beth Pfeiffer, who has written extensively on the insurance fiasco.
Several other states across the nation — including Tennessee, California and Kentucky — have witnessed similar failures among self-insured groups.
Employers who were CRM’s clients are now huddling with attorneys to decide whether to fight or pay state assessments that essentially make them responsible for making their injured workers’ claims whole.
The villages of Lancaster, Sloan and Kenmore all subscribed to Public Entity Trust of New York, a CRM trust, for varying lengths of time.
Ten other cities, towns, villages and school districts also face penalties for signing up with PETNY to handle their workers’ compensation insurance.
“We are not pleased with this situation,” said Donald Kasprzak, mayor of Plattsburgh, which has been ordered to pay $186,000.
Over the past two years, 12 of 63 group self-insured trusts operating in New York State have gone belly-up, according to Keegan. The state Workers’ Compensation Board stepped in to protect injured workers, so that claims could continue to be paid.
All New York state employers must provide workers’ compensation insurance for their employees.
The state is currently conducting forensic audits on all 12 failed trusts, which left liabilities totaling more than $360 million against assets of $53 million.
New York state also has tightened its regulatory hold on the remaining legitimate trusts peddling workers’ compensation insurance.
Lancaster made its first payments “under protest” toward a $20,000 assessment for the village’s two-year participation in the Public Entity Trust of New York. Village leaders have now been advised not to pay anything further.
Kathleen P. Johnson, clerk/treasurer for Village of Kenmore, said the village is still evaluating its legal options and will have no further comment on its involvement in PETNY for now. Kenmore has been told it owes an assessment of $31,684 and has paid its first installments “under protest.”
Sloan has taken a different tack.
“We just paid the whole thing — $3,000,” said Village Attorney Paul Murak.
