New York State AFL-CIO

Self Insured Group Trusts

A phenomenon of the ‘90’s was the proliferation of self insured group trust for workers’ compensation. Such trusts, while in many ways similar to mutual insurance, are significantly different in one crucial respect—-they are not regulated by the Insurance Department.

All across the country these schemes have run into trouble generally leading to insolvency of the trusts, default or payment to injured workers and charges against trust administrators and brokers who sold these plans to greedy and slow witted employers looking to save a quick buck. All employers participating in such plans share joint and several liability if the plans go belly up as they are now doing. The dimension of the problem was low balled at approximately $79 million; upward revised figures now run to over $200-$400 million dollars.

The response of the administration to this crisis has been capon-like at best. The Chair of the Workers’ Compensation Board is the key figure in resolving the looming mass insolvency. The press advisory quoted below is instructive:

“Hamilton, Bermuda, June 2– CRM Holdings, LTD. (the “Company”)” a leading provider of a full range of products and services for the workers’ compensation insurance industry today announced its wholly-owned subsidiary Compensation Risk Managers LLC (“CRM”) has reached resolution with the NYS Workers’ Compensation Board (“WCB”)

No fines, no penalties, and no admission of wrong doing were important elements of an agreement signed today between the WCB and CRM. Under terms of the agreement CRM voluntarily exited the self insured group market...will voluntarily surrender it’s third party administrator’s license…

“I would like to thank WCB Chairman Weiss for working with us to resolve this matter quickly...said David Hickey, Jr, the Company’s Chairman and Chief Executive Officer.

The hearing originally scheduled for May 20th but postponed...has been cancelled. Both sides consider the matter resolved...In a separate matter, CRM agreed to pay $55,000 to satisfy all penalties that previously had been assessed by the WCB.” (Emphasis added).

This matter, and the entire self insured trust fiasco requires swift, stern and complete response. The insolvent trusts are required to be shored up by their fellow participants in more secure trusts. The more well off trusts, such as those administered by First Cardinal are desperately fighting to resist any joint and several responsibility, as required by law. Various administration officials have advocated that the State Insurance Fund or the General Fund bail out these trusts. This from the same sources who support denying the workforce adequate safety net protections.

More on this matter, including our proposal to solve and prevent a repeat of this debacle in the next Alert.

Denis M. Hughes, President

Issue of the WeekThe New York State AFL-CIO opposes the following legislation:

S. 8159 Morahan/A. 10966 Rivera

This bill extends authority of the NYS Dormitory Authority to issue financing and bonds on behalf of the New York State Association of Retarded Citizens (NYSARC). NYSARC is a not-for-profit representative of providers of services overseen by the Office of Mental Retardation and Developmental Disabilities (OMRDD).

There is no more important service that the state can invest in than ensuring that individuals and their families who need the services offered by OMRDD have access to the best possible care and facilities. NYSRAC and its affiliates’ operations receive a vast amount of their funding through state and local taxpayer grants to accomplish this purpose.

The fact is that a large portion of these funds are diverted from direct care services and the workers who provide those services, to fund exorbitant administrative salaries of NYSARC’s management as well as high administrative lobbying and other expenses. In fact, a significant amount of these funds have been used directly to defeat the interests of the employees of NYSARC, including the defeat of union organizing campaigns and lobbying against pro-worker legislation.

Year after year NYSARC comes to Albany complaining about their staff retention problems which are directly related to their management policies. Instead of improving their own internal policies and respecting the rights of their own employees, NYSARC asks for even more money from the government under the guise of improving employee salaries. Yet year after year NYSARC opposes language to require that state funds be dedicated to increase the pay of direct care workers.

We should not continue the trend of using taxpayer backed funds to fund activities of an employer that does not respect the needs and rights of its workforce.

This bill has passed the Senate and is in the Assembly Ways and Means Committee.

Keep An Eye OnTuesday, June 10, 2008
Unemployment Insurance Task Force Meeting, 12 Noon, 100 South Swan Street, Albany, NY.