NCPA - National Center for Policy Analysis


January 26, 2007

According to new reports, employers cheat New York State's workers' compensation system by not paying $500 million to $1 billion a year in required insurance premiums, forcing other employers to pay higher premiums, says Steven Greenhouse in the New York Times.


  • Illegal underpayments represent 15 percent to 20 percent of all the workers' comp premiums that are supposed to be paid each year statewide, according to a Fiscal Policy Institute report.
  • Similarly, a report last year by the state's association of insurance agents, estimated -- based on inside knowledge of industry practices -- that up to 20 percent of New York's employers did not pay all their required premiums.

According to insurance experts, companies achieve underpayment in several ways, for example:

  • A company with 100 employees might tell its insurer that it has only 70 workers and then pay premiums for only 70; but if any of the company's 100 employees are injured on the job, they would be likely to qualify for worker's comp benefits.
  • Another common practice is for companies, often taxi or trucking companies, to say that their drivers are independent contractors (who are not required to be part of the workers' comp system) when by many definitions they are actual employees.

Government, business and labor leaders say the noncompliance hurts the state's business climate by forcing law-abiding companies to pay higher workers' comp premiums when many corporations are already complaining that their premiums are too high, says Greenhouse.

In addition, the Fiscal Policy Institute report asserts that if more companies paid their full premiums, the extra money would enable the state to cut workers' comp premiums over all and increase benefits for injured workers. The report maintains that a lack of enforcement has emboldened employers to cheat.

Source: Steven Greenhouse, "Study Says Many Firms Cheat New York Workers' Comp System," New York Times, January 25, 2007.

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