At the end of June, Gov. Kathy Hochul signed legislation into law that directly impacts businesses with outstanding unpaid balances with the New York State Insurance Fund.
What does the new law do?
Under the new law (S.9096/A.10078), which goes into effect immediately, businesses that owe a prior amount to the NYSIF are eligible for a new policy and would be permitted to pay off the previous obligation in installments under the new policy. The law does not provide a time frame in which any past amount must be repaid. This law also applies to a business entity related by ownership or control to another business entity that has an unpaid balance with the NYSIF. For example, if a sole proprietor operating under the name John Doe Construction, owed a past amount due to the NYSIF. The sole proprietor could start a new business operation under a different name and still avail itself of the opportunity to pay off the past amount due.
Prior to this new law, an entity that had an outstanding balance with the NYSIF was automatically ineligible for a new policy—this applied to businesses with common ownership as well. In the absence of one of the largest workers’ compensation carriers in the state, many businesses were left without a viable choice for coverage. Though, some businesses turned to Professional Employer Organizations. However, recent changes in New York state law dealing with determining when a worker is an employee or independent contractor could impact a business’s ability to purchase coverage through a PEO. S.9096/A.10078 reestablishes a safety net for businesses in the event there is instability in the PEO marketplace.
Impact on consumers
Under the new law, thousands of businesses should be eligible for coverage through the NYSIF. According to the NYSIF, from January 2020 to September 2021, nearly 8,000 new business applications were immediately ineligible for coverage because the applicant owed a balance on a prior policy.
If the NYSIF were to have written all of these polices, the total additional estimated premium of those new policies is estimated at over $127 million.
What does this mean for agents?
The new law reopens a significant workers’ compensation carrier for producers.
The NYSIF serves as an insurer of last resort in the state, a function that is critical to ensuring that many businesses have coverage, when they otherwise would not.
Of course, producers moving risks from a PEO or other workers’ compensation carriers into the NYSIF will undoubtedly see a reduction in compensation—as the NYSIF does not offer commissions on policies.
PIANY has long advocated for a change in the law to permit the payment of compensation to producers on NYSIF policies. The association will continue to push for this necessary change. In the meantime, producers are reminded that they are permitted to charge fees on NYSIF policies.