New York Governor Eliot Spitzer signed into law a measurerevising the method used to set workers' compensation rates in thestate yesterday.

The measure also extends for five years the New YorkCompensation Insurance Rating Board's (CIRB) statutory authority tocompile data but limits its abilitiy to provide input for ratesetting, which had been the insurance industry group's role in thepast.

Sponsored by Sen. George D. Maziarz, R-Newfane, andAssemblywoman Susan V. John, D-Rochester, the bill won finallegislative approval on Tuesday. Its form followed recommendationsin a report submitted to the legislature in September 2007 by StateInsurance Superintendent Eric Dinallo.

David Dickson, past president of the Professional InsuranceAgents of New York, explained that under the current rate-settingframework, called "administered pricing," the published workers'comp rate "is a composite of an analysis of the premiums andlosses--the exposures for each occupation--plus a composite of allof the expense, acquisition and loss-adjustment factors that areprovided by each of the carriers."

CIRB collects all of this data and forecasts costs for thecoming year, and files rates for approval with the superintendent.CIRB's statutory authority to compile data and set rates, however,was scheduled to sunset on Feb. 1 under workers' compensationreform legislation enacted last year.

Mr. Dinallo's September report had criticized aspects of theexisting rate-setting structure, stating that it does not allow forsufficient competition.

The text of the bill, citing Mr. Dinallo's report, also notesthat "because the [CIRB] rates filed with the superintendent areset by a committee of insurers, there is an inevitable appearanceof collusion and a lack of transparency."

Under the new law, CIRB would be allowed to continue itsdata-gathering role.

With respect to rate filing, the process would change from"administered pricing" to "loss cost." The law calls for a rateservice organization, such as CIRB, to file with the departmentonly the industrywide loss data and related expenses, rather thanfully developed rates.

Each individual carrier would then separately file with thedepartment its own loss cost multiplier, which takes into accountinsurer-specific data, such as operating expenses.

The loss cost data provided by CIRB, combined with the carriers'individual loss cost multipliers, would determine workers'compensation rates for each insurer.

"The loss cost approach to rate setting would remove theappearance of collusion as each insurer would file its own losscost multiplier and the RSO would only file loss costs," the billstates.

The law also sets the governance structure for a licensedrate-setting organization, in accordance with recommendations madeby Mr. Dinallo.

"At present, CIRB's board is comprised of only insurerrepresentatives," the bill states. The measure would require arate-setting organization to have nine members on its governingbody, a majority of whom cannot be representatives of privatecarriers.

Other members of the RSO governing body would include designeesof the State Insurance Fund, the Insurance Department, the Workers'Compensation Board, the AFL-CIO and the Business Council.