An investigation by NY Focus published on April 23 found that New York workers’ compensation benefits paid to injured workers fell by $1.4 billion per year between 2014 and 2023, a 37% decline. The drop occurred even as workplace injury rates held steady or rose in some sectors. Over the same period (2017 to 2024), workers’ comp insurers in New York accumulated $7.7 billion in cumulative profits, and employer loss costs fell 54%.
Governor Kathy Hochul’s 2026 budget proposal would eliminate the special-authorization requirement that medical providers must obtain before treating injured workers. That policy, adopted by the Workers’ Compensation Board in 2010, was designed to streamline approved treatments but evolved into a de facto denial mechanism: insurers pre-deny any procedure not on the authorized list, forcing physicians to submit complex justifications that many abandon. NY Focus also reported that all four WCB executive directors from 2010 to 2022 subsequently moved to workers’ compensation insurance firms, raising regulatory-capture concerns.
Who It Affects
Self-insured employers in New York with meaningful workers’ comp exposure (large municipalities, school districts, hospital systems, manufacturers, and transportation fleets) are the most directly exposed. Any entity that has used the past decade’s declining loss costs to reduce IBNR or case reserve estimates should treat this as a stress-test trigger. The effect concentrates in New York’s system; multi-state self-insured programs will feel it in proportion to their New York payroll share.
The Reserve Mechanism
The reform creates risk on two axes: frequency and severity.
Frequency. The pre-authorization barrier discouraged providers from entering the workers’ comp system, which reduced the volume of claims that received full medical treatment and, indirectly, the volume of claims filed at all. If Hochul’s reform passes and new providers enter the network, previously suppressed or discouraged claims re-enter the system. Self-insured employers should expect higher claim counts per unit of payroll exposure, particularly in accident years following the effective date. The chain ladder method will not pick this up automatically; historical development patterns reflect a decade of administratively suppressed frequency and will understate the new normal.
Severity. Removing the authorization barrier means broader access to medical treatment per claim. Average medical costs per claim are likely to rise as procedures that were previously pre-denied become accessible. This is a severity trend shift, not a one-time adjustment. Actuaries using a Bornhuetter-Ferguson approach will need to revisit the expected claim ratio for New York accident years, since the prior expectation was calibrated to the suppressed-cost environment. A BF estimate that anchors to 2017 through 2024 loss costs without adjustment will understate the ultimate.
It is worth noting that Hochul’s proposal addresses only the provider-authorization barrier. Broader reforms to benefit adequacy and schedule loss-of-use rules remain pending in the Assembly, meaning additional severity pressure could follow.
What to Ask Your Actuary
- How much of our New York WC reserve reduction over the past five years reflects the regulatory environment (pre-authorization denials, tighter schedule-loss rules) versus genuine frequency improvement? If the regulatory posture reverses, what is the range of reserve impact?
- Should we apply a regulatory-change loading factor to our New York WC development triangles to account for the possibility that Hochul’s reform passes this session?
- Are our IBNR estimates capturing the risk that historically suppressed claims could re-emerge as late-reported filings once administrative barriers are lowered?
What to Watch Next
The New York State Legislature is expected to finalize the 2026 budget by June. If Hochul’s provider-authorization reform is included, watch the WCB’s claim-filing volume data in Q3 and Q4 2026 for early signs of frequency acceleration. A sustained uptick in filings per payroll unit would confirm that the decade-long decline was at least partly administrative, not structural, and would validate a reserve strengthening for open New York accident years.