New Player in N.Y. Workers' Compensation Marketplace

One of the quickest ways to spark an animated conversation among trainers in New York is to mention workers' compensation.

In an instant you'll hear one trainer with a large stable talk about a total annual payment of $300,000, or one with less than 20 horses mention paying $25,000.

Each of them, and others paying somewhere in between those figures, will explain how those charges are drowning them in a sea of red ink and causing them to wonder why they stay in business or remain in New York.

"New York is in big, big trouble because of workman's comp," trainer Danny Gargan said.

Brightening the outlook are some promising recent developments, yet a slow response and some skepticism reflect a bigger problem than the actual rates. It's a series of misunderstandings, misconceptions, and differences of opinions that have prevented horsemen from building a united front to address such a crucial issue.

To illustrate the financial crunch trainers are facing, Gargan said his workers' comp costs are roughly 22% for every dollar of payroll, so he's paying about $3,500 a week for $16,000 in salaries to his stable workers and other costs such as a daily $1.60 per-stall charge that goes toward workers' comp.

In comparison, those same charges average out to about 7% in Kentucky and 11% in Florida, while at Monmouth Park in New Jersey, which is operated by the state's horsemen, the cost of workers' comp is taken out of purses with no cost passed on to trainers.

"There's a reason I had 24 stalls at Keeneland," Gargan said.

Yet there is some good news about such a depressing situation. The cost of policies has gone down in the last two years and could be tumbling even more this year.

Trainer Kiaran McLaughlin, who said he paid roughly $300,000 in workers' comp a year ago, said through rate reductions and rebates he's on course to possibly pay about $225,000 this year.

"I have a higher day rate (a trainer's daily per-horse charge for caring for a runner) than most people, but I still can't cover everything," McLaughlin said.

Providing optimism is the entrance into the New York marketplace earlier this year of John Unick, a broker for Insurance Office of America. Based in California, Unick played a lead role some 15 years ago in establishing a self-insured format for that state, which brought sky-rocketing workers' comp rates under control and made them manageable.

"Through having IOA, it gets our rates in line with other states, and by having IOA in the marketplace it can breed beneficial competition that can encourage other carriers to lower their rates," said Martin Panza, NYRA's senior vice president of racing operations. "Anytime you have a free marketplace and you have a new company in that marketplace, that's a huge positive. With IOA if you have good mod rates (experience modification rates), you should be fine."

Working with Safety National, an A-plus carrier, Unick is confident he can help New York trainers in the short term with lower rates and in the long term by moving horsemen at the New York Racing Association tracks (Aqueduct Racetrack, Belmont Park, and Saratoga Race Course) toward a self-insured policy.

"I hope we can form a long-term relationship that will ultimately reform New York's workers' comp situation, which is a mess but doesn't have to be," Unick said.

Unick said the major problem in New York is that even though jockeys and exercise riders have their own workers' comp policy, they are included in the insurance code for stable workers, who are far less likely to suffer an injury than the riders.

"This is an unnecessary crisis because the pool is contaminated by jockeys and exercise riders. This has been going on for 15 years and you knew this would happen. We have been advising people in New York that they need to follow the California model with a self-insured program. The grooms and the hot walkers are not the problem," Unick said. "You can only separate the two in a self-insured policy because the regulations are problematic. When you self-insure you put your money where your mouth is, which will mean the New York racing industry would be putting up collateral to reform their problem."

Unick, who took out an ad in the Belmont Park condition book to introduce his company to NYRA trainers, said in most cases his policy will reduce rates by 20%. Trainer Phil Serpe paints an even brighter picture. He is awaiting confirmation on a policy that could drop his rate from just under 24% to about 11.5%.

"For me, 11% would be great, because it's about half of what we're paying now," said McLaughlin, who put his rate at between 19-20%.

And yet, for all that talk of savings, Unick said he has been contacted by only a handful of trainers about the new policy and he warns that more vigorous attention is needed to solve the problem.

"I have not spoken to that many trainers. You have to catch people at the right time when their policy expires or they might have to pay a penalty to switch companies," he said. "But the big picture is that New York racing has to get its act together because this is another wolf at the door. If they don't aggregate themselves and get together on this issue with a self-insured model, it's not going to solve itself and that's a fact. It's not subjective. It's a mathematical certainty."

Timing is one factor in the situation, since trainers who recently took out policies with other companies could be socked with penalties for dropping that policy prematurely. Yet the lack of a ground swell for Unick's policy raises questions about some trainers' business practices and if there's a wide-spread understanding of how the rates are structured.

"No one should be paying around 24%. Either they don't understand the policy or they are getting taken advantage of," said New York Thoroughbred Horsemen's Association president Joe Appelbaum, who pointed out that some policies have 30% rebates. "The base rate should be 19.5%, unless you have a bad experience model.

"This is a big issue and there's a tremendous amount of misinformation. There's a hysteria, but we brought the number down 20% in the last two years. If a trainer's rates are not below 20%, they need to come into our office and we'll help them find a better rate."

Like Panza, Appelbaum sees a reason for optimism with the addition of IOA and Unick, a new face in New York but a respected player throughout the industry.

"It shouldn't be woe is me, because workers' comp is a lot better than it was two years ago," Appelbaum said. "There are three takeaways. One, we're down 20% in the last two years. Two, we have a private insurer entering the market which shows that someone thinks it's a viable market and that should help costs go lower. And three, we're here (at NYTHA) to help you evaluate the policies and help you get the best rate."

Yet for some, lower rates are not the answer. As much as Serpe's payments could be greatly reduced, he would prefer to see New York adopt New Jersey's policy of using purse money to cover workers' comp costs and offering per-start credits of $500 to owners and $300 to trainers for unplaced finishes throughout the meet. NYRA has a per-start credit of $300 for owners and trainers during its winter meet at Aqueduct.

"It's been difficult here in New York. I paid just under 24% in workers' comp last year. Mid-sized stable like ours with 25-30 horses, it's killing us," said Serpe, who estimated his 2018 workers' comp costs were more than $50,000. "I think NYRA is making a major mistake not figuring out a way to pay for workers' comp like they do in New Jersey. Trainers are reducing their stable or not going back to New York.

"You would have to charge a day rate of $130 to make a profit here and owners will not pay that when they can send their horses elsewhere. Yes, the purses are great, but you have to be able to win the purses. Not all of us are in the situation where we can walk up $500,000 horses and be the favorite in a non-winners-of-one allowance race. Some of us have to struggle and hope we come up with a good horse.

"If I can get an 11.5% rate, anything helps. But I'm on the bandwagon to see what we can do to get rid of the workers' comp in New York."

Michael Musto, executive director of the New Jersey Thoroughbred Horsemen's Association, said the workers' comp structure has been beneficial to Monmouth.

"People appreciate it, especially when they leave," Musto said. "When trainers talk about coming to Monmouth, it's workers' comp they mention first. With no workers' comp payments and our purse enhancements for this year, we're expecting to have about 1,500 horses on the grounds. We had maybe 1,100 last year."

Yet what works for Monmouth is a different ball game in New York. 

"People are envious about the New Jersey situation," said trainer Bruce Brown, who has paid as much as $125,000 a year in workers' comp payments. "But sometimes things are too good to be true and I'm not sure if that will work for us."

Panza said the New Jersey model was not possible at NYRA because of year-round racing.

"We are already putting nearly $5.5 million from purses into workman's comp. I'm not going to pay $14 million," Panza said. "They run 61 days at Monmouth. We run 226. It's not feasible for us. Is it fair to owners to cut the purses dramatically to cover that cost?"

As a sign of the purse differential between NYRA and Monmouth, a maiden special weight race has a purse of $80,000 at Belmont Park, while at Monmouth it's worth only $45,000. In addition, New York trainers who charge day rates of $95-$105 generally charge owners only $8 to $10 less for stabling at Monmouth.

"Everyone wants free stuff," Appelbaum said. "I get it, but it can't work here."

What can work in New York is the pertinent question and it will be interesting to see if a newcomer to the Big Apple marketplace can broker the solution to a thorny situation.