California: Bureau calls for more than 24 percent increase in comp premium rates
However, the state's insurance commissioner has promised to convene a hearing on the matter.
The bureau submitted the filing to the California Department of Insurance, recommending that the increase take effect July 1 for new and renewal policies. The WCIRB's governing committee said it based the filing on:
- Rising medical costs. The WCIRB's evaluation of Dec. 31, 2008, loss experience found an increase in the claims cost benchmark of 17.6 percent. The bureau said this indicated that the increase was primarily the result of rising medical costs.
- Recent comp board decisions. Secondly, the WCIRB said it based the filing on its analysis of the anticipated cost increases stemming from three recent Workers' Compensation Appeals Board decisions -- Ogilvie v. City and County of San Francisco, Almaraz v. Environmental Recovery Services, and Guzman v. Milpitas Unified School District. The decisions, many believe, could have far-reaching impacts on the amount of permanent disability awards, which were targeted under the California Legislature's workers' comp reforms in 2004.
Officials said the analysis indicated an additional increase of 5.8 percent. According to members of the governing committee, this increase is a "minimum estimate" of the potential additional costs arising from these decisions because no cost data is yet available. It is quite likely, the committee said, that the actual additional costs arising from these decisions could be significantly higher.
In a letter to Insurance Commissioner Steve Poizner, Gov. Arnold Schwarzenegger said he was extremely concerned about the filing and about how the appeals board's decision will impact employer costs.
"I am confident that these decisions will not stand through the appellate process, based on their inconsistency with the law," he said. "The permanent disability rating schedule is supposed to promote consistency, uniformity and objectivity. The board's decision runs contrary to that mandate. My administration will support the effort to overturn these decisions and protect the intent of the workers' compensation reforms."
Commissioner calls for hearing. After the bureau's filing, Poizner said he would hold a hearing to investigate why medical costs are increasing so rapidly. The recommended increase, he said, couldn't come at a worse time, when the state's unemployment rate has jumped significantly.
"Before transitioning into public service, I spent 20 years starting companies and creating jobs in Silicon Valley," he said. "I know how hard it is to make a payroll and the impact that workers' compensation insurance costs have on businesses. The last thing that California's employers need is increasing workers' compensation costs when so many of them are struggling to keep the employees they have."
Poizner said that over the past two years, he has carefully scrutinized the WCIRB's proposed rate recommendations and rejected or reduced every unwarranted increase in the benchmark. For example, in 2008, the commissioner cut a 16 percent increase in the benchmark to just 5 percent. In 2007, he rejected a 4.2 percent increase and held rates steady.
"I will give this WCIRB recommendation the same level of careful scrutiny I have given previous requests," Poizner said. "Additionally, I will convene a hearing of all those in the workers' compensation system -- doctors, insurance companies, applicant attorneys, labor, etc. -- to determine why workers' compensation medical costs are increasing. These soaring costs are unsustainable and must be controlled if we are to prevent a repeat of the workers' compensation crisis we saw earlier this decade."
Poizner also expressed concern about the quality of data provided by the WCIRB. He said his department is in the process of completing a review of the bureau's operations and a report is expected in June.
The commissioner will hold a hearing in April to solicit feedback about the proposed change. After the hearing, Poizner can either accept or revise the filing. The Department of Insurance, however, has no authority to set workers' comp rates in the state.
April 23, 2009
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