California: Insurance commissioner urges rating bureau to withdraw comp rate increase

The Workers' Compensation Insurance Rating Bureau of California's decision to slightly reduce its recommended rate hike failed to please the state's insurance commissioner.

At a hearing to discuss the bureau's proposed double-digit increase for workers' comp rates in the coming year, Insurance Commissioner Steve Poizner called on the WCIRB to withdraw its recommendation. In March, the bureau recommended a 24.4 percent increase in pure premium rates, citing skyrocketing medical costs and the potential impact of decisions by the state's Workers' Compensation Appeals Board as the primary drivers. However, the bureau recently revised its filing, changing its recommendation to a 23.7 percent increase.

Poizner said the recommendation should be withdrawn based on the board's announcement that it would reconsider its en banc decisions in Almaraz v. Environmental Recovery Services, Guzman v. Milpitas Unified School District, and Ogilvie v. City and County of San Francisco. These decisions, many believe, could have a significant impact on the amount of future permanent disability awards, which were addressed under the state Legislature's workers' comp reforms in 2004. The WCIRB attributed approximately 6 percent of its 23.7 percent recommended increase to the potential impact of those decisions.

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"The WCIRB should withdraw the portion of the increase related to the Almaraz and Ogilvie cases," Poizner said. "The governor has said that he believes the ruling will not survive the appellate process in its current form and that his administration supports the effort to overturn the decisions. I believe that any increase should be considered after the judicial process has concluded."

Due to the reforms, Poizner said the costs in the state workers' comp system have fallen by more than 60 percent since hitting an all-time high in the early part of the decade. A number of factors are causing the costs to increase, but Poizner vowed to prevent rates from returning to pre-reform levels.

"Five years ago, skyrocketing workers' compensation costs were the bane of the economy," he said. "Many jobs left our state, and countless companies expanded elsewhere because of the high costs of workers' compensation in California."

Despite Poizner's call to withdraw the proposed increase, the California Department of Insurance has no authority to set workers' comp rates in the state.

Hearing examines medical costs. The rise in medical costs in California was also discussed at the hearing. Poizner said that although increased medical treatment costs may be justified, information provided at hearing did not adequately support the WCRIB's rate request.

"Insurers have the ability to control costs through medical treatment guidelines, utilization review, and medical provider networks," he said. "So rather than explain why costs are going up, all I heard is that they are going up, and we should pass them along in the form of rate increases. This is unacceptable, and the public deserves better. Because of this, I have decided to continue this matter to a special investigative hearing to examine medical inflation."

Poizner said he will convene a meeting with all parties to try to determine why costs are spiraling out of control.

"When we get those answers, I will ask the governor and the Legislature to make the necessary changes to ensure a stable and effective workers' compensation system," he said.

A second hearing on medical treatment costs will be held on June 8 in Sacramento.

June 1, 2009

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