Commission questions bureau's request for 22.8 percent comp rate hike

California's insurance commissioner is raising questions over a request by state officials to increase workers' compensation rates by nearly 23 percent.

Insurance Commissioner Steve Poizner held a public hearing in October on the Workers' Compensation Insurance Rating Bureau's recommendation to increase the state's workers' compensation claims cost benchmark by 22.8 percent. The benchmark, which is purely advisory, is used by insurers and lawmakers to measure and project costs in the workers' comp system. Poizner warned that such a large increase would not be wise given the current economic climate.

"During this deep recession, any increase in workers' compensation insurance costs will have a devastating effect on small businesses," he said.

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Although he has not officially rejected the recommendation, Poizner did nix a similar request in July to increase the benchmark by 23.7 percent. At the time, the commissioner asked that insurers use all available tools to control costs before any increase in the benchmark would be considered.

Poizner said he will closely scrutinize the request and consider the testimony presented at the hearing before he makes his decision. The commissioner said he would be looking for "evidence that efforts to root out inefficiencies in the workers' comp system are being made."

After several years of rate decreases following the enactment of legislative reforms, the California comp system has faced heavy criticism in 2009. In June, Poizner hosted an investigatory hearing to examine the increasing medical costs in the workers' comp system. According to the commissioner, testimony from the hearing indicated that insurers were not realizing efficiencies to bring down the costs in the system. Specifically, Poizner cited a failure to achieve a balance between cost and benefit with medical provider networks and utilization review, and a lack of effective communication with medical providers.

Recommendations issued. Poizner released an outline for areas where the workers' comp system could achieve further efficiencies. Among the 27 recommendations, the commissioner advised the state and insurers to:

Implement pharmacy networks. Poizner said all insurers should implement pharmacy networks with or without regulations based upon the example set by Safeway and the fact that the provisions of Labor Code Section 4600.2 do not require regulations as a prerequisite.
Create pharmaceutical regulations. Regulations, Poizner said, should be implemented regarding physician dispensing of pharmaceuticals. Legislation may be necessary to deal with this, the commissioner noted.
Require the prescribing and/or dispensing of generic drug equivalents.
Examine the utilization review process. Poizner said the utilization review process needs some utilization review of itself.
"If a majority of medical requests are going to utilization review and are approved, it is not effective," he said. "Utilization review, as it was intended for health care, was for the outlier circumstance."
Require billing and payment at fee schedule.
Update the fee schedule. The commissioner said the state Division of Workers' Compensation should update the fee schedule immediately and "continue to do it as an ongoing process."
Implement billing regulations. Poizner said regulations for electronic billing and a standard medical bill form need to be implemented.

Read more at the WORKERSCOMP Forum^TM homepage.

October 26, 2009

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