California: Insurance commissioner denies second request to raise WC rates
In August, the Workers' Compensation Insurance Rating Bureau recommended an increase in the state's workers' comp 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. After hosting a public hearing on the proposed rate hike, Poizner said the increase was not warranted in the midst of an economic recession. He rejected a similar request in July to increase the benchmark by 23.7 percent.
"One in eight Californians is unemployed," he said. "Countless others are also suffering and have either given up looking because they cannot find work or have taken part-time jobs while they seek full-time work. Any increase in costs for employers will only make our already dire economic situation worse. Given these harsh economic realities, I refuse to rubber-stamp double-digit increases to the workers' compensation claims cost benchmark, especially when I see clear evidence that the cost control reforms from 2003-04 have yet to be fully implemented."
Poizner pointed to testimony from the hearing that indicated that insurers were not realizing efficiencies to bring down the costs in the system. Specifically, he 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.
"These increases requested by the WCIRB give insurers an excuse to raise rates in concert without fully utilizing all of their cost containment tools or increasing efficiency," he said. "I will not consider an increase in the claims cost benchmark until I see substantial efforts being made by insurers to use all available tools to constrain costs and improve efficiency."
Poizner criticizes analysis.
Poizner also criticized the WCIRB's analysis of the Workers' Compensation Appeals Board's en banc decisions in Almaraz v. Environmental Recovery Services, Guzman v. Milpitas Unified School District, and Ogilvie v. City and County of
San Francisco. The board issued its reconsidered opinions in September due to pressure from the governor, state lawmakers, and many insurance analysts who predicted that those decisions would have a significant impact on the amount of future permanent disability awards. However, Poizner called WCIRB's analysis of the reconsidered opinions "inadequate" and said that its rate increase request was almost identical to its last filing "despite the WCAB having made substantial changes to its decision in the Almaraz and Guzman case."
"I do not entirely reject the possibility that these WCAB decisions will increase permanent disability costs, and it appears that the decisions may change further," he said. "Given the lack of actual data and differing assessments, along with the economic challenges faced by California's employers, I believe the proper course of action is to further monitor the data on permanent disability costs, properly analyze the effect of these decisions, and await the resolution of further legal appeals."
Fund requests increase.
One day after Poizner rejected the WCIRB's rate hike, the State Compensation Insurance Fund filed a 5 percent rate increase in collectible premium.
"The principal driver of the rate increase is medical inflation," said Doug Stewart, interim president and CEO of the fund.
Despite the increase, Stewart noted that State Fund premium levels have fallen significantly since 2003, and even after the rate hike will be 43 percent below pre-reform levels.
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January 4, 2010
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