NU Online News Service, Oct. 17, 12:13 p.m. EDT

California workers' compensation insurers, which have been hurt by increasing underwriting losses over the past three years, should benefit from two bills signed into law recently, and from several bills opposed by the industry that were not signed, according to Moody's.

In its Weekly Credit Outlook, Moody's says AB 378, one of the two bills signed, represents the “biggest positive effect for insurers,” as it establishes a fee schedule for compound drugs. “Until now,” says Moody's, “the state's workers' compensation fee schedules excluded these drugs, whose usage and costs increased at a much higher rate than other pharmaceuticals…and essentially created a billing loophole.”

Moody's notes that prescription drugs make up approximately 20 percent of total workers' comp medical costs, “so cost containment on this front is important for the industry.”

Another bill, SB 684, limits the ability to move workers' comp disputes outside the state, but Moody's says the bill has “little credit implication for the industry.”

However, the rating agency says four bills vetoed by Governor Jerry Brown “would have significantly increased costs on insurers, so their veto is a boon.”

The bills included a new licensing requirement for physicians conducting workers' comp reviews, a requirement to provide vouchers for work training, an extension of temporary disability payments and new anti-discrimination rules, Moody's says.

The rating agency says of the bills, “These generally positive outcomes for the insurance industry are particularly important in the context of the industry's currently very poor workers' compensation results, especially in California, which makes up 11 percent of the workers' compensation market.”

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Insurers Should Benefit from Calif. Workers&rsquo; Comp Legislation

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