NU Online News Service, July 9, 3:49 p.m. EDT

The president of a California insurers' trade group said the state insurance commissioner, by rejecting a hike in workers' compensation insurance rates, isn't facing facts.

"Our reaction here at the ACIC was that the commissioner's action appears to be unrealistic," said Sam Sorich, president of the Association of California Insurance Companies. "There is clear evidence that costs are increasing and, in fact, the commissioner's own actuaries recommended, I think, a 13 percent increase in rates and the commissioner decided to ignore that recommendation."

Commission Steve Poizner yesterday said self insured entities had been able to cut their costs and he saw no reason why private insurers couldn't do the same

But, Mr. Sorich said there is ample evidence that medical costs are rising and that a couple of decisions by the state workers' compensation board have also contributed to those increases.

Mr. Poizner turned down an industry request for an increase of 23.7 percent in the Claims Cost Benchmark. His action, however, is purely advisory and does not prevent insurers from raising their rates. The commissioner cannot alter what insurers charge unless those rates are deemed discriminatory or fiscally unsound, pointed out Mr. Sorich.

Contrary to Mr. Poizner's assertion, Mr. Sorich said the industry is not inefficient and is using the tools the state legislature gave it in order to hold down costs.

However, additional reforms that would help drive down costs, such as doctors no longer dispensing drugs in their offices and updating the medical fee schedule, need legislative approval.

"There is some action that needs to be taken, but it is out of our control," said Mr. Sorich.

He agreed with one point Mr. Poizner raised, that the increases would have an impact on small businesses, "but at the same time it would be irresponsible for insurers to ignore the costs they are encountering."

If insurers are not financially viable to pay claims they would cease doing business in the state and that would mean fewer insurers in the state, returning California to the worker's comp crisis of the 1990′s, he said.

"That is not in anyone's best interests," he said.

Today, buyers have an ample number of insurers to choose from, said Mr. Sorich, reflecting Mr. Poizner's advice that buyers need to shop around for insurance.

"We always encourage shopping around, especially in this environment," he observed.

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