WCIRB To Request 22.8 Percent WC Increase In Calif.

NU Online News Service, Aug. 13, 3:41 p.m. EDT

California's top insurance regulator said he will "closely scrutinize" an anticipated request by insurers for a 22.8 percent hike in the benchmark rate for workers' compensation coverage.

Insurance Commissioner Steve Poizner, noted he had already rejected the Workers' Compensation Insurance Rating Bureau (WCIRB) Workers' Compensation Cost Claims Benchmark rates request last month for a 23.7 percent increase for the July period.

He said he did so then because "insurers were inefficient and were not fully using available tools to control costs. Instead of striving to control medical costs, I found that insurers were attempting to pass unsupported costs along to employers in the form of rate increases. They must work to be as efficient as their self-insured counterparts."

In this expected filing, for the Jan. 2010 period, Mr. Poizner said, "Given these findings and understanding the devastating effect any increase in workers' compensation insurance costs will have on small businesses, I will closely scrutinize this new WCIRB filing for evidence that the efforts are being made."

For its part, WCIRB, a private trade association, said in a statement its recommendation is based on two principal components. "First, the WCIRB's evaluation of March 31, 2009 loss experience produces an indicated increase in the claims cost benchmark of 16 percent." The increase is primarily due to increased medical costs, WCIRB said.

"Second, the WCIRB's analysis of anticipated cost increases stemming from three recent Workers' Compensation Appeals Board decisions [against employers] (Ogilvie v. City and County of San Francisco, Almaraz v. Environmental Recovery Services and Guzman v. Milpitas Unified School District) indicates an additional increase of 5.8 percent."

According to WCIRB these rulings permit more challenges to the process of setting disability payment amounts based on the extent of worker injuries.

WCIRB communications director Jack Hannan said the WCIRB has not made a filing yet, but its Governing Committee has authorized the 22.8 percent figure. The request is expected to be filed next Wednesday, Mr. Hannan said.

Regarding Mr. Poizner's promise to examine the filing to see if insurers are using available tools for cost cutting, Mr. Hannan said that is outside the WCIRB's purview.

He said the WCIRB looks at data reported by insurers, such as medical costs and indemnity costs, and then projects what pure premium rates should be based on that data. The benchmark rate is only advisory and individual insurers are not required to abide by it.

As for the causes for the increased loss costs, Mr. Hannan said WCIRB data is able to show where the increases are coming from: more visits to medical professionals by injured workers, and more procedures conducted during these visits. But he added the data does not show why there are more visits and more procedures.

Mr. Poizner has released an outline detailing areas where the system can be more efficient, and he said he expects the industry to implement his changes before he considers a positive rate change to the benchmark.

Among his recommendations, Mr. Poizner suggested requiring the prescribing and/or dispensing of generic drug equivalents, implementing regulations regarding physician dispensing of pharmaceuticals, and implementing regulations for electronic billings and a standard medical bill form.