CA Commissioner Rejects Request For Any Increase In WC Cost Benchmarks

Sacramento, CA (CompNewsNetwork) - Citing testimony that self-insured employers have been able to reduce overall workers' compensation costs, Insurance Commissioner Steve Poizner rejected a rate application from the Workers' Compensation Insurance Rating Bureau (WCIRB), an insurer backed group, to raise the Workers' Compensation Claims Cost Benchmark by 23.7 percent.  

While the Department of Insurance does not set workers' compensation insurance rates, an increase in the cost benchmark usually leads to workers compensation insurance premium increases, with small businesses and their employees feeling the brunt of cost increases. 

“My response to this requested record increase by workers' comp insurance companies is this – no. I will not include avoidable costs in the Benchmark”, said Commissioner Poizner. “Because of the faltering economy, record unemployment levels, and objections to the proposed increase from employers, I have focused on whether insurers and other parties in the workers' comp system are exhausting every available avenue to control costs before granting any increase to the Benchmark. 

“While self-insured employers face the same medical inflation and other cost drivers challenging the rest of the industry, they have cut costs in other areas that have resulted in a net decrease in overall workers' compensation costs. The evidence presented at a Department of Insurance investigatory hearing provided a dramatic demonstration of the failure of insurers to adequately utilize the cost containment tools given to them by the legislature, thereby allowing unnecessary costs to creep into the workers' compensation system.” 

Commissioner Poizner held an investigatory hearing in early June to examine the increasing medical costs in the workers' compensation system. During that hearing, he heard testimony that indicated that insurers were not realizing efficiencies to bring down the costs in the system, including failing to achieve a balance between cost and benefit with medical provider networks and utilization review, and are not communicating effectively with medical providers. Earlier, Commissioner Poizner had asked the WCIRB to withdraw the portion of the increase related to the Almaraz/Guzman and Ogilvie decisions by the Workers' Compensation Appeals Board. 

As a result of the June hearing, Commissioner Poizner has released an outline for areas where the workers' compensation system can achieve further efficiencies. He expects the industry to implement many of these changes before he will consider a positive rate change to the Benchmark. Highlights of the 27 recommendations include:                                                   
  • 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. 
  • Regulations should be implemented regarding physician dispensing of pharmaceuticals.  Legislation may be necessary to deal with this. 
  • Require the prescribing and/or dispensing of generic drug equivalents. 
  • Utilization Review needs some utilization review of itself.  If a majority of medical requests are going to utilization review and are approved, it is not effective. Utilization review, as it was intended for health care, was for the outlier circumstance.
  • Require billing and payment at fee schedule. 
  • DWC should update the fee schedule immediately and continue to do it as an ongoing process. 
  • Regulations for electronic billing and a standard medical bill form need to be implemented. 
Commissioner Poizner also announced the creation of a Workers' Compensation Costs Advisory Group. This group, comprised of a cross-section of all participants, will meet on an ongoing basis. This will accomplish the purpose, similar to the investigatory hearing, of informing the commissioner and CDI staff regarding the key cost drivers in the system and make ongoing recommendations to deal with them. 

The Insurance Commissioner issues the Workers' Compensation Claims Cost Benchmark to measure and project costs in the system. The Benchmark has fallen 63.4 percent since its high in 2003. Commissioner Poizner has been vigilant in closely scrutinizing requests for increases in the Benchmark. 

In October 2008, Commissioner Poizner rejected WCIRB's request for a 16 percent increase in the Benchmark and instead granted a 5 percent increase. 

In May 2008, Commissioner Poizner, citing forecasted marketplace stability, did not issue an interim pure premium rate advisory - the first time in six years an interim pure premium rate advisory was not issued by a California insurance commissioner. 

In January 2008, Commissioner Poizner recommended no change in workers' compensation insurance rates based upon his review of the data provided by WCIRB at that time. 

In 2007, the commissioner called for a 14.2 percent decrease in workers' compensation pure premium rates. 

Commissioner Poizner has worked to ensure an efficient and effective workers' compensation insurance market. In the last two months alone, he released a top down review of the Workers Compensation Insurance Rating Bureau and an audit of State Fund, the state's largest workers' compensation insurance company. Both reviews included specific recommendations that would make the organizations more proficient and successful at their duties. 

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