NORTH BAY – October has been a time of change for the state workers’ compensation system, foreshadowing a shift in rates, losses and regulation.
In the past few weeks, the insurance commissioner criticized insurers for not doing more to save money and implied he would not accept a rate increase, despite repeated analyses showing the system nearing insolvency. At the same time, the governor stamped five and tossed one workers’ comp-related bills, and three permanent disability cases carrying millions in future losses are headed to the California Court of Appeals.
“During this deep recession, any increase in workers’ compensation insurance costs will have a devastating effect on small business,” California Insurance Commissioner Steve Poizner said in a hearing Oct. 6. The meeting was the final deliberation of state actuaries’ recommendation that pure premium rates increase by 22.8 percent.
The carefully ambiguous testimony did not give a clear thumbs up or down to the increase but said insurers need to make a more proactive effort to reduce inefficiencies in the system. Mr. Poizner has rejected the past three suggested rate increases.
The Workers’ Compensation Insurance Rating Bureau made the 22.8 percent recommendation in September for policies beginning in January 2010, saying insurers are still writing premiums below losses. The agency regularly makes pure premium rate analyses, which the commissioner chooses to accept or reject. The recommendations are meant only as a benchmark and are not mandatory.
The commissioner asked carriers to make several changes to lower front-end costs, including better scrutiny and regulation of prescribing, creating regulated provider and pharmaceutical networks and more efficient and timely payment systems, among others.
The WCIRB’s January 2010 recommendation also incorporated changes to the experience modification formula that were the result of a committee formed by the commissioner in 2007. The bureau was asked to evaluate the system due to concerns from employers whose experience ratings were increasing even though their losses remained the same.
“The changes will be phased in over the next couple years. Basically, we updated some methodologies to calculate tables and made efforts to make the forms more clear to policyholders,” said WCIRB spokesman Jack Hannan.
Counter to what many had hoped would improve their rating, the September report said overall, “the impact should be relatively minor for the overwhelming majority of experience-rated employers.”
Also recently, three Workers’ Compensation Appeals Board cases advanced to the California Court of Appeals. The cases known anecdotally as Almaraz/Guzman and Ogilvie, have serious implications for permanent disability losses. An Oct. 16 report from California’s legislative analyst said the decisions, if upheld, “would likely lead to increased benefits for workers and higher costs for businesses and governments.”
The Workers' Comp appeals board initially sided with employees, saying doctors should not rely solely on certain AMA Guidelines to determine permanent disability. Then, the board reconsidered the decision seeing the potential for a windfall of new claims. The most recent decision filed in September was revised to say only in some cases are doctors required to look outside of the rules. The cases account for about 5.8 percent of the WCIRB’s recommendation that premium rates increase. The legislative report also predicted increased incentives to litigate and more objectivity in disability ratings.
Finally, in a marathon sign-or-veto session this month, the governor decided several workers' comp-related bills.
Assembly Bill 483 requires the launch of a Web site showing whether an employer has workers’ comp coverage. Similar language has twice been vetoed, but the new bill was given the official blessing Oct. 11. Senate Bill 186 extends an allowance for employees to pre-designate their physicians. The provision would have expired Dec. 31.
AB 361 bars employers from refusing to pay medical bills after services were rendered if treatment was previously approved. Another Assembly bill said insurers must pay for injuries caused by a third party under certain circumstances. AB 1227 expanded temporary disability coverage for some public safety officers.
Most recently, the quasi-public workers’ comp “insurer of last resort” State Compensation Insurance Fund announced its presidential pick Oct. 21. The carrier’s chief risk officer Doug Stewart will fill the post beginning today.
