CALIFORNIA, July 8, 2009 - California Insurance Commissioner Steve Poizner recommended this afternoon that workers' comp carriers make no change to rates in the next policy period, striking down the insurance rating bureau's referral earlier this year that pure premiums rise by 23.7 percent.
However, the commissioner and bureau's recommendations do not force companies to change rates either way, but are meant to be used as a benchmark. Many carriers have already filed rates for the next cycle and most include increases between 4 and 10 percent, though some went as high as 33 percent.
The Workers' Compensation Insurance Rating Bureau, the agency that analyzes the experiences of state insurers and recommends rate changes to the commissioner, has asked for an increase in rates for three consecutive cycles citing continued underwriting under the cost of claims, but the group has yet to receive approval. The commissioner continued his rejection streak releasing this statement today:
"My response to this requested record increase by workers' comp insurance companies is this - no."
Mr. Poizner said if self-insured groups have proven the ability to cut costs, it should also commercial carriers should also reduce their expenses instead of asking the purchasers to pay for company inefficiencies.
"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," he said in a statement.
The department recommended in June that a number of changes be made in the workers' comp system including the implementation of a pharmacy network, regulation on physician dispensing of prescriptions, requiring a billing and payment fee schedule and a list of other regulatory changes.
The commissioner at the same time announced the creation of a Workers' Compensation Costs Advisory Group, which will meet regularly and investigate cost drivers in the system and how to reduce their effect.