News: 2009 Press Release

Insurance Commissioner Steve Poizner today issued the following statement on his hearing on Workers' Compensation Insurance Rating Bureau's (WCIRB) request to increase the Workers Compensation Cost Claims Benchmark by 22.8 percent:

"During this deep recession, any increase in workers' compensation insurance costs will have a devastating effect on small businesses. In order to prevent further damage to our state's frail economy, I have worked tirelessly over the past two years to reduce the inefficiencies in the workers' compensation system.

"I rejected previous requests to increase the Costs Claims Benchmark and asked that insurers use all available tools to control costs. I will closely scrutinize the WCIRB's request for the increase and carefully consider the information presented at today's hearing for evidence that efforts to root out inefficiencies in the workers' comp system are being made."

The request made today by the WCIRB Governing Board, if approved, would be effective in January 2010. The proposed hike is sent to the Insurance Commissioner who approves, rejects or amends the change to the Claims Cost Benchmark. The Benchmark is purely advisory and the Department of Insurance does not set workers' compensation insurance rates.

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.

As a result of the June hearing, Commissioner Poizner has released an outline for areas where the workers' compensation system can achieve further efficiencies. 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.

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 July 2009, Commissioner Poizner declined WCIRB's application to increase the Benchmark by 23.7 percent.

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. This year, 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.