SACRAMENTO, Calf. – The following statement can be attributed to Mark Sektan, president of the Association of California Insurance Companies regarding the Workers’ Compensation Insurance Rating Bureau’s (WCIRB) Governing Committee announcement that it will make an informational filing.
“California’s workers’ compensation system is at a crossroads; we can either address the increasing cost drivers in the system and reject new legislation which creates additional cost pressures or turn a blind eye to the emerging problems and let the chips fall where they may,” said Mark Sektnan, ACIC president. “Before reforms were enacted in 2003 and 2004, California’s system was the costliest and most complicated in the country. The historic reforms brought stability and predictability back to the system and focused the process on evidence-based medicine and returning injured workers to their job. These reforms saved employers over $50 billion. Workers’ compensation is generally cyclical and right now we are trending in the wrong direction. The question is: can we get back on the right road? The right answer is: don’t get distracted, address the cost drivers.
“There is no longer a question if costs are increasing, at issue is what are we going to do about it? We need to acknowledge that costs are increasing and find solutions like AB 378 by Assemblyman Jose Solorio that will reign in escalating costs for compound drugs.
“We need to ask why costs are going up. In addition to rising medical costs, which have been well documented from many sources, claims costs are rising because of the Ogilvie and Almaraz/Guzman decisions. We are also feeling the affects of the economy on payroll, continued pressure to inflate permanent disability awards both by manipulation of the AMA Guides and claiming new disabilities once a claim has been accepted, increased costs due to the delays brought about by the hiring freeze at the Division of Workers’ Compensation and Workers’ Compensation Appeals Board, and for an increasing number of claims increased costs associated with the Medicare Secondary Payer Act and its requirements for approving settlements.
“Employers need to know two things: they are still in the driver’s seat when it comes to managing their workers’ compensation costs. Being committed to a safe workplace and having a comprehensive return to work program are critical steps an employer can take to manage its workers’ compensation costs and allow its broker to shop for the best insurance price in the competitive market. The pure premium rate is a reflection of overall losses and loss expenses in the workers’ compensation system. In 1993, the Legislature determined that the insurance marketplace needed to be more competitive. The experience since then has at times been rocky and the need to make sure an adequate pure premium rate is adopted is an important part of ensuring the overall solvency of the system. Individual insurers will make individual pricing decisions based on their own individual experience and market goals. When competition is allowed to flourish employers gain, but as history shows that competition must be tempered by the realization that premiums need to reflect costs over the long term
“We also look forward to working with the Commissioner to improve this process and to preserve a competitive, solvent insurance marketplace for California’s employers.”