Sacramento, CA – The California Applicants’ Attorneys Association (CAAA) recently questioned the need for the pure premium rate filing submitted to Insurance Commissioner Dave Jones Thursday, April 12th, by the Workers’ Compensation Insurance Rating Bureau (WCIRB). The WCIRB is the research arm of the workers’ compensation insurance industry.
“We are frankly amazed at the timing,” noted Brad Chalk, President of CAAA. “Given the severe financial troubles facing state government, forcing Commissioner Jones to go through an expensive regulatory process, including holding a public hearing, just to consider a small 4% increase in the advisory pure premium rate looks to be unnecessary and wasteful.” Chalk pointed out that even the WCIRB admits that insurers “may, and often do” ignore the approved rates.
Chalk also pointed out that the rate filing shows that the insurance industry’s most recent 2011 results were significantly better than the immediate prior years. “In view of this improvement,” Chalk said, “we see no need for this mid-year rate adjustment.”
Mark Gerlach, a consultant to CAAA and a former Insurance Rate Analyst with the Insurance Department, added that the filing should be summarily rejected by Commissioner Jones because it fails to comply with his directive that the WCIRB include a separate accounting of medical cost containment expenses in its next filing. “Looking at the industry wide data,” Gerlach said, “it’s clear that indemnity benefits are not a cost driver.” While there is some increase in medical costs, Gerlach noted that other indications show that the main driver of medical costs is actually the expense of “cost containment” efforts, such as Utilization Review and Bill Review. “Until the WCIRB complies with the Commissioner’s order and provides a separate evaluation of these expenses,” Gerlach said, “no further increases in the pure premium rates should be approved.”
Chalk also pointed out that an increase in claim adjustment expenses, which was identified by the WCIRB as a significant cost driver, is a result of the broken panel Qualified Medical Evaluator (QME) process. Chalk noted that testimony from several injured workers at the Workers’ Compensation Forum held by the Department of Industrial Relations last Thursday illustrated how “both UR and the panel QME process have led to horrendous delays, slowing needed treatment and delaying return to work, all of which unnecessarily adds to employers’ costs.”
Chalk said CAAA would be submitting comments and recommendations to commissioner Jones once a date for the public hearing is set. “However,considering that an insurer’s cost of making a mid-year rate change would probably consume most or all of this small increase,” Chalk added, “and also considering the significant State cost involved in reviewing this filing, it certainly raises questions as to why the insurance industry felt the need to submit this minor proposal at this time.”