DCRB Seeks Decrease in Del. WC Voluntary Loss Costs, Residual Market Rates

October 17, 2014

The Delaware Department of Insurance said it has received the Delaware Compensation Rating Bureau’s (DCRB) filing proposing a decrease in both the workers’ compensation voluntary market loss costs and the residual market rates for 2015.

DCRB’s filing No. 1404 proposes a 3.52 percent decrease in voluntary market loss costs and a 1.56 percent decrease in the residual market rates. The proposal represents a contrast from double-digit increases in average workers’ comp rates in the past couple of years.

Delaware Insurance Commissioner Karen Weldin Stewart said on Oct. 15 she is encouraged that DCRB’s initial indicated rates reflect a decrease. The commissioner has hired two independent actuaries to review the filing along with the Ratepayer Advocate’s independent actuary.

Over the past couple of years, workers’ comp rate hikes in Delaware have prompted state officials and the legislature, as well as the insurance industry and the business community, to look at ways to decrease the high-rising cost of worker’s comp insurance as it relates to some of the cost drivers, said Oyango Snell, ‚Äécounsel, state government relations, at Property Casualty Insurers Association of America.

“Some of the those cost drivers included high-rising medical expenses for surgery and anesthesiology as well as ambulatory services,” said Snell. “So you had the Workers’ Compensation Task Force that was established by the governor, led by the lieutenant governor. And lawmakers as well as the folks from the business community and the insurance industry came together to work on various proposals over the course of a two-year period, and what you are seeing now is what potentially could be done in Delaware.”

Snell also said DCRB makes it clear that the proposed reduction is dependent upon the mandates in the state’s House Bill 373 of 2014, which was signed into law on July 15, 2014.

The legislation requires a 33 percent reduction in medical expenditures phased in over a three-year period; imposition of caps expressed as percentages of Medicare per-procedure reimbursements beginning on Jan. 31, 2017; and a revision of certain procedures pertaining to the position of Ratepayer Advocate. “So it’s a positive step in the right direction. And we hope that those mandates actually help those medical costs go down,” said Snell.

Delaware’s recently established Workers Compensation Oversight Panel, which had its opening meeting in August, is charged with devising a new medical fee schedule that would lower medical costs for workers’ comp cases by 33 percent over next three years, starting with a 20 percent reduction by Jan. 31, 2015.

DCRB said in its filing that work is continuing on the development of those mandated fee schedules, and that they were not available for review or evaluation as part of the preparation of this filing. DCRB said it had elected to price House Bill 373 based solely on its interpretation of the legislative intent. DCRB added that it reserves the right to amend or replace the filing indications if subsequent analysis of the actual fee schedules adopted appear to produce different results from those prescribed in the statute.

On that basis, DCRB said in its filing, savings from House Bill 373 were estimated to be approximately 32.45 percent of medical loss costs and 21.95 percent of total loss costs. Accordingly, House Bill 373 produced a decrease in residual market rates of approximately 21.95 percent.

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