The Delaware Compensation Rating Bureau (DCRB) announced that it has submitted to the Delaware Department of Insurance a filing of revisions to the state’s Residual Market Plan, voluntary market loss costs and related rating values with a proposed effective date of Dec. 1, 2015.
DCRB said in its “Circular No. 909” Monday that its analysis for the filing produced a proposed overall increase in collectible rate level of 14.92 percent for the Residual Market Plan and a proposed overall increase in collectible loss costs of 15.03 percent for the voluntary market.
In comparison, DCRB last October proposed a 1.56 percent overall decrease for the residual market rates and a 3.52 percent overall decrease for voluntary market loss costs for 2015. That filing was later amended to an overall decrease of 9.7 percent for the residual market rates and an overall 11.5 percent decrease for the voluntary market loss costs. The amended filing was approved by Insurance Commissioner Karen Weldin Stewart this past January, with the effective date retroactive to Dec. 1, 2014 for new and renewal businesses.
Commenting on the latest filing, DCRB Senior Vice President Bruce Decker told Insurance Journal that DCRB looks at new information that comes into its system for its annual filings each year with the Delaware Department of Insurance. “We analyze it based on the fact that we do get new data that comes in. So this time, it produced an increase,” he said, adding that DCRB’s analysis included latest data from policy year 2013.
“This time, we saw an upward movement in the frequency that we measure. The claim frequency is the number of lost-time claims per $1 million of expected losses. Historically it’s been going down, but in this past review, there was an uptick,” said Decker. “That was a significant change because it wasn’t just a decrease slowing down. It was an actual increase. So that was a factor.”
He also said the indemnity severity trend was going up this time and that produced part of the indication that DCRB sees as an increase. On the claims duration, he said DCRB continues to see claims staying open longer, something that’s been happening now for several years in Delaware.
In the Circular No. 909, DCRB explained that a key factor in the development of the proposed changes in rates and loss costs is the enactment of House Bill 373 of 2014 (HB373), which set procedures and requirements for the health care payment system for workers’ comp claims.
Among those requirements is that the fee schedule would result in a reduction of 20 percent in aggregate workers’ comp medical expenses by the year beginning Jan. 31, 2015, an additional reduction of 5 percent of 2014 expenses by the year beginning Jan. 31, 2016 and an additional reduction of 8 percent of 2014 expenses by the year beginning Jan. 31, 2017.
DCRB said that in preparing its filing, the DCRB believes that the first, and largest, reductions in medical fee schedules required under HB373 will produce savings in medical expenditures of less than 20 percent. However, DCRB said it cannot yet ascertain the extent to which savings in medical expenditures accomplished by way of the Jan. 31, 2015 medical fee schedules will fall short of that threshold.
“We are also aware that opportunities exist for changes to the health care payment system in 2016 and 2017 to compensate for a shortfall in the intended effects of the January 31, 2015 changes,” DCRB stated. “Accordingly, the DCRB has elected to again recognize the full extent of savings specified in HB373 in preparing its December 1, 2015 residual market rate and voluntary market loss cost filing.”
DCRB said it continues to collect Medical Data Call information, detailed medical bill line-item records reflecting services provided, charges rendered and payments made for injured Delaware workers. DCRB noted that to date, it has received “very limited amounts” of data pertaining to services provided after Jan. 31, 2015, the effective date for the first fee schedule reduction required under HB373.
However, information available from that source will expand over the course of the next two or three calendar quarters, and will become a very probative source for evaluation of experience after the Jan, 31, 2015 fee schedule changes, DCRB stated. As this information becomes available, DCRB will rely very heavily on it in making subsequent evaluations of the impacts of law changes on system costs.
The DCRB filing will be examined by the Delaware Department of Insurance and Delaware’s Ratepayer Advocate in coming months.
Was this article valuable?
Here are more articles you may enjoy.