Calif. Workers’ Comp Rating Bureau to Recommend 22.8% Increase in Rates

August 13, 2009

The WCIRB will submit a filing to the California Department of Insurance (CDI) recommending an approximate 22.8 percent increase in pure premium rates (or “claims cost benchmark”) effective Jan. 1, 2010. The WCIRB Governing Committee made its decision to recommend the increase based on recommendations heard at the WCIRB Actuarial Committee on July 31, 2009.

The recommendation is based on two principal components. First, the WCIRB’s evaluation of March 31, 2009 loss experience produces an indicated increase in the claims cost benchmark of 16 percent. This indicated increase is primarily the result of increased medical costs. Second, the WCIRB’s analysis of anticipated cost increases stemming from three recent Workers’ Compensation Appeals Board decisions (Ogilvie v. City and County of San Francisco, Almaraz v. Environmental Recovery Services and Guzman v. Milpitas Unified School District) indicates an additional increase of 5.8 percent.

The proposed hike is sent to the Department of Insurance 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.

The WCIRB says that if the full 22.8 percent increase is approved by the Insurance Commissioner, the Jan. 1, 2010 pure premium rates will still be, on average, 55 percent lower than the approved pure premium rates in effect July 1, 2003.

Insurance Commissioner Steve Poizner says he will closely scrutinize the new WCIRB filing and seek out evidence that efforts are being made to control costs.

scrtoday issued the following statement on Workers’ Compensation Insurance Rating Bureau’s (WCIRB) request to increase the Workers Compensation Cost Claims Benchmark by 22.8 percent:

“Last month, I rejected WCIRB’s request to increase the Cost Claims Benchmark, in part because I found that insurers were inefficient and were not fully using available tools to control costs,” Poizner said. “Instead of striving to control medical costs, I found that insurers were attempting to pass unsupported costs along to employers in the form of rate increases. They must work to be as efficient as their self-insured counterparts.”

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. As a result of the June hearing, Commissioner Poizner has released an outline recommendating areas where the workers’ compensation system can achieve further efficiencies. He expects the industry to implement many of these changes before he will consider a positive rate change to the Benchmark.

The Insurance Commissioner issues the Workers’ Compensation Claims Cost Benchmark to measure and project costs in the system. In July 2009, Commissioner Poizner declined WCIRB’s application to increase the Benchmark by 23.7 percent.

The WCIRB expects to submit its pure premium rate filing to the CDI on or around Aug.t 18, 2009. Once the filing is submitted, it may be viewed or downloaded from the Regulatory Filings section of the WCIRB web site at www.wcirbonline.org.

Sources: WCIRB, CDI

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