California Commissioner Questions Workers’ Comp Increase

California Insurance Commissioner Steve Poizner is indicating that he may not support the state Workers’ Compensation Insurance Rating Bureau’s (WCIRB) request to increase the Workers Compensation Cost Claims Benchmark by 22.8 percent.

Poizner released a statement Tuesday in which he said that small businesses cannot tolerate such an increase in this economy, and that outlined some of his suggestions for addressing the costs of workers’ compensation.

“I rejected previous requests to increase the Costs Claims Benchmark and asked that insurers use all available tools to control costs,” Poizner said in a news release. “I will closely scrutinize the WCIRB’s request for the increase and carefully consider the information presented at today’s hearing for evidence that efforts to root out inefficiencies in the workers’ comp system are being made.”

The WCIRB Governing Board decided it would ask for the 22.8 percent hike in August. The committee has said the hike is necessary primarily because of rising medical costs, and those costs account for 16% of the requested increase. The rest is necessary because of two Workers’ Compensation Appeals Board decisions delivered this year regarding permanent disability.

If the hike is approved it goes into effect in January 2010. Proposed increases are sent to the Insurance Commissioner. He 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.

Commissioner Poizner had a hearing on medical costs and workers’ compensation in early June. In the release, Poizner says that he came away from that meeting convinced that insurers had not exhausted the options for greater frugality. He says insurers have not eliminated inefficiencies, and working with medical providers effectively enough.

Some of Poizner’s recommendations for reducing costs in the workers’ compensation system are outlined in the department’s release. They include:

* Poizner says all insurers should implement pharmacy networks with or without regulations based upon the example set by Safeway and the fact that the provisions of Labor Code Section 4600.2 do not require regulations as a prerequisite.

* Regulations should be implemented regarding physician dispensing of pharmaceuticals. Legislation may be necessary to deal with this.

* Require the prescribing and/or dispensing of generic drug equivalents.

Poizner also recommends more rigorous utilization review and that strict fee schedules be established and heeded.

In the release, Poizner, who is running as a Republican candidate for governor, says his department has been “vigilant” and successful in holding workers’ compensation rates in recent years. In October 2008, Commissioner Poizner rejected WCIRB’s request for a 16 percent increase in the Benchmark and instead granted a 5 percent increase, the release says.

California’s benchmark has fallen 63.4 percent since its high in 2003.