California Insurance Commissioner Steve Poizner has rejected for the second time this year an insurance industry request for a large increase in the workers’ compensation benchmark premium rate.
The Workers’ Compensation Insurance Bureau had asked for a 22.8 percent increase in the Workers’ Compensation Claims Cost Benchmark. In July, the Bureau had asked for a 23.7 percent increase, a rate that was previously rejected by Poizner.
The Bureau has said the increase is necessary because of rising medical costs and the potential impact of two pending court cases concerning payments for permanent disabilities. It has been reported that the underwriting ratio for all California workers’ compensation insurers is growing unfavorable.
In rejecting the requested increase, Poizner said he was worried that an increase would exacerbate California’s unemployment problem. The unemployment rate in the state was officially 12 percent in September, and, though some hiring appears to be occurring in other regions, it may have continued to increase in October, according to reported data from SurePayroll Inc., an online payroll service used by more than 25,000 small businesses. Their data was reported to indicate that jobs continued to be lost in October, and were down 2.1 percent on the year.
“One in eight Californians is unemployed,” said Poizner, who is running for the governor’s office in 2010. “Countless others are also suffering and have either given up looking because they cannot find work or have taken part-time jobs while they seek full-time work. Any increase in costs for employers will only make our already dire economic situation worse.
“Given these harsh economic realities, I refuse to rubber stamp double-digit increases to the Workers Compensation Claims Cost Benchmark, especially when I see clear evidence that the cost control reforms from 2003-2004 have yet to be fully implemented,” he added. “At the same time, we see those who are self-insured fully implementing the 2003-2004 cost containment measures. They have proven that a very efficient system that is focused on getting injured workers back to work in a cost-effective manner can be created.”
Poizner has proposed a list of 27 things insurers could do to improve their efficiencies, and cut costs.
For its part, the Bureau said that even with the proposed increase, the average pure premium rate would still remain 55 percent below the average rate in July 2003, just before the state adopted crucial reforms.
Moreover, many observers are perplexed by Poizner’s position and particularly by the fact that he proposed no suggested increase of his own, according to the Los Angeles Times. They noted that a hearing examiner for Poizner’s own department has proposed a 15.4 percent increase.
The Association of California Insurance Companies told the Times that it was “puzzling” that Poizner would reject his own examiner’s proposal without rationale. And, Scott Hauge, an insurance agent in San Francisco and the president of Small Business California, said: “It’s hard for me to understand why there would be no rate increase.”
Last year, the Bureau requested a 16 percent increase, and Poizner recommended 5 percent.
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