View this article online: https://www.insurancejournal.com/news/west/2018/04/05/485467.htm
The California Workers’ Compensation Insurance Rating Bureau’s governing committee has voted to authorize the WCIRB to submit a lower mid-year pure premium rate filing to the California Department of Insurance based in part on reduced lien filings and a new drug formulary.
The mid-year filing will propose July 1, 2018 advisory pure premium rates that average $1.80 per $100 of payroll. That is 7.2 percent lower than the insurance commissioner’s approved average Jan. 1, 2018 advisory pure premium rate of $1.94 and 19.0 percent less than the industry average filed pure premium rate as of Jan. 1, 2018 of $2.22.
This proposed July 1, 2018 decrease follows six straight decreases since 2015. If approved, the decrease will result in an average drop of more than 35 percent from the January 1, 2015 advisory pure premium rates, according to the WCIRB.
The governing committee’s decision was based on the WCIRB actuarial committee’s analysis of insurer loss and loss adjustment experience as of Dec. 31, 2017. The actuarial committee noted that cumulative injury claims continue to increase, particularly in the Los Angeles region. In addition, medical severities show signs of increase after several years of more modest severity trends driven by Senate Bill No. 863 and allocated loss adjustment expenses continue to increase.
Despite the upward pressures on system costs, the committee said a reduction in advisory pure premium rates was warranted by the favorable loss development largely driven by significant increases in claim settlement rates, a sharp decline in lien filings following the implementation of Senate Bill 1160 and anticipated savings resulting from the new drug formulary.
SB 1160 went into effect Jan. 1, 2017, and requires the California Department of Insurance to automatically stay liens belonging to providers who have been indicted or charged with crimes. The DIR issued a progress report in late March on its anti-fraud efforts, including updates on the suspension of 227 medical providers from treating California’s injured workers and the dismissal of 292,000 illegitimate liens with claims valued at more than $2.5 billion.
A new formulary for prescription drugs in workers’ comp is expected to create more efficiency and put California on par with only a few states that are starting to recognize the value they bring to the workers’ comp system.
However, with some turnover at the top of the California Department of Industrial Relations and a gubernatorial election coming up, it’s unclear how interested those who take over the reins will be in keeping up with the reforms made over the last few years to the state’s workers’ comp system.
Mark Walls, a workers’ comp watcher who is vice president of communications and strategic analysis for Safety National, acknowledged that the SB 863 reforms passed back in 2012 continue to make a positive impact on workers’ comp costs in California.
“However, we are cautious about the future,” Walls said. “Christine Baker, who was the director of the Department of Industrial Relations, recently retired. Her efforts were key to the success of SB 863. In addition, the election of a new California governor in November could mean a new legislative agenda when it comes to workers’ compensation. Will the new administration maintain a focus on keeping workers’ compensation costs down for California employers? That remains to be seen.”
The WCIRB anticipates submitting its filing to the CDI by April 10, 2018. The filing and all related documents will be available in the filings and plans section of the WCIRB website.
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