"One in eight Californians is unemployed," said Commissioner Poizner. "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," said Commissioner Poizner. "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.
"These increases requested by the WCIRB give insurers an excuse to raise rates in concert without fully utilizing all of their cost containment tools or increasing efficiency. I will not consider an increase in the Claims Cost Benchmark until I see substantial efforts being made by insurers to use all available tools to constrain costs and improve efficiency."
Commissioner Poizner also criticized the WCIRB analysis done on recent Workers Compensation Appeals Board (WCAB) rulings, calling the application "inadequate" and "almost identical to its last filing despite the WCAB having made substantial changes to its decision in the Almaraz/Guzman case."
"I do not entirely reject the possibility that these WCAB decisions will increase permanent disability costs and it appears that the decisions may change further," said Commissioner Poizner. "Given the lack of actual data and differing assessments, along with the economic challenges faced by California's employers, I believe the proper course of action is to further monitor the data on permanent disability costs, properly analyze the effect of these decisions, and await the resolution of further legal appeals."
WCIRB had requested a 22.8 percent increase in the claims cost benchmark to be effective Jan. 1, 2010. While the Claims Cost Benchmark is purely advisory and the Department of Insurance does not set workers' compensation insurance rates, history has shown that when Commissioner Poizner has declined to increase the Claims Cost Benchmark, real-world workers' compensation insurance rates have increased at a far slower rate than the steep increases requested by the WCIRB.
As part of his effort to closely scrutinize the workers' compensation system, 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, including failing to achieve a balance between cost and benefit with medical provider networks and utilization review, and are not communicating effectively with medical providers.
As a result of the June hearing, Commissioner Poizner has released an outline for areas where the workers' compensation system can achieve further efficiencies. Highlights of the 27 recommendations include:
* 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.
* Utilization Review needs some utilization review of itself. If a majority of medical requests are going to utilization review and are approved, it is not effective. Utilization review, as it was intended for health care, was for the outlier circumstance.
* Require billing and payment at fee schedule.
* Regulations for electronic billing and a standard medical bill form need to be implemented.
The Insurance Commissioner issues the Workers' Compensation Claims Cost Benchmark to measure and project costs in the system. The Benchmark has fallen 63.4 percent since its high in 2003. Commissioner Poizner has been vigilant in closely scrutinizing requests for increases in the Benchmark.
* In July 2009, Commissioner Poizner declined WCIRB's application to increase the Benchmark by 23.7 percent.
* In October 2008, Commissioner Poizner rejected WCIRB's request for a 16 percent increase in the Benchmark and instead granted a 5 percent increase.
* In May 2008, Commissioner Poizner, citing forecasted marketplace stability, did not issue an interim pure premium rate advisory - the first time in six years an interim pure premium rate advisory was not issued by a California insurance commissioner.
* In January 2008, Commissioner Poizner recommended no change in workers compensation insurance rates based upon his review of the data provided by WCIRB at that time.
* In 2007, the commissioner called for a 14.2 percent decrease in workers compensation pure premium rates.
Commissioner Poizner has worked to ensure an efficient and effective workers compensation insurance market. This year, he released a top-down review of the Workers Compensation Insurance Rating Bureau and an audit of State Fund, the state's largest workers compensation insurance company. Both reviews included specific recommendations that would make the organizations more proficient and successful at their duties.