Legislation Throws Rates Off Upward Trajectory
By Robert Warne - September 30, 2003 Based on a conservative evaluation of the cost saving measures contained in AB 227 and SB 228 the Workers’ Compensation Insurance Rating Bureau (WCIRB) swapped its recommended 12 percent January 1, 2004 pure premium rate increase with a 2.9 percent reduction.
The announcement was made at a California Department of Insurance public hearing Sept. 29.
The rate reduction is the first pit stop pure premium rates have pulled into since they’ve been racing in an upward spiral over the past few years to keep up with pricy claims.
According to the Sacramento Bee, Insurance Commissioner John Garamendi said during the meeting that, "Reductions in workers' compensation costs are going to happen. Further increases are not going to happen."
The WCIRB made its recommendation after it was able to verify at least $3.5 billion in savings as a result of the work comp legislation.
Saving from reforms in fee schedules for doctors, hospitals, outpatient surgery centers and prescription drugs and caps on chiropractor and physical therapy visits and the elimination of the voc rehab program were quantifiable.
But the WCIRB didn’t factor fraud reform and medical protocols to prevent over treatment and re-evaluation of existing medical claims into the rate reduction because the savings couldn’t be measured yet.
The American Insurance Association is pleased that California is starting to deal with its subjective and complicated workers’ compensation system.
The AIA is concerned though because, “Despite the cost-saving reforms, this package will increase costs for insurers through added requirements placed on carriers regarding the injury and illness prevention program. Changes in the legislation also require insurers to contract with overly qualified people instead of using qualified company personnel.”
Garamendi will issue a final verdict on the rate decrease in October.
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