Thursday, July 9, 2009


Citing testimony that self-insured employers have been able to reduce overall workers' compensation costs, California Insurance Commissioner Steve Poizner rejected a rate application from the Workers' Compensation Insurance Rating Bureau (WCIRB), an insurer backed group, to raise the Workers' Compensation Claims Cost Benchmark by 23.7 percent.

"My response to this requested record increase by workers' comp insurance companies is this - no. I will not include avoidable costs in the Benchmark," said Poizner. "Because of the faltering economy, record unemployment levels, and objections to the proposed increase from employers, I have focused on whether insurers and other parties in the workers' comp system are exhausting every available avenue to control costs before granting any increase to the Benchmark.

"While self-insured employers face the same medical inflation and other cost drivers challenging the rest of the industry, they have cut costs in other areas that have resulted in a net decrease in overall workers' compensation costs. The evidence presented at a Department of Insurance investigatory hearing provided a dramatic demonstration of the failure of insurers to adequately utilize the cost containment tools given to them by the legislature, thereby allowing unnecessary costs to creep into the workers' compensation system."

As a result of a June hearing, Poizner has released an outline for areas where the workers' comp system can achieve further efficiencies. He expects the industry to implement many of these changes before he will consider a positive rate change to the Benchmark. 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.
  • DWC should update the fee schedule immediately and continue to do it as an ongoing process.
  • Regulations for electronic billing and a standard medical bill form need to be implemented.

Poizner also announced the creation of a Workers' Compensation Costs Advisory Group. This group, comprised of a cross-section of all participants, will meet on an ongoing basis. This will reportedly accomplish the purpose, similar to the investigatory hearing, of informing the commissioner and CDI staff regarding the key cost drivers in the system and make ongoing recommendations to deal with them.

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