Citing testimony that self-insured employers have been able to reduce overall workers' compensation costs, 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.
While the Department of Insurance does not set workers' compensation insurance rates, an increase in the cost benchmark usually leads to workers compensation insurance premium increases (and many HAVE announced increases despite the Department's recommendations -- to read about that, CLICK HERE).
Some of the Insurance Commissioner's comments:
"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."
The Commissioner 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 were not communicating effectively with medical providers.
Earlier, Commissioner Poizner had asked the WCIRB to withdraw the portion of the increase related to the Almaraz/Guzman and Ogilvie decisions by the Workers' Compensation Appeals Board.
As a result of the June hearing, the Commissioner released an outline for areas where the workers' compensation system can achieve further efficiencies. He announced that 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:
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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.
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Regulations should be implemented regarding physician dispensing of pharmaceuticals. Legislation may be necessary to deal with this.
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Require the prescribing and/or dispensing of generic drug equivalents.
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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.
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Require billing and payment at fee schedule.
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DWC should update the fee schedule immediately and continue to do it as an ongoing process.
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Regulations for electronic billing and a standard medical bill form need to be implemented.
Commissioner 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.
To read the Department's underlying (proposed) decision and grounds (21 pages),
→
CLICK HERE.
To read the report issued on the hearings that were held,
→
CLICK HERE.
To read the actual final decision and order from the Department,
→
CLICK HERE.
