State Bureau Recommends Decreased Workers’ Compensation Premium Rates
The Workers' Compensation Insurance Rating Bureau, a not-for-profit association that represents insurers and recommends premium rates, on Monday said that workers' compensation premium rates should be decreased by 2.9% to 5.3%, the Los Angeles Times reports (Dickerson, Los Angeles Times, 11/4). The bureau originally had recommended a 12% increase in premium rates beginning Jan. 1, 2004. However, the bureau revised its recommendation after Gov. Gray Davis (D) signed legislation (AB 227 and SB 228) in September to reform the workers' compensation system (Chan, Sacramento Bee, 11/4). The reforms will establish fee schedules for treatments and prescription drugs; limit chiropractic and physical therapy visits; implement reviews that use national standards to determine the proper amount of care for certain injuries; and increase penalties for employer fraud from $50,000 to $150,000 (California Healthline, 10/31). The Department of Insurance in September said that the advisory rate would fall by 2.9% as a result of measures included in the workers' compensation reform laws. The bureau estimate of 2.9% does not include potential savings from instituting interim treatment guidelines developed by the American College of Occupational and Environmental Medicine; the guidelines are supposed to be in place by April, the Oakland Tribune reports. Under the workers' compensation legislation, the state is supposed to develop its own guidelines by December 2004. The bureau estimate of a 5.3% reduction in premium rates assumed annual savings of $700 million from the interim guidelines. Robert Mike, president of the Insurance Rating Bureau, said that there are too many uncertainties -- including how doctors will react to treatment guidelines -- to estimate accurately how much the guidelines will reduce treatment costs (Mitchell, Oakland Tribune, 11/4). "Laws never work completely as they are intended to," Mark Sektman, a lobbyist for the American Insurance Association, said (Sacramento Bee, 11/4).
However, a report from the DATA/Survey Research Center at the University of California-Berkeley estimated that the interim treatment guidelines could save between $1.4 billion and $4.5 billion in 2004, the Tribune reports. Frank Neuhauser, project director at the DATA/Survey Research Center, said that savings will most likely be $3.1 billion. Neuhauser said that the savings estimates were generated by comparing the cost of treating workers' compensation injuries to the cost of treating the same injuries of people injured off the job who had fee-for-service health plans (Oakland Tribune, 11/4). Neuhauser said that bureau actuaries "tend to be more conservative and are slower to move on trends."
Insurance Commissioner John Garamendi (D) said that he is likely to recommend higher premium cuts than those recommended by the bureau, the Bee reports. Garamendi said that his recommendation is "extremely important to the insurance industry," adding, "That number is the goal that they will go for. If the number is low, they'll go for a low number. Set a high standard, it might very well be achieved" (Sacramento Bee, 11/4). Garamendi is expected to make a final ruling by the end of the week (Los Angeles Times, 11/4).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.