Poizner’s Directive Bears Fruit

Poizner’s Directive Bears Fruit

One large problem in California workers' comp has been the inability of the WCIRB to accurately assess workers' comp cost trends.

The WCIRB (Workers Compensation Insurance Rating Bureau) collects data from insurers and makes recommendations on rates to California 's Insurance Commissioner who, in turn, makes a recommendation to the industry. With the industry deregulated, none of this is binding on individual insurance carriers. But it has political and symbolic effect.

Concerned over the WCIRB's less than stellar track record over the past decade, current Insurance Commissioner Poizner made a set of recommendations to the WCIRB in 2008.

In 2007, Poizner charged that from 1995 to 2000, WCIRB forecasts underestimated costs by 20 to 60%, while post 2004 reform forecasts by the WCIRB overestimated costs by by 30 to 50%.

Among the recommendations was for the WCIRB to change the way it assesses medical costs as part of its "Uniform Statistical Reporting Plan".

The WCIRB has now submitted a plan to revise the way it assesses costs.

Utilization review and medical bill review are to be handled differently.

The cost of medical cost containment programs will be moved from the medical loss column to the allocated loss adjustment expense category.

This will, over time, provide more transparency as to what the system costs really are.

Utilization review, nurse case management, and bill review and some other loss control schemes have become costly line items in and of themselves (and profit centers for many of the companies). Medical costs have risen, but cost containment expenses have also reisen dramatically.

As premium dollar volume has declined in California workers' comp, allocated and unallocated medical costs have loomed larger in relation to benefits actually paid out to disabled workers.

I have to credit Insurance Commissioner Poizner on this one. His recommendation to the WCIRB has come to fruition. Over the long run we may have a better system as a result.

To see the recommended changes in the WCIRB's reporting, you can click here (it's part of their amended rate filing).

This blog originally appeared on WorkersComp Zone. Reprinted with permission.    

Comments

Julius Young
  • 10-07-2009

Julius,

We could not agree more.  An important next step, as we pointed out in our testimony at yesterday's hearing (10/06/09), will be to separate the costs of managed care programs of all kinds out of the premium formula in order to create more accountability for their cost effectiveness, similar to how a self-insured employer must be accountable for these costs.

Steve Cattolica,

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