Increases, Guzman Case & New Requirements Important developments in California workers’ compensation which will affect your bottom line…
The WCIRB issued a Summary of Insurer Experience on August 26, 2010, which include for the first time a recap of the financial results of insurers financial reports for the 2009 workers’ compensation financial year. On an “underwriting ratio basis”, meaning premium compared to losses and operating expenses, the 2009 calendar year combined loss and expense ratio was 116%, compared to 101% for 2008 and 85% or 2007. Even more telling, the first report for 2010 indicates losses are 5% higher in 2010 than in the prior year. These financial results will drive insurance company decisions on pricing and rates.
#2- CA Court of Appeals upholds WCAB in Guzman Case The 6th District Court of Appeal upheld the Workers’ Compensation Appeals Board ruling in the controversial case of Milpitas Unified School District v WCAB (Guzman). The primary issue is whether Labor Code section 4660, changed in 2004 workers’ compensation reforms, permits deviation from a strict application of the descriptions, measurements, and percentages contained in the AMA Guides for purposes of determining permanent disability. The reform was designed to promote consistent and uniform ratings of disabilities. Since the 2004 reforms, permanent disability costs have decreased and become "determinable, predictable, and quantifiable," The Court took a broader view of both the text and the statutory mandate. The court held that the variety and unpredictability of medical situations prevent mechanical application The physician should be free to acknowledge his or her reliance on standard texts or recent research data as a basis for his or her medical conclusions, and the WCJ (Workers Compensation Judge) should be permitted to hear that evidence. It is anticipated that this decision, if not overturned by the California Supreme Court, will increase total workers’ compensation costs by 5.8%, in part due to significantly increased litigation.
#3- WCIRB Rate Increase Proposal of 29.6% for January 2011 This week, the Workers’ Compensation Insurance Rating Bureau (WCIRB) announced that it is recommending a 29.6% increase in what is known as the Advisory Pure Premium Rate for workers’ compensation insurance for policies starting on January 1, 2011. The 29.6% proposed increase reflects two dynamics. The first is that costs have been steadily increasing for several years, particularly the costs for medical treatment. (Medical costs per claim have increased by 60% since 2005.) The second dynamic is that previous increases proposed by the WCIRB (23% for 2009 and 24% for 2010) have been rejected by the Insurance Commissioner. Since there has been no adjustment in the Pure Premium Advisory Rate since January 2009, it has not kept pace with the rate of cost increases during that period, according to the WCIRB. The size of the latest proposed increase, therefore, is even larger. (Recent news reports state that costs were greater than premiums collected in 2009, leading insurers to lose $1.5 billion last year.) The Insurance Commissioner will hold hearings on this rate proposal in early October and likely will not issue a decision until November. The Commissioner is expected to completely reject any increase, just as he has for the past two proposals, based more on politics than on evidence and economic. The end-result of this process is still only a recommendation that is non-binding on insurers. Each insurance company sets rates based on its own costs (a reason why a competitive market and the ability to shop around its good for employers.) Many insurers have already been making adjustments to their rates during the past 18 months. So, you should start working early with your insurance agent or broker on renewal of your company’s 2011 policy! # 4 Calif. Employers Face New Workers' Comp Posting Requirements As of Oct. 8, California employers must begin distributing an updated version of the workers' compensation new hire pamphlet to all employees hired on or after that date; post revised workers' comp employee posting notices; provide an updated version of the Division of Workers' Compensation (DWC)-1/Notice of Potential Eligibility to injured workers; and post new medical provider network (MPN) notices if they use an MPN. The state has approved amended regulations governing the basic workers' compensation notice materials that employers must use to inform employees of their rights and obligations under California workers' compensation law. Insured and self-insured employers are subject to the posting notice and pamphlet requirements, and failure to provide current information to employees can lead to loss of medical control, civil penalties of up to $7,000 for each violation of the posting requirement, and the tolling of the statute of limitations for filing claims. The MPN notice regulations require that before coverage is implemented, the complete written MPN employee notification also be posted in both English and Spanish in a conspicuous location frequented by employees during the workday and in close proximity to the workers' comp posting. Because the details on this 'complete written MPN employee notification' are MPN-specific, claims administrators are scrambling to make sure these notices are ready for employers to post by the Oct. 8 effective date. The California Workers’ Compensation Institute will produce the required materials and translate the pamphlets and posting notice into Spanish as required by law and print the materials. Shipment is expected by mid-September. Don Dressler Consulting will provide FREE copies to our clients and have copies available at cost to anyone else interested.
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Issue 38, September 2010 |
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