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Insurance Commissioner Steve Poizner has denied the Workers’ Compensation Insurance Rating Bureau’s (WCIRB) request for a 27.7% rate increase.
In a statement released today announcing the Commissioner's decision, WCRIB noted the CDI's hearing officer's proposed decision recommended a 20.4% increase. As a practical matter, the Commissioner's action is likely to have little effect since the WCIRB Benchmark is purely advisory and the CDI does not set workers' compensation insurance rates.
“Once again, workers’ compensation insurers have failed to demonstrate that they have adopted procedures to control costs or that they are operating efficiently,” Poizner said. “It’s easier for the insurers to get together and argue that they need huge rate increases than for them to do the hard work of implementing cost savings.”
The Commissioner also explained that he denied the increase because he believes that 2004 reforms have not been fully implemented. He acknowledged medical cost inflation and other cost drivers, but stated that he believes insurers have not done enough to control costs. He has asked WCIRB to provide more data as to the profitability of carriers and expressed his opinion that insurer profitability that this should be part of any increase rate consideration.
Commissioner Poizner also announced his decision to implement three reforms that will significantly improve and inject transparency into the review process. The reforms require the WCIRB to:
“The workers’ compensation rate-making system is long overdue for some much-needed reforms,” Commissioner Poizner said. “The benchmark rate is only theoretical, and this has enabled insurers to file for and pass on rate increases to businesses. I will not allow this broken rate-making process to serve as cover for the insurance industry in its justification for higher rates that are simply not justified.”