Tuesday, May 15, 2012, 08:51 AM - Political developmentsThe California Department of Insurance will be holding a hearing today in San Francisco on the WCIRB mid year filing requesting a hike in the advisory workers' comp rate.
THe insurance market is not required to follow WCIRB recommendations or the rate finding of CDI. Rates continue to be far, far below the levels that were reached in before the 2003/2004 reforms.
Still, with the economy in a slow-mo recovery phase, Insurance Commissioner Jones is likely to look carefully at the request for any hike in the advisory rate. Prior Insurance Commissioner Poizner repeatedly swatted down requests for hikes in the "pure premium" rate.
What do the applicant attorneys think about the request?
Here is a statement addressed to Chris Citko of CDI from Brad Chalk, CAAA President (prepared with the help of Mark Gerlach, an insurance expert who consults for CAAA):
"Dear Mr. Citko,
The California Applicants’ Attorneys Association recommends disapproval of the pure premium rate filing submitted by the Workers’ Compensation Insurance Rating Bureau on April 12, 2012. The filing not only ignores the decision made by the Bureau’s Governing Committee just 6 months ago to refrain from filing mid-year rate changes absent "extraordinary circumstances," but it also fails to comply with the directive from Commissioner Jones to include disaggregated medical cost containment data.
With regard to the justification for a mid-year filing, we see no conditions that could be considered "extraordinary circumstances." Nor does the filing identify any "extraordinary circumstances" that would justify this proposal. The Executive Summary of the filing does state that the "system’s underlying costs have continued to deteriorate," but that hardly qualifies as an "extraordinary circumstance." And in any case, several charts in the Executive Summary show just the opposite – that cost pressures are abating.
For example, Chart 1 displays the estimated ultimate indemnity + medical + ALAE cost per claim over the period 2005 through 2013. This graph shows increases between 2005 and 2009, but little or no change from 2009 through 2011 (2012 and 2013 are disregarded as these figures are only projections based on the WCIRB’s inaccurate trend estimates). Charts displaying medical costs per indemnity claim, Chart 8, and indemnity costs per indemnity claim, Chart 9, show the same pattern – increases between 2005 and 2009, then leveling off between 2009 to 2011.
The projected ultimate on-level severity trends for both medical and indemnity benefits also follow this pattern (pages A:B-25 and A:B-26). The projected on-level severity for both medical and indemnity increased between 2005 and 2009, decreased in 2010, and then increased a minuscule 0.3% in 2011. In view of the sharp decrease in the on-level severity trend over the past two years, we recommend that the selected severity trends of 3% for indemnity and 7% for medical be rejected. These selected trends are not based on any actuarial computation, but were arbitrarily selected without any statistical justification. Reducing these trend factors to reflect the current experience will eliminate most or all of the indicated change in the pure premium advisory rates..
With regard to cost containment data, Commissioner Jones’ Decision and Order for the January 1, 2012 Pure Premium Rates included the following directive to the WCIRB – "With this order I am directing the WCIRB to include disaggregated medical cost containment expenses of insurers and an analysis of that data in its next filing."
The WCIRB may contend that this directive was intended to apply to the next "annual" filing, and not to a mid-year filing. That argument misses the point. As explained by Commissioner Jones, reviewing this cost containment data is one part of analyzing the efficiency of insurers. Calendar year data from the WCIRB and limited transactional data from the CWCI both show that cost containment expenses are the fastest growing "medical" cost. In order to accurately identify the real cost drivers in the system, it is important that the WCIRB comply with the Commissioner’s directive.
In analyzing the efficiency of insurers, it is also important to look at the sharp growth in allocated loss adjustment expenses. Chart 10 shows that the average allocated loss adjustment expense per indemnity claim has nearly doubled since 2005. As we said in our comments regarding the January 1, 2012 Pure Premium Rate filing, the causes of this increase may be beyond the scope of this pure premium rate hearing. However, loss adjustment expenses have become a major cost driver in the system, and we recommend that the Commissioner direct the WCIRB to provide more detailed data on these expenses, as well as an analysis of that data, in its next filing.
Thank you for the opportunity to comment on this rate proposal.
S. Bradley Chalk, President
California Applicants’ Attorneys Association"
The hearing will be held at the CDI at 45 Fremont Street, 22nd Floor, starting at 1 p.m. today.
Sunday, May 13, 2012, 03:09 PM - Political developmentsEvery good play has its scenic backdrop.
Shakespeare's Hamlet had its Elsinore Castle in Denmark. South Pacific had its Bali Ha'i.
So it will be this year with California workers' comp, which will be on the table as the legislature struggles with deficits spinning out of control.
By the time you read this there will be few who haven't heard about California's $16 billion deficit .
A sour economy continues to result in poor revenue collection, pushing some hard choices to the fore.
How workers' comp will fare in budget revisions isn't yet known. Despite the fact that the system is supposedly user funded, that has not always spared the system from cuts. Under Schwarzenegger, judges and staff were furloughed, cutting hours and pay.
The choices ahead are grim, even if one of the proposed tax initiatives
(Munger or Brown) passes.
Civil courts are likely to see more cuts, putting the civil justice system in danger.
The pressure on workers' comp funding is likely to be extreme.
For a good assessment of some of the tough choices facing the Governor and legislature, I recommend this piece by John Myers, "Bigger deficit, bigger budget fight ahead":
http://www.news10.net/capitol/article/1 ... on-deficit
Sunday, May 6, 2012, 10:07 PM - Political developmentsIt was smooth sailing at the legislature this week for Christine Baker and Rosa Moran.
Both easily won confirmation to their posts as head of the DIR and the DWC.
By all accounts, Moran and Baker work well together.
With reform efforts on the horizon, the political pressures on both will be substantial.
Each brings a unique background to the job of managing California's workers' comp programs. Baker has years of experience navigating workers' comp politics, dealing with stakeholder groups and policy wonks. Moran has extensive experience in the system from representing injured workers and serving as a workers' comp judge.
Congratulations to both.
Tuesday, May 1, 2012, 10:26 PM - Political developmentsThe DWC listening tour is now over.
Yesterday I had a chance to catch one of the final sessions in Oakland.
It was interesting that the only specific mention of monetary savings I heard yesterday came from comments by SCIF's representative. SCIF claims that they project over a billion in achievable savings if certain changes are adopted.
By now it's clear that influential employer spokespeople are seeking to remove judges from making decisions about medical treatment. Apparently those stakeholders are unhappy with the current dispute resolution process.
But I'm not aware of any studies that show how this would generate savings.
And from the level of a practitioner, most treatment decisions are either dictated by UR physicians or by tie-breaker QMEs.
If numbers have been crunched on the savings that could be generated by other dispute resolution methods, I'm not aware of that. I don't believe that CHSWC has data on that issue at this time.
So this push may be philosophy driven rather than data driven.
Whatever. The push is on.
I'm told it is for some sort of IMR system. That's Independent Medical Review.
You'll likely be hearing a lot more about this. So to help you get up to speed, here is a link to a RAND report that analyzes different IMR models that could be used in California workers' comp (the HMO model, the Medicare model and the Texas workers' comp system model):
http://www.rand.org/content/dam/rand/pu ... ndixes.pdf
And here is a link to a study by the California Healthcare Foundation of the IMR program used with California healthcare plans:
http://www.chcf.org/~/media/MEDIA%20LIB ... istory.pdf
Sunday, April 29, 2012, 05:49 PM - Political developmentsAmerican culture has long touted the retirement years as "golden years".
The baby boomer generation in particular has nurtured the notion that "seventy is the new sixty". Living longer, getting cosmetic surgery, bringing our pop culture along with us as we age.
Mick Jagger and Neil Young are still rockin'.
But there is rising angst as Americans recognize that retirement security is, well...not so secure.
This is highlighted in the results of a March 2012 study by the Employee Benefits Research Institute, written by Ruth Helman, Craig Copeland and Jack VanDerhai, titled "The 2012 Retirement Confidence Survey: Job Insecurity, Debt Weigh on Retirement Confidence, Savings".
Here are the key finding of the EBRI paper:
-"Americans’ confidence in their ability to retire comfortably is stagnant at historically low levels. Just 14 percent are very confident they will have enough money to live comfortably in retirement (statistically equivalent to the low of 13 percent measured in 2011 and 2009)."
-"Employment insecurity looms large: Forty-two percent identify job uncertainty as the most pressing financial issue facing most Americans today."
- "Worker confidence about having enough money to pay for medical expenses and long-term care expenses in retirement remains well below their confidence levels for paying basic expenses."
-" Many workers report they have virtually no savings and investments. In total, 60 percent of workers report that the total value of their household’s savings and investments, excluding the value of their primary home and any defined benefit plans, is less than $25,000."
-"Twenty-five percent of workers in the 2012 Retirement Confidence Survey say the age at which they expect to retire has changed in the past year. In 1991, 11 percent of workers said they expected to retire after age 65, and by 2012 that has grown to 37 percent."
-"Regardless of those retirement age expectations, and consistent with prior RCS findings, half of current retirees surveyed say they left the work force unexpectedly due to health problems, disability, or changes at their employer, such as downsizing or closure."
-"Those already in retirement tend to express higher levels of confidence than current workers about several key financial aspects of retirement."
-"Retirees report they are significantly more reliant on Social Security as a major source of their retirement income than current workers expect to be.
 Although 56 percent of workers expect to receive benefits from a defined benefit plan in retirement, only 33 percent report that they and/or their spouse currently have such a benefit with a current or previous employer."
-" More than half of workers (56 percent) report they and/or their spouse have not tried to calculate how much money they will need to have saved by the time they retire so that they can live comfortably in retirement."
-"Only a minority of workers and retirees feel very comfortable using online technologies to perform various tasks related to financial management. Relatively few use mobile devices such as a smart phone or tablet to manage their finances, and just 10 percent say they are comfortable obtaining advice from financial professionals online."
The study noted that:
"One reason for the difference between workers’ expectations and retirees’ experience of retirement age is that many Americans find themselves retiring unexpectedly. The RCS has consistently found that a large percentage of retirees leave the work force earlier than planned (50 percent in 2012) (Figure 33). Many retirees who retired earlier than planned cite negative reasons for leaving the work force, including health problems or disability (51 percent); changes at their company, such as downsizing or closure (21 percent); and having to care for a spouse or another family member (19 percent). Others say changes in the skills required for their job (11 percent) or other work-related reasons (23 percent) played a role. Some retirees mention positive reasons for retiring early, such as being able to afford an earlier retirement (33 percent) or wanting to do something else (28 percent), but just 8 percent offer only positive reasons."
Many injured workers find themselves in the big group that retires dearly due to health problems or disability.
This is one reason why any changes to California's workers' comp system need to be crafted very carefully.
With credible studies showing a huge drop in permanent disability indemnity benefits paid to disabled workers since 2004, there are many California workers who are even less prepared for retirement than they would have otherwise been.
That's why it is important to carefully consider how a benefit increase is done. How will a benefit increase be distributed between lower end disabilities and disabilities of workers who cannot return to work?
If procedural hurdles are placed in front of workers, and impairment rating standards further tightened, will an "increase" be illusory? If disability percentages are assigned increased monetary amounts on a chart but percentages of disability awarded are compressed, how will this actually play out?
If the Almaraz-Guzman and Ogilvie cases were to be deep-sixed, how do we know that workers would not be that much further in the hole?
I have yet to see any reliable studies on these questions.
Legislators and the workers' compensation press are going to want to know more as further discussions between stakeholders proceed.
The statewide DWC listening tour has been great. Let's hope that some of the ideas that have emerged can be used in systemic changes.
But pretty soon the DWC leadership and stakeholder leaders need to start floating some of their ideas.
It's too important to emerge from a back room as a done deal at the end of the legislative session.
Here is a link to the employee benefits study. The study is replete with interesting charts and tables:
http://www.ebri.org/pdf/briefspdf/EBRI_ ... 9_RCS2.pdf