California SB 863
California SB 863 was supposed to be a cost-cutting measure for all parties involved in their WC system. Last week, the WCIRB (Workers Comp Insurance Rating Bureau) recommended a 6.7% increase due to a number of factors for policies effective January 1, 2015.
According to the WCIRB press release, there were numerous factors that led to the recommended rate increase:
- Continued adverse medical loss development
- Greater recognition of changing long-term medical paid loss development patterns
- Continued high levels of indemnity claim frequency
- Higher than anticipated loss adjustment expense inflation in part attributable to less than projected frictional costs savings resulting from Senate Bill No. 863 (2012)
- Lower than forecast wage growth
- Modest increase in the experience rating off-balance correction factor
The Cost Driver Section in WCIRB’s rate filing report delved further into the reasons for the recommended increase. SB 863 was supposed to save $200 million which never materialized due to the Independent Medical Review (IMR) process. The WCIRB had to remove the $200 million in savings from their calculations.
The WCIRB went on to say:
The WCIRB’s estimated frictional cost savings related to IMR were predicated on replacing higher cost medical treatment dispute resolution mechanisms such as medical liens and the qualified medical evaluator (QME) and expedited hearing processes with lower cost IMRs.
However, Division of Workers’ Compensation (DWC) data on IMR suggests the volume of IMRs is two to four times higher than that contemplated in the initial cost estimates. Also, while at a reduced volume, medical treatment on a lien basis is still occurring.
Finally, while qualified medical evaluations are generally not being conducted on medical necessity issues, many claims, partially in response to the Dubon decision, are having expedited hearings on utilization review issues.
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