By Julius Young

Injured workers and labor activists were welcome to attend this week's Department of Insurance meeting on workers' comp rates.

The hearing, held Tuesday in San Francisco, was in response to the Workers' Compensation Insurance Rating Bureau's recommendation of a large price increase for comp insurance. The recommended increase is now a whopping 23.7%.

With his gubernatorial campaign sputtering (low in the early polls and lots of campaign staff turnover), the comp pricing issue is a high profile assignment for Insurance Commissioner Steve Poizner.

Comp costs have been an ongoing concern in the business community, particularly in a tight economy. Politically the issue is a hot potato; how that is handled could prove to be an opportunity or a liability for Poizner.

The Insurance Commissioner has no ultimate control over comp pricing.

He can accept the Workers' Compensation Insurance Rating Bureau (WCIRB ) recommendations or reject them and propose other price targets, but these are not mandatory. But the WCIRB/Department of Insurance rate filing process has great significance politically.

Poizner has criticized WCIRB forecasting in the past. And he's been willing to reject WCIRB recommendations.

In any event, it's pretty much all show. The pure premium rate that is set by Poizner is not binding on carriers. Some will price their comp business below the pure premium rate and some may price it higher.

But the PR symbolism is important.

If Poizner accepts the large rate increase recommended by the WCIRB, the signal is that all is not well in comp. Injured workers' and their advocates know that, but employers and the public have been led to believe that the 2003/2004 reforms "fixed" the system.

Given the size of the WCIRB recommended rate increase, the press and the business community will demand to know what has occurred. Were the reforms oversold? Did the reforms result in artificial savings? Should employers accept that higher comp costs are simply inevitable? Is it possible to inoculate the comp system against medical inflation which is ravaging our health care system generally?

I don't expect any mind-bending epiphany on the issue of why medical costs appear to be rising. That's complicated and probably demands more study data than the WCIRB has developed. Nor do I expect anything much on employer profits and broker fees. Poizner has shown no willingness to take on the broker community or carrier profits.

Recent past hearings have been notable for concern over the rising portion of comp premiums spent on loss adjustment expenses, i.e. insurer overhead expenses.

But it's clear that Poizner's department can blame permanent disability for only a small portion of any projected increase in costs. Even if the Almaraz/Guzman decisions went into effect, the WCIRB's figures project these to be responsible for only around 1/4 of the recommended premium increase.

Stay tuned.



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Julius Young is an applicants' attorney with Boxer & Gerson LLP in Oakland. This column was reprinted with his permission from his blog, http://www.workerscompzone.com
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