WC Insurers Do Not Need a Rate Increase

Tuesday, July 14, 2009 | 0

By Todd-McFarren


FACT:  The insurance industry has misleadingly labeled the costs of denying and delaying medical care as "medical costs."

Insurance carriers spent $550 million in 2008 on "cost controls." Insurers' costs to review, and often reduce, delay, or  deny recommended by the worker's physician, more than doubled as a percentage of medical costs between 2002 and 2007 (California Workers Compensation Institute data included with the recent rate filing). During the same period, according to Workers Compensation Insurance Rating Bureau (WCIRB) data, payments to physicians consistently declined, dropping by 40% from 2003 to 2007.

Half a billion dollars on cost containment is unnecessary and hinders treatment.

Insurers have the ability to control costs through medical treatment guidelines, utilization review and medical provider networks. Why is so much being spent to overrule medical care recommended by the insurers' own handpicked doctors? Injured workers are required to see doctors chosen by the company, so why are they overruling these doctors? Since the majority of treatment is provided through medical networks established by employers or insurers, and virtually all fees are subject to a fee schedule, why is so much money going to cost control?

FACT:  Insurers have recorded $26 billion in record profits since 2004.

FACT:  Workers' compensation claims have dropped by 40% since 2004.

Claims by the most severely injured workers - those with permanent disabilities - have dropped by 50% since 2004, and compensation for these permanently disabled workers has been slashed from 50% to 70%.  Because so many smaller claims are leaving the system, only the more serious claims are left to be covered under workers' compensation. This makes it appear that medical costs are going up, when in fact it simply means that the average injury covered by workers' compensation is more severe.

Injured workers are turning to group health policies, social security, disability and other public providers - because they can't get medical care from the insurance companies. Taxpayers are paying the bills for on-the-job injuries that insurance carriers should cover.

FACT:  Insurance industry claims that the changes are no longer reducing costs are untrue.

Self-insured entities like Safeway, the University of California and school districts testified in June 2009 to Insurance Commissioner Poizner that their costs, and rates, are still declining.

Statutory limits on physical therapy and chiropractic treatment are still in place, medical treatment authorization requests are still judged against nationally developed treatment guidelines and are subject to utilization review, outpatient facility fees are still subject to the Medicare fee schedule, injured workers can still receive a maximum of 104 weeks of temporary disability, penalties for unreasonable delay are still minuscule, and permanent disability awards are still subject to apportionment.

FACT:  Insurance industry grossly overstates the impact of recent court decisions that could increase costs, and failed to include those that will reduce costs.

The two decisions will have only a minor impact on permanent disability compensation. These cases will not and cannot reverse the unintended 50% reduction in permanent disability benefits caused by adoption of the 2005 PDRS.

Some workers will have the right to attempt to rebut a disproportionate, unfair, or inadequate rating. However, because permanent disability benefits comprise only about 10% of overall benefits, any eventual cost impact will be minor.

Other recent court decisions will reduce both benefit and expense costs.


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Todd McFarren, president of California Applicants' Attorneys' Association practices law in Watsonville. This article reprinted with permission.
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