Jones Weighs In
Thursday, December 6, 2012 | 0
In my recent post "Under Submission," I noted the choices that Insurance Commissioner Dave Jones faced as he considered setting the advisory "pure premium" workers' comp rate for 2013.
Jones has now issued his order, recommending that insurers set the benchmark comp rate at $2.56 per $100 of payroll. This represents a 2.8% change from the average pure premium rate of $2.49, as of Nov. 9, 2012.
While less than the $2.61 per $100 of payroll that had been recommended by the Workers' Compensation Insurance Board Actuarial Committee, the recommendation is significantly more than the $2.38 per $100 of payroll figure which was recommended by the WCIRB Governing Committee. The Governing Committee's vote for a lower pure premium rate had been widely seen as a political move, although if that is so, it's hard to see what was gained in such a move.
And in any event, actual rates charged will be set by insurers who need not follow the recommendations of the WCIRB or Jones. Workers' comp pricing is affected by X-mod formulas, credits and discounts and a number of other factors.
Jones claims that "math does matter" and notes that Department of Insurance actuaries found that the Governing Committee decision to reject the Actuarial Committee decision was not sound and based on an unsupported speculation about Senate Bill 863 savings. Jones noted that speculation has led to a wave of insurance bankruptcies in the 1990s.
Jones expressed concerns that insurers set rates high enough to pay claims, saying that, "today, companies are paying out 116% more in claims than they are collecting in premiums."
Premiums collected are just a part of the story, however, since insurers do invest the premiums and earn returns on that money.
Jones chided the WCIRB Governing Committee, noting that in the future he expected them "to provide a sufficient and reasonable basis for its recommendation with proper actuarial support."
But the overall message that Jones' rate recommendation sends is that a rise in comp costs is likely to be tamped down by the SB 863 reforms.
Jones noted that there is much to be done to implement SB 863. No surprise there.
What does Jones think is on the horizon? That's of some interest. As California's Insurance Commissioner, Jones does not have a direct role in formulating workers' comp laws or regulations. But Jones is a capable and popular guy in Sacramento and is seen as having a bright political future which could include a run for governor a couple of election cycles from now.
For the future, Jones says that:
"There are additional reforms to be explored that were not part of SB 863 to achieve additional savings. These include addressing through legislation and regulations ongoing problems with the overuse of powerful and addicting pain medications and reviewing reasons for increasing cumulative trauma claims and post-termination claims. We also need to standardize as many processes and procedures as possible. I encourage all stakeholders to refrain from thinking their work is done with regard to workers' comp reforms and encourage the Legislature and the Governor to use this upcoming legislative session to advance more reforms to reduce systemic costs and to make sure that resources are going where they should be going
Those comments by Jones seem to indicate that we'll see another push for significant reforms, probably centered on opioid usage and cumulative trauma claims.
An upcoming meeting of CHSWC on Dec. 14 will feature a study on opioid use in California's comp system done by Teryl Nuckols-Scott of the University of California, Los Angeles.
Historically, reforms to California's system have come in waves that were 8 to 10 years apart. Those wave sets may be coming more often in the future.
A link to the decision by Jones can be found here.
Julius Young is an applicants' attorney with the Boxer & Gerson law firm in Oakland. This column was reprinted with his permission from his Workers' Comp Zone blog.
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