HURRICANE SEASON

Hurricane season is upon us.

Unsettled weather brings tropical storms, some of which turn into hurricanes. Some hardly make a dent, like recent Hurricane Alex. Some look threatening, but fade into “tropical depressions”, like recent Hurricane Bonnie.

But others, (like Katrina or the Hurricane Hazel of my childhood memories in the Carolinas) leave a swath of change in their wake.

These hurricanes start with peculiar atmospheric conditions. Our weather scientists track those as they arise, knowing that many times it will dissipate.

But not always.

So it is in California workers’ comp. The last big comp hurricane was in 2003/2004.

Pressures inevitably develop. Winds begin to strengthen. Thunder is heard in the distance.

So it is right now.

The thunder this week was news that the California Workers’ Compensation Insurance Bating Bureau will soon be filing a request for a 30% increase in workers’ comp rates.

More thunder was heard, as some in the employer community began to sound alarm that the Schwarzenegger workers’ comp reform agenda was threatened. The argument was made by John Kabateck executive director of the National Federation of Independent Business in a piece “Workers’ Comp May Be Headed for Another Rough Ride in California”:
http://www.insidebayarea.com/opinion/ci_15720925

Perhaps the storm will pass.

Insurance commissioner Poizner will hold hearings on the WCIRB request.
Insurers are free to raise rates no matter what Poizner does, of course.
But the hearings may provide shed important light on the strength of the gathering winds.

The WCIRB’s recent decision to seek an increase of 30% broke down along insurer members of WCIRB versus the public members. And there have been recent charges that some WCIRB public members are not allowed access to key policy-setting meetings.

All this sturm and drang insures that there will be extra interest in the hearings surrounding the upcoming WCIRB rate hearing.

There will be analysis of how much the insurers are really profiting……whether they are getting a handle on controlling loss adjustment expenses….and whether results from SCIF are skewing figures applicable to the rest of the industry.

A major part of the brewing storm is medical treatment costs.

Within the past several weeks we’ve seen just how hard it is to control costs in the California comp system. No group wants to give ground.

Part of the DWC’s 12 point cost cutting agenda was to achieve savings from ambulatory surgery center fees. An earlier plan to cut fees from ambulatory surgery centers had been expected to save $70 million in system costs.

A current proposal would cut the ambulatory surgery center fee structure by only about $40 million.

The surgery centers may have their reasons to object, and object they do to even the lesser cut.

Parties to the system don’t want to take a haircut. And some of the surgicenter doctors threaten to pull out altogether if they are forced to take a hit.

We saw a version of this playing out last week with a bill to control the costs of compounded medicines. The bill, AB 2779 (Solorio), would limit reimbursement for compounded prescriptions unless they were proved to be medically necessary, and the Medi-Cal fee schedule would govern such medicines.

Increased use of compounded medicines appears to be a growing cost driver in the system and a tempting profit center for some physicians.

While there may be a case that can be made occasionally for their use under special circumstances, widespread use of compounded medicines would appear to be abusive.

AB 2779 passed out of a California Senate committee but may well be watered down if it moves forward at all.

Forcing haircuts is hard.

And we’ve seen that in recent efforts to devise a different fee structure for doctor payments.

On August 17th the DWC will be holding a hearing in Oakland on its efforts to reform the fee schedule:
http://www.dir.ca.gov/dwc/dwc_newslines … 40-10.html

A recent version of the fee schedule elicited strong comments from doctors, some of whom…..well, you guessed it…..threatened to stop treating injured workers.

So let’s take stock.

Some unhappy stakeholders. Employers perhaps facing significant premium increases in a down economy. Insurers claiming that they are losing money. Injured workers denied a statutorily mandated benefit adjustment.

It’s starting to look like tropical storm time.

Whether this blows on through, or strengthens to a hurricane, time will tell.

Julius Young
www.boxerlaw.com

Category: Political developments