Over two years in development, the California Department of Insurance just released its top to bottom review of the Workers' Compensation Insurance Rating Bureau. The timing of the controversial release is at least interesting coming just days before Monday’s hearing on the Bureau's rate recommendation. It will be the second such hearing and the first in history to be webcast live via Workers’ Comp Executive. The Bureau is recommending a controversial 23.7% increase, while the administration is watching its workers’ comp reform crumble along with the economy. What’s also interesting is that some of the problems identified have already been solved. Welcome to California workers’ comp politics.

While generally supportive of the Bureau's on-going efforts to improve its assessment of the costs in the state's workers' comp system and project rates, the report still found a number of faults with both its process and the final product of its work.  In particular, the auditors faulted the Bureau for:

• Failing to collect detailed transactional data;
• The accuracy and completeness of some of the data it relies on for its recommendations;
• Not properly policing carriers which submit incomplete, inaccurate data or fail to submit it in a timely fashion.

The report also calls for improvements in the Bureau's actuarial projections and the process by which it makes rate recommendations. The report calls on the Bureau to use multiple actuarial projection methods and then offer CDI a range of pure premium rate recommendations, rather than presenting a single finding. In itself this is a controversial finding and will change the nature of and likely add to the contentiousness of the process

The report calls on the Bureau to work closely with the State Compensation Insurance Fund to ensure that its data collection and reporting system is working as it should. There have been issues with how State Fund is reporting specific data types. Large chunks of SCIF's data have either been excluded outright or tempered in recent rate filings, including the current one.

Few Surprises

Jack Hannan, spokesmen for the WCIRB, noted that the Bureau was not surprised by the audit findings as many of the issues have been raised in the past and are already being addressed. "In terms of the collection of transactional level data, we have a group that's looking at additional data and we're going to provide something to the department in October related to this issue," he said.

And the Bureau is already in substantial compliance with another recommendation - that carriers submit their data electronically. WCIRB launched its web-based aggregate data submission system a year ago and now data covering 99% of the insured market is being submitted quarterly via the system.

Hannan says the Bureau will be meeting with CDI within the month to discuss the recommendations in detail and to develop a plan of action.

In releasing the report, Insurance Commissioner Steve Poizner cited his concerns about the quality of the Bureau's past rate recommendations and their cost implications for employers.

"Especially in a time when the Rating Bureau is requesting unprecedented rate hikes, we must carefully scrutinize all the data involved in making this decision to ensure that any change in the benchmark is warranted," Poizner said in a release. "Every additional dollar spent on workers' compensation insurance is a dollar that an employer cannot use to save or create a job."

No estimates were made, however, as to what the recommendations would cost in terms of added staff and resources to collect and analyze the data and develop additional actuarial projections. And there was no word on who would foot the bill for the recommended in-person audits of carriers.

A copy of the audit report is available in our resources section or by clicking here. And you can read the Bureau's response by clicking here.

Information about the Live Webcast can be found right here .

Reported in San Francisco by Brad Cain and in Sacramento by Dale Debber

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