Do I Look Stupid To You? Do I?

Tom Rowe, president and chief executive officer of the State Compensation Insurance Fund, said yesterday that by recommending no change in advisory pure premium rates for 2013 the Governing Committee of the California Workers' Compensation Insurance Rating Bureau (WCIRB) can "seize on the spirit and substance of this reform" [SB 863] and "profoundly improve" the California workers' comp system.

Bruce Wick, a public member of the Governing Committee, seconded that sentiment by saying that a recommendation of no increase would send a "great message" to the comp community, and that it would improve the likelihood that the Division of Workers' Compensation (DWC) will draft regulations to successfully implement savings provisions.

All four public members of the Governing Committee voted in favor of no increase in rates.

The remaining five carrier representatives voted against the no increase recommendation (in addition to Rowe, Steve Meyer, a vice president for Ace Property & Casualty, also voted for no increase).

I think the five carrier representatives have it right - making a no increase recommendation on the basis of amorphous and ever changing estimates is irresponsible, and hoping that the comp community would "seize on the spirit and substance" of SB 863 is not being realistic.

The latest estimate from the WCIRB is that SB 863 will generate net savings of $1.2 billion in 2013 and $610 million in 2014, when the full benefit increase of SB 863 takes effect. Those savings are offset by a 2% increase in costs observed in data from the second quarter of 2012.

But WCIRB actuaries have not projected savings associated with independent bill review, an Official Medical Fee Schedule using the Resource-Based Relative Value Scale (RBRVS) and interpreter, copy service and home health care fee schedules because those are specifically tied to what regulations come out of DWC - without seeing the actual regulations any number pushing is just fanciful thinking and pure speculation.

The WCIRB works with numbers - sometimes fuzzy numbers - but at least something that can in fact be added and subtracted.

The provisions of SB 863 concerning bill review, RVRBS and fee schedules have no numbers attached to them and can not be quantified - not until DWC says that X service is worth Y dollars.

And thinking that the comp community will embrace the spirit of reform is idealistically simplistic.

Why is reform necessary in the first place? Because some people in the comp community don't play well in the sand box and make their own rules to capitalize on the system.

These are called in the statistical world, "outliers."

By definition outliers don't play by the same rules that everyone else does, and outliers disproportionately affect statistics unless they are discounted.

But in the world of workers' compensation outliers can not be discounted because they are real and affect overall system costs - and yes they affect those costs disproportionately. That is why there is regulation - to keep outliers in check.

Are outliers going to embrace the "spirit" of reform?

I'll answer that with a very short vignette. My sister-in-law startled a young street vendor trying to sell her overpriced trinkets in Cabo San Lucas during a port visit on a family cruise by exclaiming, "Look at me ... do I look stupid to you? Do I?"

Do I?