Workers’ comp, quake insurance, fraud and disaster prep top his list

Sacramento Business Journal (California)

California’s workers’ compensation system should be tweaked to make sure injured workers get treatment as quickly as possible, insurance commissioner Steve Poizner says after two months on the job.

While recent workers’ comp reforms reduced ambiguity and employers’ costs, Poizner says he’s concerned they also made it more difficult to get care fast. Changes could be made through new regulations or legislation.

In an interview last week, Poizner also outlined other goals:

– Keep shrinking the State Compensation Insurance Fund’s market share
– Boost efforts to fight insurance fraud
– Increase disaster preparedness
– Help the California Earthquake Authority develop coverage that would appeal to more buyers.

He’d also like to make the commissioner’s office nonpartisan.

As the Republican entrepreneur from Silicon Valley settles into the job, the insurance industry, labor, employer and consumer groups say they have both hopes and fears. Some expect the new commissioner to be independent and to listen to all sides. Many say it’s too soon to know what to expect.

Some like Poizner’s choices for his executive team, announced last week — a mix of Republicans and Democrats, fresh faces and longtime industry players. Others worry Poizner and those fresh faces will be slow to learn the complex industry. Consumer watchdog Harvey Rosenfield publicly criticized Poizner’s pick of insurance industry insider Bill Gausewitz as special counsel to the commissioner.

Rosenfield, author of the state’s Proposition 103 insurance reform initiative, endorsed Poizner over Cruz Bustamante, a Democrat who was lieutenant governor during the campaign. Some in the insurance industry fear Poizner might now lend his ear too much to Rosenfield. Poizner refused to accept donations from insurers during his campaign and has said he won’t while in office. He’d like to ban the practice.

But the industry isn’t alone in watching. Poizner, a rare Republican among the Democrats filling most other statewide offices, has been suggested as a candidate for governor in 2010, and the insurance commissioner’s post can be a stepping stone to higher office.

Fraud, quake task forces planned

Poizner’s priorities include waging a stronger fight on insurance fraud. Upon taking office, he was surprised to learn his fraud unit is missing one-fourth of its staff, in part because compensation isn’t competitive. His department, he said, will form a task force with district attorneys and insurers to address fraud.

“These three groups are not in tight coordination today. I think there’s a lack of communication and coordination. That’s got to change,” he said.

Money from insurers pays for investigations, and insurers want to make sure they lead to convictions, not just arrests. Because of concerns about a lack of results, then-state Sen. Chuck Poochigian, a Republican from Fresno, authored a bill in 2005 that would have transferred the insurance fraud division to the
attorney general’s office. The bill died in the Legislature.

Poizner also plans to form a task force on restructuring the California Earthquake Authority, for which he’s one of three voting board members. The authority, formed after the Northridge earthquake in 1994, ensures that residential seismic coverage is available. He’s concerned, he said, that its expensive mini-policies with high deductibles don’t appeal to customers.

At some point, the commissioner and Legislature must be realistic about products the CEA can offer at an affordable price, some industry observers contend.

Another of Poizner’s top priorities is to improve the state’s general disaster preparedness. “Katrina was a huge wake-up call,” he said.

“It’s not just about physical preparedness. It’s financial preparedness,” said Nicole Mahrt, local spokeswoman for the American Insurance Association.

Acknowledging it is a challenging goal, Poizner also wants to make the post nonpartisan, as is California’s superintendent of public instruction. The insurance commissioner is one of the most important policy-makers in the state, regulating an industry that represents almost 15 percent of the Golden State’s economy, he said. The change would require legislation or a ballot measure. Some in the industry would prefer the post be appointed like it was until two decades ago.

High-voltage topic

Workers’ comp is among the most contentious issues the commissioner oversees. Plenty of players will weigh in as Poizner moves to tweak the system to ensure fast medical care.

The California Applicants’ Attorneys Association and the California Labor Federation want Poizner to fix some of the unintended consequences of the broad workers’ comp reforms and return some “modicum of fairness,” as federation legislative director Angie Wei put it, to workers. At least one ballot initiative addressing workers’ comp problems is in the works.

Poizner should stop insurers from unreasonably delaying benefits to injured workers and investigate those unfair denials of medical care and benefits, said Linda Atcherley, of the attorneys association. Insurers want to protect the integrity of the complex reform package that took effect in 2004 and 2005.

Prior to reforms, the workers’ comp system was in crisis. California’s costs are still more than the national average, but they’re drastically lower, and coverage is more available.

The State Compensation Insurance Fund, meant to be California’s insurer of last resort for workers’ comp, held an estimated 60 percent market share at the height of the crisis. It’s still too high, Poizner said; State Fund estimates the share at around 30 percent though Poizner said it’s more like 40 percent. He wants to attract more insurers to California and gradually trim State Fund’s market share percentage to somewhere in the 20s.

On the homeowners insurance front, Allstate Insurance Co. is mulling whether to stop selling new homeowners policies in California, insurance agents say. A big determining factor likely will be whether the insurer gets Poizner’s OK for a 12.2 percent rate increase. A hearing will be set in the next month or so.

“We need to let that process play out,” Poizner said. But, he added, “I will absolutely not permit any insurance company in California to charge excessive rates.”

Agenda wish lists

Those with a stake in the industry have other priorities they’d like Poizner to take on. Consumers Union wants the commissioner to enforce former Commissioner John Garamendi‘s regulation that bans auto insurers basing rates primarily on where a person lives, said senior attorney Mark Savage.

The consumer group also wants Poizner to formally ban the use of credit scoring to assess risk, increase awareness of the state’s low-cost auto insurance program, and protect the financial health of the CEA.

In addition, the group wants Poizner to comply with a regulation that requires an annual report showing where insurers are and aren’t writing policies and develop a plan so government leaders can act on that information.

Insurance agents, meanwhile, would like Poizner to protect their role in the industry.

David Nielson, executive director of the Alliance of Insurance Agents & Brokers, is hopeful about Poizner. Poizner doesn’t “put on airs” and admits when he doesn’t know something, Nielson said. “How refreshing is that?”