Denn Cuts Increase

In Workers Compensation Rates

 

Commissioner Tells Insurance Companies To Resubmit

Application With 20 Percent Cut In Proposed Increase

 

Dover – Insurance Commissioner Matt Denn said Tuesday he would not approve a proposed increase in the workers compensation insurance rates charged to all businesses in Delaware, telling insurance companies that only a lower rate increase would be acceptable to him.

 

The move followed the first-ever public hearing on workers compensation insurance rates in Delaware.

 

The Delaware Compensation Ratings Bureau, which submits a rate application on behalf of all companies that sell workers compensation insurance in the state, had applied for base rate increases between 9.1 and 10.2 percent. Commissioner Denn has notified DCRB saying that he will not approve that application, but would approve an application that asked for base increases between 7.1 and 8.1 percent, a 20 percent reduction and the amount recommended by a separate actuarial review.

 

DCRB’s proposed rate was based in part on a history of medical costs that included an unusual spike in costs in 2000. During the public hearing on October 26, DCRB representatives said they could not explain the spike, but had opted to factor the higher costs into future projections. The separate actuarial review suggested that the spike in costs could be treated as an anomaly and not be factored into future rates.

 

“Having received no specific information regarding 2000 medical costs that explains why they were so high or any indication that they are or are not likely to recur at that level, I believe my responsibility to Delaware policyholders requires me to accept the lower of the two actuarially sound projections,” Commissioner Denn said.

 

By law, the insurance commissioner can only approve or reject a rate application. However, Commissioner Denn indicated to DCRB that if it submitted a new application with the lower discussed rate increase, he would approve it. DCRB has responded that it is in the process of preparing an amended application for the lower rates.

 

This is the first application for an increase in workers compensation insurance rates since Commissioner Denn took office in January 2005. The Commissioner significantly revamped the process, ordering an independent actuarial review of the application, assembling a group of business and labor representatives to review the application and the actuarial report, and holding a first-ever public hearing to receive public comment.

 

In 2004, the base workers compensation insurance rates increased by 13.5 to 16.7 percent, about twice this year’s increase.

 

“It was good for labor and the working people of Delaware to get a chance to look at the proposed increase and to comment on it, and we thank Matt Denn for that opportunity,” said Samuel Lathem, president of the Delaware AFL-CIO.

 

“It was very nice to have a public hearing as part of the review process this year,” said A. Richard Heffron, senior vice president for government affairs of the Delaware State Chamber of Commerce. “We believe that the new process is a positive development and that the Commissioner came out with a good decision as a result of it.”

 

“One of my main goals as Insurance Commissioner is to control the costs of insurance and I believe a more public process for workers compensation rates will help accomplish that,” Commissioner Denn said. “I think this new process has worked well and I plan to use the same process in the future.”