Workers Comp Zone


The WCIRB has just announced that it plans to recommend to Insurance Commissioner Poizner a 16% increase in workers’ comp rates effective 1/1/09. The actual “filing”
(a recommendation with the Department of Insurance) will be coming in the next few days.

The Insurance Commissioner can accept or reject the WCIRB
recommendation. The WCIRB recommendation applies to “pure
premium rates”; these essentially set the tone for California workers’ comp pricing but are not binding on California comp insurers.

California employers won’t be welcoming this news.

The WCIRB recommendation apparently reflects concerns about rising costs, particularly medical treatment costs.
A WCIRB news release claims that the increase breaks down as follows:
10.8% for increasing medical treatment costs
2.8% for increasing loss adjustment expenses
1.8% “due to the annual adjustment to the experience
rating of balance correction factor”

The small PD rating schedule revision currently under consideration would add another 3.7%.

The WCIRB release notes that even with the increase, premiums would be down 60% from the pre-2004 reform level.

Even without seeing the actual filing, its clear that medical costs continue to be THE big driver in workers’ comp costs. Despite somewhat Draconian treatment guidelines and utilization review, medical and pharmacy costs continue to spiral. New medical technologies and more expensive medications may be a component of the problem. It’s a scenario not unlike that seen in the healthcare system in general.

Insurers have been feasting on large profits in California workers’ comp since 2004. Loss ratios have been at historically low levels for most of the last 4 years. But most observers have expected margins to tighten somewhat tighten somewhat.

The scenario that may be emerging is one where benefit levels for disabled workers are low but costs for employers are rising. If that’s the scenario, they system is not “fixed”, but rather in need of another overhaul.

Stay tuned.

Julius Young

Category: Political developments