On July 15 Insurance Commissioner Ricardo Lara issued his decision on the advisory workers’ comp rate. Lara’s decision, which is not binding on insurers, recommends that benchmark rates be maintained at $1.45 per $100 of payroll.
$1.45 is the same that Lara had approved in his 2021 finding. So unlike pricing everywhere else in our inflationary economy, the takeaway is that workers’ comp costs are not spiraling right now. This keeps workers’ comp out of the headlines.
At an April 20, 2022 WCIRB Governing Committee meeting, the two public members had proposed a rate of $1.42 per $100 of payroll. They were outvoted, and the WCIRB Governing Committee recommended a rate of $1.55, a penny more than they had sought in 2021. This was covered in my recent blog post “The Next WCIRB Rate Recommendation”: https://www.boxerlaw.com/workerscompzone/the-next-wcirb-rate-recommendation/
Here is what Lara’s press release says about current rate finding:
“Today, Insurance Commissioner Ricardo Lara adopted and issued a rate for workers’ compensation insurance that reflects California’s still-recovering economy. Recognizing that businesses are working hard to return to a nearly pre-pandemic market but still facing economic uncertainty and continued COVID-19 disruptions, the Commissioner’s action maintains the benchmark rate at $1.45 per $100 of payroll for workers’ compensation insurance unchanged from last year and within the reasonable actuarial range proposed by other experts, effective September 1, 2022.
Because of continued uncertainty regarding COVID-19 and its effects on the economy, this year’s pure premium rate remains the same as last year’s rate, and again does not include a COVID-19 factor. Commissioner Lara will continue to review data in future pure premium rate filings to determine the long-term impact of COVID-19 claims as well as other experience data.
“We’re working hard to get California back to business as usual as people return to work,” said Commissioner Lara. “This year’s rate is on par with normal, pre-pandemic levels while still reflecting the long-term benefits of workers’ compensation reform passed by the State Legislature and signed by the Governor to reduce costs.”
Commissioner Lara’s decision results in an average advisory pure premium rate that is below the $1.56 average rate proposed by the Workers’ Compensation Insurance Rating Bureau of California (WCIRB) in its filing with the Department of Insurance. Commissioner Lara issued today’s advisory rate after a virtual public hearing that he convened on June 14, 2022 and careful review of the testimony and evidence submitted by stakeholders.
The recommended rate is based on insurance companies’ cost data. The pure premium rate is only advisory, as the State Legislature has not given the Commissioner rate setting authority over workers’ compensation rates. The average advisory pure premium rate level of $1.45 approved by the Commissioner is about 18 percent lower than the industry-filed average pure premium rate of $1.77 as of January 1, 2022.
Commissioner Lara issued emergency rules in June 2020 allowing businesses to reduce costs for workers whose duties changed to lower-risk classifications or were furloughed due to the pandemic. Late last month, Commissioner Lara issued an Order directing the WCIRB to continue implementing the rule he adopted in 2020 which excludes COVID-19 claims from being used in calculating experience modification rates from December 1, 2019 forward.”
Keep in mind, however, that advisory rates are not what most employers pay. Average rates are higher, as noted by Lara. According to the CDI, In January 2022 average filed rates were $1.77 and average charged rates net discounts was $1.81.
The actual decision and order can be found here: Proposed Decision & Order – California Department of Insurance
Stay tuned. This week I’ll be posting a recap of the most significant developments in California workers’ comp during the first half of 2022.