Workers’ Comp Reform Could Impact WCIRB’s 12.6% Pure Premium

By Don Jergler | August 16, 2012

The Workers’ Compensation Rating Bureau’s Governing Committee has unanimously voted to authorize the WCIRB to make a Jan.1, 2013 filing recommending an average advisory pure premium rate that is 12.6 percent above the $2.38 average industry filed pure premium rate filed in July.

That’s not the news, those familiar with the upwardly spiraling workers’ comp costs in California say.

The part of WCIRB’s announced recommendation, which is for $2.68 per $100 of payroll, that got the attention of those who are watching workers’ comp rates closely is that the WCIRB decision could be affected by a workers’ comp reform package in the works in state Legislature.

The recommendation “is subject to revision pending a review of workers’ compensation reform proposals under consideration in Sacramento and a review of June 30, 2012 loss experience once it becomes available,” WCIRB said in its announcement on Wednesday.

The WCIRB committee was acting on the WCIRB Actuarial Committee’s review of loss and loss adjustment experience projections based on March 31 data, and WCIRB will submit its Jan. 1, 2013 pure premium rate filing to the California Department of Insurance around Aug. 21, WCIRB stated.

“It wasn’t a surprise,” Jerry Azevedo, a spokesman for the Workers’ Compensation Action Network said of the filing. “Everyone knows that insurance carriers and the self-insured community are both getting hammered with higher costs and have been for several years.”

What Azevedo was encouraged by is that the reform package, if it holds true to promises to reduce costs within the system, could get WCIRB to lower its advisory rate.

“They are just now going to start taking a look at the reform package,” he said. “Based on what I’ve heard in some briefs this package would not necessarily take this form a rate increase proposal to a rate decrease proposal, but it might go toward controlling the cost a bit.”

The question remains is how much the advisory rate, and possibly rates for California’s myriad workers’ comp insurers, would go down based on an examination of the reform package.

“Does it go from 12 percent to 10 percent?” Azevedo asked. “Or does it go from 12 percent to 6 percent. Or does it remain the same based on their analysis of the package.”

That’s if there’s a package at all.

The general consensus among those seeking reform is the need for roughly $700 million in additional permanent disability benefits for injured workers, and $1.4 billion in system wide savings.

But the nearly 300-page document, which varies by size and ranges in scope depending on which version you’ve seen, is already under attack by the California Applicants’ Attorneys Association, which blasted the proposal this week, stating that “workers will get less than they do under current law.”

The proposal was hammered out by labor representatives and a small group of employers, and those parties had told other workers’ comp stakeholders they would have it in bill form this week with a committee hearing set for Wednesday. No bill has materialized and the meeting was canceled.

Those like Azevedo are keeping hope for an agreement that will lower workers’ comp costs in the state.

“It really affirms this multiyear trend that we’ve been in now,” he said.

Bottomline: After five or six years off the top of the list of the nation’s most expensive states for workers’ comp, the Golden state is clawing its way back up.

In 2002-2004 California was No. 1. Following reforms, the state dropped to 13th by 2008.

But by 2010 it was back to No. 5, and “based on where the state is right now, it looks like California could be the most expensive state again,” Azevedo said.

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