After Suggested Workers’ Comp Rate Hike California Employers Hope Reform Kicks In

September 13, 2013

The reaction from an employers’ group to a suggested hike in California’s advisory workers’ compensation rates of nearly 7 percent was – surprisingly – cautiously optimistic.

The insurer and public members of the Workers’ Compensation Insurance Rating Bureau’s Governing Committee voted unanimously on Wednesday to authorize WCIRB to submit a Jan. 1, 2014 Advisory Pure Premium Rate Filing to California Insurance Commissioner Dave Jones.

The filing will propose advisory pure premium rates that average $2.70 per $100 of payroll, 6.9 percent higher than the industry average filed pure premium rate of $2.53 as of July 1.

The deterioration is largely attributable to adverse medical loss development on pre-2012 accident years coupled with sharply increasing indemnity claim frequency, the committee stated in a release.

The Workers’ Compensation Action Network, a group that represents the interests of employers, expressed hope that reforms ushered in last year will take hold and keep rates from continuing to head upward.

Senate Bill 863 contained several cost-saving measures intended to boost benefits for injured workers and reduce wasteful spending.

However, a WCAN spokesman said what the group finds most distressing about what he said has been a 35 percent increase in premiums since 2009 is that both the cost and frequency of claims now seem to be trending up again in 2013 after a few flat years.

“It’s too early to tell whether the 2012 reforms will help blunt or reverse the trend,” Azevedo said. “The system is in the process of absorbing substantial benefit increases under SB 863. Regulators are only partially through their efforts to implement a variety of process changes intended to make the system work more efficiently. These changes, however, were really intended to offset the benefit increase, rather than cut costs.”

Azevedo noted there are also “significant front-end costs” for systems created by the law, such as independent medical review and bill review processes, as well as the possibility of unanticipated costs, like the new physician fee schedule.

In its filing the committee stated that the indicated average pure premium rate does not reflect any provision for the impact of the Resource-Based Relative Value Scale (RBRVS), which is currently under consideration by the Division of Workers’ Compensation.

“The margin of error in getting the SB 863 reforms right is very small, and we still won’t know their impact for months or years,” Azevedo said. “There’s also litigation and other attacks that could undermine what the legislature was attempting to achieve. We’re cautiously optimistic, but employers continue to look for ways to make the system more fair and efficient for all parties.”

The committee will meet on Oct. 23 to consider the impact of any adopted changes to the fee schedule and whether an amendment to WCIRB’s proposed Jan. 1, 2014 pure premium rates is appropriate.

The indicated average 2014 pure premium rate reflects recently received June 30 experience, according to a statement from the committee. This indication is higher than the indicated $2.62 per $100 of payroll, based on March 31 experience, which was reviewed by the committee at its Aug. 7 meeting.

CDI will schedule a public hearing to consider the filing and once the notice of proposed action and notice of public hearing is issued, and the WCIRB will post a copy in the Regulatory Filings section of its webiste.

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