Calif. User Funding, Fraud Assessment Rates to Be Collected

February 10, 2003

The California Department of Industrial Relations (DIR) recently issued user funding and fraud assessment rates for fiscal year 2002-2003. The new rates require all workers’ compensation insurers to collect money from insured employers and self-insured employers to help cover the budget of the Division of Workers’ Compensation and provide funds to the Department of Insurance (DOI) and local district attorneys to cover workers’ comp fraud investigations.

The 2003 User Funding Rate for insured employers is .000971 percent; for self-insureds, the rate is .003138 percent. “The total amount they’re looking to collect from employers for user funding is $20,447,000 for fiscal year 2002- 2003,” Bob Young, communications director for the California Workers’ Compensation Institute (CWCI), said.

The 2003 Fraud Surcharge for employers is .001180 percent; for self-insureds, .004620. The total Fraud Surcharge for 2002- 2003, approved by the Fraud Assessment Commission, is $30,152,168.

According to the CWCI, the rates should be applied against the insureds’ estimated annual “assessable premium” for 2003 policies. Assessable premium is defined as the amount charged after all rating adjustments (i.e. experience and schedule rating, premium discounts), except for adjustments resulting from application of deductible plans or return of policyholder dividends.

Self-insured employers should apply the rates against the total amount of workers’ comp indemnity paid. “They look at the amount of loss time payments that were made by the self-insured employer from prior years,” Young said. “Then they multiply that by the factor to deter-mine what the actual assessment is going to be. Each self-insured employer has to report how much he or she pays out on claims.”

This year’s rates are a decrease from last year’s, Young explained. “That would reflect the fact that premiums have gone up,” he said. “The prior year they needed $19,221,000. The reason the rate went down is because they apply the rate against total assessment premiums and the premiums have been rising. So they’re taking a smaller percentage, but off of a higher amount of premiums.”

The 2001-2002 User Funding Rates for insured employers was .001335, while self-insureds paid .003490. 2001-2002 Fraud Surcharges for insured employers was .002168, and .005497 for self-insureds.

While the first installment was due on or before Jan. 1, 2003, the remaining balance is due on or before April 1, 2003.

All workers’ comp policies issued by employers with an inception date during the calendar year of 2003 must be surcharged to recover the amounts advanced on behalf of the policy-holders.

“The money is collected by the state. The insurers have to pay the money up front to the state, then, in turn, collect it from the employers as they bill for their policies along with their premium,” Young said.

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Insurance Journal West February 10, 2003
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