Calif. State Fund Previews 2010 Workers’ Comp Changes

January 19, 2010

Each year brings new laws and regulations for employers, and 2010 is no exception. To help employers stay informed about regulations and issues impacting workers’ compensation insurance, the California State Compensation Insurance Fund has provided a preview of some of the potential changes on the horizon.

SB 313 – Penalties for failure to provide workers’ compensation coverage

Summary: This bill increases the potential penalty assessment imposed upon employers based on periods in which they had been unlawfully uninsured for workers’ compensation. Employers without insurance would be liable for the greater of twice what their premium per employee would have been, or per-employee penalties of $1500, up from $1000.

Why: Employer fraud is a major problem in the workers’ compensation system, with dishonest employers seeking to avoid paying premiums. The Department of Industrial Relations has indicated that 12 percent of California employers are uninsured, which contributes to increased workers’ comp costs for everyone.

AB 483 – Requires website to verify workers’ comp coverage

Summary: This bill requires that the Workers’ Compensation Insurance Rating Bureau (WCIRB) establish a Web site to help determine whether an employer is insured for workers’ compensation. Many other states have sites for online proof of coverage. The new workers comp verification site would augment California’s database for contractor licensing (www.cslb.ca.gov/).

Why: Public access to the coverage information will discourage employers from operating without coverage. A major UC Berkeley study conducted for the California Commission on Health, Safety and Workers’ Compensation (CHSWC) shows that California employers may be under-reporting payroll by as much as 23 percent on average, with high risk occupations such as construction extremely affected by fraud. This translates to billions of dollars in payroll, and contributes to honest employers paying higher premiums.

Changes to the California Experience Rating Plan Modification Formula

Summary: Insurance Commissioner Steve Poizner recently approved revisions to the formula for calculating experience modifications (ex-mods). The changes will not affect the ratings of all employers in the same way. The degree of change for an individual employer based on the revised formula will largely be determined by the number and size of losses and the employer’s payroll. Most employers will experience a change of a few percentage points under the new methodology.

Why: At the request of Commissioner Poizner, the WCIRB formed a task force to examine the ex-mod formula in 2007. The group set out to enhance the ex-mod’s predictive value and make it easier to understand, so that employers would more strongly perceive their ex-mod rating as an incentive to manage a safe workplace. For more details, visit http://www.scif.com/news/122909-ExperienceRatingChanges.html.

New Labor Enforcement and Compliance (LEC) Surcharge on 2010 Policies

Summary: This surcharge will fund activities of the Division of Labor Standards Enforcement (DLSE), an agency that works to ensure compliance with wage and hour standards. The LEC surcharge will assess premium at a rate of 0.1924 percent for all California workers’ compensation policies incepting on or after January 1, 2010.

Why: In implementing the LEC surcharge, the Department of Industrial Relations is continuing its move toward user funding of certain institutions, including Cal/OSHA and the Workers’ Compensation Appeals Board. As a result, the LEC surcharge will be taking its place alongside the six existing surcharges on premium bills:

  • Workers’ Compensation Administration Revolving Fund (WCA)
  • Workers’ Compensation Fraud Assessment (WCFA)
  • Uninsured Employers Benefits Trust Fund (UEBTF)
  • Subsequent Injuries Benefits Trust Fund (SIBTF)
  • California Insurance Guarantee Association (CIGA)
  • Occupational Safety and Health Fund (OSHF)

Source: SCIF

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