Medical Costs Drive Up Calif. Municipalities’ Workers’ Comp

January 20, 2011

Despite a decline in the number of job injury claims reported by California public self-insured employers last year, rising claim severity drove up total workers’ compensation costs for cities, counties and other public agencies in the state last year.

The higher average cost per claim, or severity, was fueled by higher medical costs, according to the Office of Self-Insurance Plans (OSIP).

This is the fourth year in a row that these costs caused claims costs to increase, the California Workers’ Compensation Institute said.

OSIP summarized data for the 12 months ending June 30, 2010 from public self-insured entities other than the state itself — including cities and counties, local fire, school, transit, utility and special districts and joint powers authorities. These entities provided workers’ compensation coverage to more than 21 million California public workers whose wages and salaries totaled nearly $96.9 billion in the 2009/2010 fiscal year.

CWCI said its review of the data found that the number of employees covered by public self-insured employers last year was down 2.6 percent from the total noted in the FY 08/09 initial report, which helped reduce the number of reported claims, which fell 3.7 percent to 121,353 cases.

Despite having fewer workers and fewer claims, however, public self-insureds’ total claim payments at the first report rose to $318 million, $7.1 million (2.3 percent) more than the comparable figure for FY08/09, and $58 million (19.6 percent) more than the post-reform low of $260 million noted in the first report for FY 05/06 claims.

CWCI traced most of the increase in public self-insured loss payments over the past four years to increased medical losses, which have jumped 28.5 percent from the post-reform low of $1,073 to $1,379 last year — well above the pre-reform level. In contrast, over the same period, average indemnity paid per claim as noted in the first reports has risen less than 12 percent, from $1,112 to $1,243.

The incurred data (paid losses + reserves for future payments) on public self-insured claims tell a similar story. Comparing initial report data for each of the last seven years, CWCI found that California public self-insured’s incurred losses at first report have risen by $173 million from a post-reform low of $852 million ($369.4 million indemnity + $483.5 million medical) in FY 05/06 to more than $1 billion ($393.7 million indemnity + $619.8 million medical) in FY 08/09 – a 4-year increase of more than 20 percent.

The public self-insureds’ total claim count for last year was up only 2 percent from the comparable figure for FY 2005/2006. So, CWCI said most of the growth in total incurred losses since the post-reform low can be ascribed to increases in the average amount incurred per claim, primarily on the medical side. Over the past four years, average incurred medical per public self-insured claim at the first report level has risen more than 25 percent, from $4,065 to $5,088, while average incurred indemnity has risen 8.3 percent from $3,106 per claim for FY 05-06 to $3,364 for FY 09-10.

CWCI’s report on OSIP’s latest public self-insured data is available at

Source: CWCI

Topics California Trends Workers' Compensation

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