California employers’ workers’ compensation insurance premiums jumped by $2 billion in 2014 but payments to workers for job-related injuries and illnesses remained static, while medical costs declined, according to the Workers’ Compensation Insurance Rating Bureau.
The Oakland-based organization’s report, mandated by state law, provides new grist for the Capitol’s perennial wrangling over the multi-billion-dollar system’s costs and benefits.
Generally, the system undergoes an overhaul about once a decade as political alliances among its major stakeholders are formed and disbanded. Most recently, employers and labor unions, with the tacit support of insurers, persuaded the Legislature and Gov. Jerry Brown to enact provisions aimed at reducing medical costs and increasing cash benefits.
The WCIRB’s new report indicates that those changes are having an effect as expenses, which include insurers’ overhead as well as medical and cash payouts, have sharply declined vis-a-vis premium income.
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Those expenses reached 122 percent of premium income in 2011, but with the 2012 reforms in place, they have since declined to 104 percent, with “losses,” mostly medical payments and cash outlays, dropping from 74 percent in 2011 to 68 percent in 2014.
The WCIRB’s data indicate that employer-paid premiums were $16.3 billion in 2014, up from $14.3 billion in 2013, due mostly to job gains as the state’s economy recovered from recession. Medical costs dropped from $5.2 billion to $5 billion and cash payments to disabled workers remained flat at $3.4 billion. Those numbers don’t include costs borne by employers, mostly large businesses and governments, which “self-insure” for workers’ compensation rather than purchase coverage from insurers.
In a side note, the WCIRB said payments to attorneys who represent workers in their benefit claims dropped from $456 million to $404 million.
Medical providers and workers’ comp attorneys have been highly critical of the 2012 overhaul and have been urging the Legislature to reopen the issue. Labor unions, which were part of the 2012 coalition, have indicated some support for reopening, but so far bills to change benefits have not moved to Brown’s desk.
Most recently, legislation that would have modified “utilization review” of medical treatments, backed by the California Medical Association and the California Federation of Labor, was blocked in the Senate Appropriations Committee.
The measure, Senate Bill 563, was introduced by Sen. Richard Pan, D-Sacramento, and was labeled a “job killer” by the California Chamber of Commerce for its potential to increase workers’ compensation costs.
Nationwide surveys have shown that California employers’ costs for workers’ compensation are the nation’s highest as a percentage of payroll.