June 23, 2008

Worker comp costs continue to slide

The premiums paid by California employers for worker's compensation insurance continued to drop sharply last year due to the far-reaching changes in the system that Gov. Arnold Schwarzenegger pushed through the Legislature four years ago.

Premiums climbed to as high as $23.3 billion in 2004 before beginning to slide as the changes, which included tightening of eligibility for benefits and curtailment of medical costs, took effect. Premiums dropped to $21.5 billion in 2005, $17.1 billion in 2006 and slid to $13.2 billion in 2007.

Schwarzenegger has claimed the workers comp overhaul as one of his major achievements but labor unions, workers comp attorneys and medical care providers have complained that it went too far and is denying legitimately disabled workers adequate support and treatment for their injuries. Critics have pushed legislation to ease up on the cost-saving reforms, but so far to no avail.

The $10 billion drop in annual premiums doesn't count at least $5 billion more than large employers who self-insure for job-related injuries have saved due to the reforms.

The new data are found in an annual report by the Workers Compensation Insurance Rating Bureau, an independent agency that gathers information about the system and recommends premium adjustments. The report says that of the $13.2 billion, insurers paid out $11.2 billion in benefits, medical payments and operating expenses, leaving a pre-tax profit of just under $2 billion or 14.9 percent, sharply lower than the 20-plus percent profits of the previous two years.

The report also reveals that "strain" was the most common injury for which worker comp benefits were claimed in 2007, accounting for just over a third, followed by "fracture" at 8.77 percent.

The full report is available here.

Posted by Dan Walters on June 23, 2008 3:16 PM