Three years after one of the Legislature’s periodic reforms of California’s system of compensating workers for job-related injuries and illnesses, costs to employers are climbing, the Workers’ Compensation Insurance Rating Bureau says in a new report.
The 2012 reform, negotiated by Gov. Jerry Brown and legislative leaders with employers and labor unions, was aimed at curbing rising medical costs by tightening treatment oversight.
Those reforms have saved billions of dollars, the WCIRB report says, but total medical costs have continued to increase, with the average medical benefit per claim 90 percent above the national median.
Changes in medical care protocols have been a source of political friction ever since the reform bill was passed over the objections of medical providers and attorneys who represent injured workers.
They have been pressing the Legislature to revisit the issue. It’s unlikely, however, to happen. The Legislature has an informal practice of dealing with the complex, multi-billion-dollar system only about once a decade.
The WCIRB report says that despite steps to curtail costs, total premiums paid to workers’ compensation insurers hit $16.5 billion in 2014, up from $14.8 billion the year before and 27 percent of all such premiums in the nation. It pointed out, however, that the premium jump reflected not only higher rates being charged by insurers to compensate for rising costs, but increases in the number of Californians on payrolls as the state recovered from recession.
The $16.5 billion figure does not include the money set aside by large employers who self-insure for compensation claims, and is still much lower than the record $21.4 billion paid in 2003, just before last decade’s reform package was passed by the Legislature and then-Gov. Arnold Schwarzenegger. Premiums dropped to as low as $8.8 billion in 2009 – the depths of the Great Recession – before beginning to rise again, leading to the 2012 legislation.
Overall, California employers, the report said, are paying an average of $3.07 in insurance premiums for every $100 of payroll, less than half of the high-water mark of $6.29 in 2003, but up from $2.94 in 2014 and a sharp jump from the lowest recent level, $2.10 in 2009.
California has, by far, the highest costs in relation to payroll of any state, the report notes, almost twice the national average.
Employers in the transportation and utility industries pay the highest premiums, an average of $14.28 per $100 of payroll, due to their high accident ratios, followed by construction at $12.95. The lowest average premium, just 84 cents per $100, is paid for office clerical workers.
Medical treatment is the largest single cost factor in the system, pegged at $6.6 billion, followed by cash benefits to disabled workers at $4.5 billion.