Capitol Alert

California’s workers’ compensation costs dropping

A Turner Construction worker levels a panel that he was installing at the Golden 1 Center, Sacramento’s new professional basketball arena, on Nov. 25, 2015. Construction carries some of the state’s highest costs of insurance for job-related injuries.
A Turner Construction worker levels a panel that he was installing at the Golden 1 Center, Sacramento’s new professional basketball arena, on Nov. 25, 2015. Construction carries some of the state’s highest costs of insurance for job-related injuries. hamezcua@sacbee.com

The good news, at least for California employers, is that the 2012 overhaul of the state’s system of compensating workers for job-related illnesses and injuries appears to be having its stated effect.

Although the changes – a deal between employers and unions that drew Gov. Jerry Brown’s blessing – increased cash benefits to disabled workers, it also cracked down on medical costs.

By 2015, the Workers’ Compensation Insurance Rating Bureau says in a new report, employers’ average insurance premiums, which had topped $6 per $100 of payroll in 2003, had dropped to $2.86.

Simultaneously, the WCIRB has submitted to Insurance Commissioner Dave Jones a recommendation for a “pure premium rate” averaging $2.30 per $100 of payroll effective July 1, 10.4 percent lower than the average pure premium rate being charged by insurers as of Jan. 1.

The WCIRB’s recommendations are advisory; insurers are free to charge whatever they believe the market will bear.

With workers’ compensation costs soaring in the early 2000s, employers and then-Gov. Arnold Schwarzenegger pressed the Legislature for an overhaul to reduce costs in 2004. And eight years later, in 2012, the Legislature acted again, this time to increase cash benefits with offsetting medical cost reductions.

Both actions followed a well-established pattern of making major changes in the multi-billion-dollar system roughly once a decade, usually involving a deal among two or three of the system’s major interest groups that adversely affect others.

The 2012 deal was opposed by medical care providers and lawyers who represent disabled workers, and since then, labor has joined them in demanding another round of changes, but Brown has shown no interest in interrupting the once-a-decade cycle.

Although the two rounds of legislative change have moderated employers’ costs, they are still higher than the $2.10 per $100 of payroll reached in 2009, and are still the nation’s highest, according to a biennial survey by the Oregon Department of Consumer and Business Services.

The Oregon survery is generally regarded as the most authoritative state-to-state comparison. In 2014, the last year the survey was conducted, California’s costs were nearly double the nationwide median.

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