Agency Recommends Further Rate Cuts for California Employers

The reforms that were ushered in by the state Legislature in 2012 seem to be paying off, with the Workers’ Compensation Insurance Rating Bureau of California recommending that benchmark rates be cut by an average of 5% in July.
The Rating Bureau has forwarded its recommendation for a mid-year rate cut to the California Department of Insurance, and the insurance commissioner will hold a hearing on the filing likely in May. The filing was made in reaction to lower-than-expected medical cost development, as well as the cost of indemnity benefits per claim.
The Rating Bureau is recommending that the average rate that California employers pay for workers’ compensation coverage be adjusted downward to $2.30 per $100 of payroll. That’s 5% lower than the official benchmark rate as of January 1st and 10% lower than the average rates that insurers had on file on January 1st.
If the insurance commissioner agrees with the recommendation and he reduces the official benchmark rate, the new rate will apply starting July 1st.
Insurers are free to file their own rates and they use the official benchmark rate as a guide-post for pricing their policies.
Rates will vary across industry sectors, and more often carriers have been adding surcharges on policies for employers in certain regions, such as Southern California.
Besides some costs decreasing, the Rating Bureau noted that there are also some upward cost pressures – such as insurers’ overhead costs of adjusting claims, and fees paid to outside attorneys, experts and investigators. There was also a 91% increase in lien filings in 2015.
SB 863, passed by California legislators in September 2012, increased benefits for injured workers as of January 2013 and included a number of changes intended to reduce system costs.
Those included an independent review process for medical treatment and billing disputes, fee schedules for home health care, language interpretation and other comp-related services, and fees for lien filings.