California Workers Compensation System Rate Reduced Significantly In Four Years
The California Workers Compensation system rate decreased quickly over the last four to five years. While reading through a few on the online publications I receive every day, I came upon a statistic in the California Workers Compensation reform that astounded me.
The rating bureau for California (WCIRB) measures and posts various statistics on the Workers Comp system in California every six months. In 2002 and 2003, the WCIRB published Workers Comp advisory rates read like a horror novel. Senate Bill 899 was enacted and the Workers Comp rates fell dramatically over the next five years.
In my opinion, it was due to the medical treatment controls put into place. The medical provider networks (MPN’s) controlled the medical treatment by employees that indirectly reduced the indemnity compensation. Let’s get back to the statistics.
The average rate paid by employers reduced in this pattern (per $100 of payroll) :
- $6.45 – 07/03 – 12/03
- $5.84 – 07/04 – 12/04
- $4.44 – 07/05 – 12/05
- $3.30 – 07/06 – 12/06
- $2.45 – 07/07 – 12/07
- $2.30 – 01/08 – 09/08
I did not include every six months as the list would have been rather long to read. Using some quick math, that make the reduction in 5 years time $4.05 per $100 of payroll or a reduction of 65%. This is the same as a 4% tax break for all employers in California.
Will the Workers Comp rates stay this low or go even lower over the next few years? That would be difficult to estimate as a few law changes or court decisions could heavily affect the California Workers Comp market.
The California Insurance Commissioner has recommended a 5% rate increase for Workers Comp policies starting on or after 1/1/2009. The WCIRB had recommended a 16% rate increase citing spiraling medical costs as the basis for the large increase. Increases in rates are normal after many years of sharp decreases in the Workers Comp insurance rates. The 16% rate increase recommendation by the WCIRB was a very surprising figure.
I will post more on California the next time as there are quite a few changes coming to the Workers Comp system over the next few months.
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