California Public Self-Insured’s WC Costs Climb As Medical Losses Increase

Graph of Work Comp cost increases in California
Work Comp costs in California

New figures from the California Office of Self-Insurance Plans (OSIP) indicate that for the third year in a row, rising claim severity (average loss per claim), spurred by continued growth in medical costs, drove up workers’ compensation costs for cities, counties and other public agencies in the state last year.
OSIP’s initial summary of public self-insured data for fiscal year 2008/2009 offers the first look at the number of claims, total loss payments and total incurred (paid losses plus reserves for future payments) for the year ending June 30, 2009. The figures are compiled annually by the state from workers’ compensation reports submitted by hundreds of public self-insured entities other than the state itself — including cities and counties, local fire, school, transit, utility and special districts and joint powers authorities. The latest summary shows these employers provided workers’ compensation coverage to nearly 2.1 million California public workers whose wages and salaries totaled $98.6 billion during the 08/09 fiscal year.
Even though the number of covered employees in the latest summary was up 8% from the total noted in the FY 07/08 initial report, the number of reported claims edged down 1.9% to 126,029. Yet, despite fewer claims, public self-insureds’ paid losses at first report rose to $311 million, which was up $11.6 million (3.9%) from the comparable figure for FY07/08, and up $51 million (19.6%) from the post-reform low of $260 million in FY 05/06. A review of first report average paid losses broken out by benefit type shows most of the increase in public self-insured loss payments over the past three years was fueled by growth in medical losses, which have climbed 19.8% from the post-reform low of $1,073 to $1,285 last year, putting them back above the pre-reform level, while the average indemnity paid per claim rose 6.4% from $1,112 to $1,183.

Incurred results for public self-insured employers tell a similar story. Comparing initial report data from the last six years shows California public self-insured’s incurred losses at first report rose from a post-reform low of $852 million ($369.4 million indemnity + $483.5 million medical) in FY 05/06 to $1.01 billion ($393.7 million indemnity + $619.8 million medical) in FY 08/09 – up 18.9% in three years. The increase in total incurred losses since the post-reform low reflects a slight increase in the number of claims reported at the first valuation combined with higher average incurred per claim – primarily on the medical side. In the past three years, average incurred medical per public self-insured claim is up 21%, from $4,065 to $4,918, while average incurred indemnity has fluctuated less than $100 per claim over the last four years, coming in at $3,124 per claim for FY 08-09, up less than 0.6% from the $3,106 level reported for FY 05-06.
CWCI has prepared a detailed report on OSIP’s latest public self-insured data that tracks changes in the volume of California public self-insured claims, and in the total and average paid and incurred amounts for these claims. The report, with initial data on FY 08-09 claims reported to OSIP and more developed data (2nd, 3rd, 4th, and 5th reports) for the most recent six years available, is n the Research section of the CWCI website. OSIP also compiles private self-insured claims data, but it is reported on a calendar year basis, so updated figures from California’s private self-insurers will be released this summer.

18 Things You Need to Know When Shopping For Workers’ Comp

Graphic representing a gift box of Workers' Comp Insurance
Work Comp Shopping Tips

18 Things You Need When Shopping for Work Comp Insurance

Before you go shopping for a workers’ compensation insurance policy you need to put together all the paperwork you will need. Keep this information in one place and use an Excel spreadsheet (if possible). The spreadsheet will be a useful tool down the line when you want to calculate rates and premiums.

1. Payroll Reports

Payroll reports showing how much employees are paid and classification codes are used to calculate premiums.   Include work site locations and specify if the type of work done varies from location to location.

2. Classification Codes

Call your state insurance commission to obtain a list of classification codes used to determine workers’ comp rates for various industries. Find the rates that apply to your industry, as it is the rate driving your premium to a large extent. Rates vary depending on the kind of industry – i.e., manufacturing rates differ from office industry rates.   If you already have a workers’ comp policy, you can use the codes you have, otherwise, bring written job descriptions to help your agent or broker assign the most accurate code possible.

3. Who is Covered and Who is Not

Determine who is and who is not covered by workers’ comp so you get the most accurate coverage. Contact the department of labor or the state department of workers’ compensation for this information.   Sometimes very small businesses aren’t required to pay workers’ comp if they have less than 3–5 employees. You should know this before you make any purchases.

4. Accident Reports for past several years.

Compile accident reports for several past years. Include all current workers’ compensation activity to date – outstanding claims, people out on comp, types of injuries and outcomes.

5. Number of Covered Employees

There are cases when certain employees are not eligible for workers’ compensation coverage. Contact your state workers’ compensation commission to obtain this information.

6. Breakdown of Covered Workers by Job Classification

Includes the owner, full and part time employees, contractors, consultants.

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