California Workers Compensation Insurance

Despite several rounds of reforms to California’s workers compensation system in recent years, employers are still struggling to control their workers’ comp costs. And according to a 2015 report by the Workers Compensation Insurance Rating Bureau (WCIRB), results of reforms such as SB863 in 2012 have been mixed.

To better understand the big picture, the California Workers Compensation Institute (CWCI) conducted a series of studies following these reforms to monitor claim development trends and analyze medical and indemnity payments at various levels for claims occurring in accident years (AY) 2002 to 2014. The latest CWCI report includes updated information on average indemnity and medical losses paid on claims from AY 2005 through the end of AY 2014, which were calculated and compared at 6, 12, 24, 36, 48, and 60 months post injury.

Here are some of the key findings from the report on the state of California workers compensation insurance:

Since 2005, the average amount paid per indemnity claim for medical treatment – excluding pharmaceuticals, durable medical equipment (DME), and medical-legal services – has increased an average of 50.9 to 56.5 percent. The average paid at six months was up 11.8 percent between 2013 and 2014, while the average paid at 12 months was up 6.2 percent.
Since 2005, average amounts paid for prescription drugs and DME increased between 157.2 percent and 260.5 percent.
Average paid medical losses decreased somewhat at 24, 36, and 48 months post injury, but increased at 6, 12, and 60 months.
Medical treatment and medical cost containment (MCC) payments account for a large share of total medical spending in the early stages of claims, but that share decreases as claims age and pharmaceuticals/DME and medical-legal costs become an increasing share of total medical costs.
Average MCC payments more than doubled between 2005 and 2010, but between 2010 and the last year for which data are available, the growth rate for MCC payments slowed, ranging from a 3.2 percent increase at 48 months post injury to a 15.7 percent increase at 24 months.
Overall trends in medical-legal payments were up between 2005 and the most recent year for which data were available.
Average indemnity benefits paid per lost time claim continue to grow, although the impact of PD benefit increases and changes in the weekly PD rates that were part of the 2012 reforms aren’t fully represented in the long-term results yet.

How well are your California workers compensation insurance cost control measures working?

The CWCI studies make it clear that costs continue to rise, and they provide valuable insights into when those costs are being incurred during the lifetime of an average claim. Employers should take time to review these findings and use them as a baseline for measuring the success of their own workers’ comp programs. With rising medical costs, increasing benefits due to increases in the minimum wage, and higher workers’ compensation premiums, you need a proactive strategy for keeping your workers’ comp costs under control. Being informed about trends through data such as the CWCI studies can help you do that through smarter, more informed decisions.

When you need expert advice, contact Republic Capital Claims Administrators and if you haven’t already done so, download our new free report, which outlines some serious California Workers Compensation Insurance cost control opportunities.