By Howard Fine
Citing rising medical costs, California Insurance Commissioner Steve Poizner recommended that the state’s insurers charge employers 5% more for workers’ compensation premiums.
In making the recommendation for the increase next year in the benchmark rate for workers’ compensation insurers, Poizner rejected an earlier recommendation from state actuaries at the Workers’ Compen-sation Insurance Rating Bureau for a 16% increase.
“Last year, experts predicted that loss (and that) expenses would increase dramatically. They did not,” Poizner said. “Given the (lack of) accuracy of past forecasts, I will wait for clear and compelling data confirming such increases before significantly increasing the benchmark.”
Nonetheless, it’s still the first recommended increase in the benchmark in five years. In his last review of workers’ compensation insurance rates in January, Poizner recommended no change in the benchmark. Prior to that, Poizner recommended a 14% decrease.
Under the 1993 workers’ compensation insurance deregulation law, the state does not set the rates insurers can charge employers for workers’ compensation insurance. Instead, the Insurance Commissioner recommends a benchmark rate on which insurers generally base their premiums.
Poizner noted that even with the 5% upward adjustment, the benchmark rate has fallen 63% since its high in 2003.
But that comes on top of a state Legislature decision that will likely increase workers’ compensation bills across the board.
The recently passed state budget included a 10% increase in a fee to fund the operation of the state’s workers’ compensation office and to create a fund to be operated by the Division of Occupational Safety and Health. The fee is tacked on to insurance premium bills.
Separately, the administrators of the state’s Workers’ Compensation Insurance Fraud Fund approved a 2.5% increase in employer payments into anti-fraud programs both at the state Department of Insurance and at district attorneys’ offices throughout the state.
Both fees take effect at the beginning of 2009 and come on top of fee increases for the 2008 calendar year. The fee will go to pay for a new electronic adjudication system and for a $13 million loan to the Division of Occupational Safety and Health. The dollar amount of the fees will depend on the size of the employer and whether that employer is self-insured or pays a third-party insurer.
Fine is a staff writer for the Los Angeles Business Journal.
