The state with the highest workers’ compensation rates in the nation may be in for a cut in premiums.
California Insurance Commissioner Dave Jones recommended a 10.2% rate decrease this week, which would bring the state’s current rate of $3.48 per $100 of payroll down significantly. In fact, at $2.46 per $100, new rates would be about 5% lower than the current industry average of $2.59 per $100 in payroll.
While the law stipulates that insurance commissioners can only recommend changes to comp rates – not enforce them – carriers typically set rates in line with recommendations.
At the recommendation of the California Workers’ Compensation Rating Bureau, Jones asked that the new premium rates take effect July 1.
A change in comp rates at this time of year is uncommon; typically, commissioners do not reassess rates until the renewal period around January 1. Jones, however, said the alterations were warranted given the decrease in medical costs associated with the care of injured workers.
Currently, workers’ comp rates in California are almost twice the median rate in the US. Two years earlier, the state had the third highest rates in the country.
The legislature has since enacted extensive reforms designed to lower costs though they will take a while to take effect, according to State Division of Workers’ Compensation spokesman Peter Melton.
For one, SB 863, which was passed in 2012 to fight low permanent disability benefits and high friction costs in the workers’ comp system, was not fully implemented with the study measured rates. The majority of the regulations within the bill were put in place beginning Jan. 1, 2014, and the study looked at rates during that year.
“Premium costs are expected to moderate due to those system changes, but they need time to work,” Melton said.
