October 28, 2008
 
 
TO:      All Interested Parties

FR:      Laura Preston, Legislative Advocate

RE:      Workers' Compensation Rate Update
 
In a prior email, ACSA notified you that the Department of Insurance would be considering a rate increase in the benchmark for determining workers' compensation costs.  The Workers' Compensation Insurance Rating Bureau (WCIRB) had notified Insurance Commissioner Steve Poizner, that a rate increase was going to be needed in order to cover the increases in medical treatment and claims adjustment costs.
 
The WCIRB had recommended a 16% increase to workers' compensation costs beginning January 1, 2009.  Last Friday, the Insurance Commissioner rejected the 16% increase and instead recommended a 5% increase in the average premium charged for workers' compensation insurance beginning January 1, 2009.  Insurance Commissioner Poizner recognized that an increase was due in order to cover rising costs for medical treatment.
 
What does this recommendation mean to school districts?  First of all, it does not apply to school districts that are self-insured.  For those of you who are not self-insured, this recommendation is only a guideline for insurers writing workers' compensation policies in California.  The Department of Insurance does not have the authority to set workers' compensation rates but he did advise insurers "to be cautious if they seek to adjust rates."  Each insurer sets their own rates based on a set of factors.  The premiums paid by individual employers in California starting in January will depend on a variety of factors and may be more or less than the Commissioner's recommended increase.   According to the Workers' Compensation Action Network, so far in October, insurers have filed for average rate increases ranging between 3.3% and 7.6%.
 
In addition to the rate increase, the Department of Insurance also renamed the "Pure Premium Advisory Rate" to the "Workers' Compensation Claims Cost Benchmark."  This was done to more accurately define the estimated change in claim costs that develop in the workers' compensation pricing system.
 
Even with this new adjustment, the Workers' Compensation Claims Cost Benchmark has fallen over 63 percent since 2003. 
 
In another set of issues regarding workers' compensation, the California Division of Workers' Compensation has delayed putting into place a new permanent disability rating schedule until July, 2009.  This Division is in charge of overseeing benefits for workers injured on the job.  They had thought new permanent disability regulations would take place in April 2008, then January, 2009 with July, 2009 the next anticipated release date.  The Division is updating benefit rules for permanently disabled workers because of the workers' compensation reforms in 2004.  It is thought that those reforms cut into injured workers' benefits too far (50-70 percent).  These cuts did save employers statewide billions of dollars in insurance premiums and boosted return-to-work rates.  The reforms were also intended to make the system more objective in deciding how much to pay an injured worker.
 
The Division is on record wanting to make two changes to the rules adopted in 2005 to reflect the legislative reforms.  They want to make changes to the areas related to age and to future earnings capacity.  They are waiting for additional data to better understand workers' wage losses following an injury.  The Division calculates the percentage of someone's disability, but the amount of money a worker gets for a disability is set legislatively.
 
I know this isn't the most exciting email to receive.  However, with the budget continuing to look ominous next year I wanted to make sure you had the most up-to-date information on these issues that could impact your general fund.
 
Laura W. Preston
Legislative Advocate
ACSA
1029 J Street, Suite 500
Sacramento, CA  95814
(916) 329-3807
lpreston@acsa.org
 
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