Thursday, April 7, 2016

Harrumph!

The California Workers' Compensation Insurance Rating Bureau will be proposing to the Department of Insurance a mid-year rate decrease of 5% from the rate adopted by the Department in October.

This is the second consecutive proposed rate decrease and is 10.5% lower than the industry average filed rate of $2.57 as of Jan. 1, 2016.

The estimated ultimate medical cost per indemnity claim, including medical cost-containment expenses, is $42,334 for 2015, according to WCIRB data. In 2011, the estimated ultimate medical cost was $45,508.

Claim frequency is also down about 1% from 2014 to 2015.

But average paid allocated loss-adjustment expenses – costs that can be directly linked to a claim such as bill review and defense attorney fees – per indemnity claim increased 10% in 2015 to $975 from $887 in the first 12 months of a claim.

Compare to 2012 when carriers paid an average of $768 per claim in ALAE at the 12-month point.

Other negative trends noted by the WCIRB include a rapid escalation in the number of liens filed and an increase in cumulative trauma claims.

In 2011 463,000 liens were filed. A surge in 2012 after the passage of SB 863 but before implementation of its lien fee provisions isn't counted by the bureau because of that anomaly, but lien filing plummeted to 189,000 in 2014, only to nearly double in 2015, when more than 362,000 liens were filed.

Cumulative trauma claims have grown from about 10% of all indemnity claims in 2006 to nearly 1 out of every 5 indemnity claims, 17.9%, in 2014. The trend upwards has been steady: 15.8% of indemnity claims involving a cumulative trauma were filed in 2013 and the number was 12.9% in 2012.

All of this is good and well if you're a workers' compensation insurance company - according to the data the overall cost of managing workers' compensation claims in California costs less than prior to SB 863.

The government will claim (again) SB 863 victorious. The insurance industry will say things are starting to work.

Of course, the advisory rate is illusory - there is no mechanism to force carriers to adopt it, or pass along the savings to employers; this is free market insurance after all.

And the base rate is only one part of the premium calculation. Many employers will wonder why their premiums haven't descended lock step and their workers' representatives will argue that benefits remain inadequate.

It's all sort of Blazing Saddles like.

Governor William J. Le Petomane: Holy underwear! Sheriff murdered! Innocent women and children blown to bits! We have to protect our phoney baloney jobs here, gentlemen! We must do something about this immediately! Immediately! Immediately! Harrumph! Harrumph! Harrumph!

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