Flash Report: 2019 Policy Assessments Released


NOVEMBER 29, 2018: 
California’s insured employers will pay less in assessments next year thanks to the absence of an assessment by the California Insurance Guarantee Association. However, costs to fund the workers’ comp system overall are on the increase. Assessments paid to support the Department of Industrial Relations and the anti-fraud activities of the California Department of Insurance and local District Attorneys are up for insured and self-insured employers alike.

Overall, the insured employer assessments handled by DIR are up 1.2 percentage points next year and will amount to 2.8% of each employers’ workers’ comp premium. DIR’s assessments were a hair under 2% of premium last year, and in 2017 they were just 1.1% of premium. These are offset for policyholders because CIGA is not assessing for 2019 which means a 2% saving or a 1.2% lower assessment overall.

Self-insured employers will end up paying more next year as they do not pay to fund CIGA’s operations and therefore are unaffected by CIGA’s historic decision not to collect an assessment next year. DIR’s assessments on self-insured employers are up 1 percentage point to 8.9% of the workers’ comp indemnity benefits that each employer paid out to injured workers. In 2017, the rate for self-insured employers was under 7%.

Earlier this year, the California Insurance Guarantee Association board of directors announced that they would not be leveling an assessment in 2019 for the first time this century. The association, which takes on the workers’ comp claims left behind by failed insurance carriers, is projecting that it has enough cash and investments on hand to pay off its workers’ comp liabilities.

At one-point CIGA had a $4 billion deficit on its workers’ comp accounts and had to issue $750 million in bonds to stay afloat. The turnaround is largely credited to the steady thoughtful leadership of executive director Wayne Wilson. Wilson is retiring this year.

The bulk of the increase in DIR’s assessments next year is going to fund the general Workers’ Compensation Administration Revolving Fund (WCARF) that is jumping from 0.8% of premium to 1.4% next year. WCARF was just 0.3% of premium in 2017. The revolving fund is largely the operating budget for the Division of Workers’ Compensation.

Also, on the increase are the assessments to fund the Division of Occupational Safety and Health through the Occupational Safety and Health Fund (OSHF) and for the Labor Commissioner’s office through the Labor Enforcement and Compliance Fund (LECF). The former is at 0.38% of premium next compared to 0.27%, while the LECF is at 0.34% compared to 0.22%.

Earlier this year, the California Fraud Assessment Commission also approved an increase in the assessment rate that employers pay to fight kickback schemes, medical mills, claimant fraud, and premium fraud, among other nefarious scams. Insured employers will be paying 0.29% of premium for these activities next year.

The assessments are fronted by carriers to the Department and then are recouped from employers as part of their workers’ comp payments in 2019. Self-insured employers pay assessments directly to DIR. The assessment letters are heading out today.

View the details

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Information Source: Workers’ Comp Executive

Flash Report: 2019 Rate Cut Deeper Than Carriers Wanted


NOVEMBER 7, 2018:
Insurance Commissioner Dave Jones’ has made the rate decision. It is the last of his tenure. It calls for an 8.4% cut in California’s workers’ comp advisory pure premium rates. The change is effective for policies that renew or incept on or after Jan. 1, 2019. California Employers will be happy.

The cut is far deeper than the 4.5% decrease recommended by the Workers’ Compensation Insurance Rating Bureau. The Bureau is a private organization with quasi-governmental responsibility. It is financially supported exclusively by insurance carriers in whose interests it operates.

Jones’ decision is squarely in line with the recommendation of Mark Priven – the actuary representing employers and organized labor on the Bureau’s Governing Committee. Priven’s recommendations have consistently been more prescient than the Bureau’s and more contemplative of California’s declining cost trends.

The Bureau’s governing committee, which is dominated by insurance industry executives, rebuffed the public members’ efforts to have Priven’s recommendation adopted. Priven presented his analysis directly to the Commissioner at a rate hearing last month (for past coverage see 2019 Rate…).

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Information Source: Workers’ Comp Executive

Mid-Year Workers’ Comp Rate Cut Approved


APRIL 4, 2018:
California employers are in line for a seventh straight cut in their workers’ comp rates. The Workers’ Compensation Insurance Rating Bureau’s governing committee members approved a filing for a 7.2% rate cut for policies incepting on or after July 1, 2018.

If this proposal is ultimately adopted, the cumulative rate cuts since Jan. 1, 2015 will be 35%.

The Bureau is a private, but quasi-governmental organization financially supported exclusively by insurance carriers in whose interests it operates.

The committee’s insurer members heard a proposal from the public members’ actuary for a deeper 11.8% cut in rates. The difference stems from alternate methodologies for projecting medical loss development and the trending methodologies used to develop his rate projection. The lower 7.2% cut passed with the unanimous support of the carrier representatives. Both public members present opposed the motion and expressed support for the deeper cut.

The proposed rate cut is based on the industry’s year-end 2017 experience that shows a continued decline in the projected loss ratio for these July 1 policies. The data show continued improvement not only on the medical front, but also some improvement on indemnity benefit costs including temporary disability benefits. Loss adjustment expenses (LAE), however, remain high and are limiting the size of the rate cut.

Driving much of the improvement in the experience is the state’s accelerating claim settlement rate. The settlement rate had been improving for several years but the pace of settlements accelerated significantly through the end of 2017. The state’s improved claims environment that is encouraging the closure of claims stems from the SB 863 reforms as well as subsequent anti-fraud initiatives targeting workers’ comp liens. Last year’s increase in settlements followed the dismissal of nearly 300,000 liens.

The Baker workers’ comp reforms significantly increased permanent disability benefits for injured workers, while introducing new dispute resolution processes that may finally be impacting the system’s TD costs. Feeding into the settlement rate as well is the impact of the subsequent lien reforms from SB 1160. The measure has reduced the number of new liens coming into the system by 40%. This measure alone amounts to savings of roughly half-a-billion dollars.

Primary Factors in the July 1, 2018 Rate Cut

Lower Loss Development: -6 percentage points
Inclusion of the 2017 Accident Year: -1 percentage points
New Drug Formulary: -0.5 percentage points
Loss Adjustment Expenses (LAE): +0.5 percentage points

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Information Source: Workers’ Comp Executive

Commissioner Issues Decision on July 1, 2017 Pure Premium Rate Filing


MAY 22, 2017:
Today, the California Insurance Commissioner issued a decision regarding the WCIRB’s July 1, 2017 Pure Premium Rate Filing (Filing) which was submitted to the California Department of Insurance on April 11, 2017. A public hearing regarding the Filing was held on May 3, 2017.

In his decision, the Commissioner approved the advisory pure premium rates proposed by the WCIRB that average $2.02 per $100 of payroll effective July 1, 2017. The approved advisory pure premium rates are 16.5% lower than the corresponding industry average filed pure premium rate of $2.42 as of January 1, 2017 and 7.8% less than the average approved January 1, 2017 advisory pure premium rate of $2.19.

The Insurance Commissioner’s Decision and electronic files containing the approved July 1, 2017 advisory pure premium rates may be downloaded from the Publications and Filings section of the WCIRB website (www.wcirb.com).

The “WCRATE” file with the abbreviated class wording and the approved July 1, 2017 advisory pure premium rates is also available for download in the Publications and Filings section.

Related Information

Insurance Commissioner’s Decision
Bulletin Regarding the Insurance Commissioner’s Decision (WCIRB Bulletin 2017-08)
July 1, 2017 Pure Premium Rate Filing

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Information Source: WCIRB California

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