FLASH REPORT: Workers’ Comp Regulatory Filing Approved
MAY 2023:
The California Department of Insurance fully adopted the Workers’ Compensation Insurance Rating Bureau’s September 1, 2023, regulatory filing. A separate decision on the advisory pure premium rates is still pending.
The Bureau is a private organization with quasi-governmental responsibility. It is financially supported exclusively by insurance carriers in whose interests it operates.
Approval of this regulatory filing clears the way for employer X-Mods to be updated and increases the threshold for experience rating. The filing boosted the threshold from $9,200 to $10,200 to account, the Bureau says, for overall wage inflation.
The regulatory changes also create a separate, long-awaited lower rate for California’s 8871 telecommuter classification. The classification’s pure premium advisory rate has been tethered to the 8810 clerical classification since its creation. The premium charge for 8871 will be cut by 25% due to its lower losses and higher payroll compared to the 8810 classification’s experience.
BROKER ALERT: Remember to add the telecommuter class to employers with telecommuters.
Approval of the filing also clears the way for splitting the 9079 restaurant classification into six new classifications. The new classes will take effect in about 15 months, on September 1, 2024. However, they will still be combined for rate-making purposes until the Bureau collects enough credible experience to establish individual class rates.
The new classifications include:
- 9058 Hotel/Motels/Short-Term Housing – food/beverage
- 9080 Restaurants – Full Service
- 9081(1) Restaurants – Not Otherwise Classified
- 9081(2) Concessionaires
- 9082 Catering
- 9083 Restaurants – Fast Food/Fast Casual
- 9084 Bars/Taverns
Workers’ Comp Executive will provide coverage of the rate hearing and decision when it occurs.
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FLASH REPORT: Record High Workers’ Comp Assessments for 2023
NOVEMBER 2022:
The Department of Industrial Relations’ annual assessments on California employers is now over $1.5 billion – a $191 million or 13.9% increase from the assessments for 2022.
The assessments, together, amount to a tax of nearly 5.9% insured employers will pay on top of workers’ comp premium next year.
Insured employers are paying 72.37% of the total assessment for 2023 compared to 74.07% in 2022. Self-insured employers now account for a higher relative percentage of California’s payroll. Labor Code sections 62.5 and 62.6 require DIR to allocate the assessments between insured and self-insured employers in proportion to payroll.
The agency says it needs $1,568,378,400 to manage the state’s workers’ comp system, oversee workplace safety and health, enforce California’s wage and hour laws and fight fraud in the system. The total includes increases of $58.8 million for the Subsequent Injuries Benefits Trust Fund (SIBTF), which now tops $430 million, and a $54 million increase for the Workers’ Compensation Administration Revolving Fund (WCARF) that covers administrative expenses for the Department.
Self-insured employers are assessed based on the amount of indemnity benefits paid to injured workers, which will be 11.8% under the assessment formula. Insured employers are paying 72.37% of the total assessment compared to 74.07% this year, as self-insured employers now account for a higher percentage of the state’s payroll. Labor Code sections 62.5 and 62.6 require DIR to allocate the assessments between insured and self-insured employers in proportion to payroll.
Insured employers are again spared what used to be a standard 2% surcharge to fund the California Insurance Guarantee Association (CIGA). The association has enough money and investments to cover the workers’ comp claims left behind by failed insurance companies.
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More details and analysis available via the Premium edition of Workers’ Comp Executive.
VIEW FROM THE TOP
Bill Mudge, Workers’ Compensation Insurance Rating Bureau of California
OCTOBER 2022:
Bill Mudge has been at the helm of the Workers’ Compensation Insurance Rating Bureau of California for 11 years as president and CEO, after spending nearly three decades in the insurance industry, mostly in leadership roles. Based in Oakland, California, Mr. Mudge spoke with Business Insurance Assistant Editor Louise Esola about workers compensation in the largest state economy in the nation and the future of the business. Edited excerpts follow.
Q: Much of your career was spent working for insurers. What pulled you toward working on the data side?
A: I spent 27 years in the California workers compensation market on the insurance company side, beginning in 1984. It’s been quite a journey — once as an observer and participant and now a data researcher. I’ve seen nearly 40 years of California workers comp and all of its ups, downs and sideways. I came here at the request of the WCIRB board, having been CEO of two insurance companies, including one I started from scratch in the mid-2000s, CompWest Insurance Co. California is the largest workers comp market in the world, certainly in the country, making up about 20% of the market in the U.S. It was an opportunity to get my hands on all of the industry’s data, not just the data that I had available to me from the insurance companies that I ran but my competitors. And now they’re all our members. And so working collaboratively with them as members in this industry has been really just a joy for me, rather than competing with them on the playing field.
Q: In the comp industry, the state of business in California is followed closely nationwide. Why is that?
A: The pure size of the California economy and the California workers comp system. It is the biggest. If you’re an insurer and you focus on writing workers comp, it’s hard not to have a big portfolio in California. So it has a lot of attention from that standpoint. Also, I think people look at California as a bit of a bellwether on the changing nature of comp, as trends could move across the country.
Q: What are some of the top issues right now?
A: Number one is COVID. It’s not going away. We’re almost now at 300,000 reported claims; two-thirds of them have been accepted into the claim system. We have more COVID claims reported in 2022 with the variants than we had in all of 2021. Long COVID is represented in one of five cases overall and probably the iceberg under the waterline that we’re worried about. I think the medical community is struggling with trying to define what is long COVID and what are the symptoms related to that. Certainly we’re starting to see long COVID-related cases in the data. What does that mean to potential things like permanent disability when people can’t go back to work? I don’t know. The medical community is keeping their eyes on trying to understand what that means.
The second issue is the economy. We were humming along pre-pandemic and then everybody went home, lots of people lost their jobs, and then job switching started to occur, too. People that came back to work said, “I’m not going to work doing that anymore. I’m going to do something else.” And so we’re seeing — and not surprising because we saw it coming out of the Great Recession — there’s a real correlation between economic recovery and increasing claims frequency. We’re seeing that across California. We’re also seeing less-experienced workers versus experienced workers. And less-experienced workers that are not as trained, not as skilled, early on have a higher propensity to become injured on the job.
The increase in cumulative trauma claims, medical inflation and rising medical-legal costs are also issues.
Q: The workers comp market has been stable for years. Do you see this continuing?
A: I don’t think it is stable now for all the reasons I mentioned. In fact, it’s a bit unstable at the moment and costs are rising. Even in a competitive market, at some point, you have to price for the underlying costs. I think the golden days are probably behind us right now.
Q: What can be done?
A: The silver lining in all this is that workers are getting paid a lot more money, and higher wages equate to higher premiums, at least on the insurance side, and higher premiums can cover a lot of costs without rate increases. But I think probably we’ll need both of those to start to stabilize the combined ratio in this system. And safety. I think it’s got to be forefront for employers, whether it’s all these COVID safety protocols we’ve all come to learn or whether it’s good old-fashioned training workers. I think it’s back to the ABCs of how to run a safe place to work, and if the claim doesn’t happen, that’s a good thing.
Q: Everybody’s involved with data right now in the workers comp industry. They’re embracing it. What are some of your thoughts about the place of data in this industry?
A: It’s really a data-driven business, and whether you’re on the claim side or whether you’re on the underwriting side we have a lot of tools for members to help them with benchmarking and insights and all of that. And we provide data to both insurers and agents and brokers to help take some of the transactional friction out of the system and streamline the process of transacting insurance in California. It’s just going to intensify — trying to get a view of what’s going on in the system now, not what was going on in the system when a policy and its data came into us after it was final audited some 20 months or so from policy inception. We are really trying to understand what’s going on now. Data is going to be more and more important in a dynamic system like we’re living in right now.
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Credit: Business Insurance magazine