Claim Trends

Indemnity Claims Up for Calif. Private Self-Insured Employers

While medical-only claims are declining for private self-insured companies in California, indemnity claim frequency has seen the biggest jump in 10 years.
By: | July 25, 2014

In 2013, private self-insured companies registered the biggest increase in indemnity claim frequency in the past 10 years, according to a new report. At the same time, the incidence of medical-only claims declined.

Otherwise, the latest reports show “virtually no change in claim frequency in 2013.” Also flat was the average paid and incurred amounts per claim noted in the first reports for 2013 compared to the previous year.

The summary by the California Workers’ Compensation Institute is based on data compiled by the Office of Self-Insurance Plans. It reflects the experience of private self-insured employers who covered nearly 2.09 million California employees last year — down from 2.12 million employees in the 2012 initial report.

“The number of workers’ compensation claims reported by California’s private self-insured employers was down about 2 percent in 2013,” the summary says, “but for the fifth year in a row, private self-insured claim frequency was flat, as a marginal decline in the medical-only claims rate was offset by a slight uptick in the indemnity claims rate.”

There were 76,015 private self-insured claims last year — 1,542 fewer claims than in the 2012 initial report. However, “with the number of covered employees down, the private self-insured claim frequency rate held steady,” the report explains, “coming in at 3.64 claims (2.22 medical only and 1.42 indemnity) per 100 employees — almost identical to the 2012 rate of 3.65 claims (2.33 medical only plus 1.32 indemnity) per 100 employees.”

Looking at aggregate claim frequency rates from 2004-13 shows most of the decline in frequency occurred after the 2002-04 legislative reforms. For the last nine years the frequency rate has remained below 4 claims per 100 covered employees, the report says. Most of the fluctuation reflects changes in medical-only claim frequency even though “in 2013, indemnity claim frequency registered the biggest increase in the past 10 years while the incidence of medical-only claims declined.”

The OSIP data shows the number of indemnity cases reported in 2013 was 29,573 — up from the 28,065 cases in 2012 and higher than the 29,026 cases reported in 2011.

In terms of loss payments, the total as of the end of last year for private self-insureds was $180.9 million, or 2.8 percent less than in 2012. The total incurred — paid losses plus reserves for future payments — was 580.5 million for 2013, about 14.1 million or 2.4 percent lower than the initial incurred amount reported for 2012 claims.

CWCI’s analysis of more developed data confirms that reductions in average loss per claim combined with lower claim volume to push losses to a post-reform low in 2005. “By 2006, however, both average paid and average incurred losses began to trend up sharply, driving up private self-insured’s total losses even as claim volume continued to fall,” the report explains.

Nancy Grover is the president of NMG Consulting and the Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at [email protected].

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