California: State Fund files for a 15 percent increase in WC premiums

California largest provider of workers' compensation coverage filed for a 15 percent increase in premiums.

The State Compensation Insurance Fund's midyear rate plan will apply to new and renewal workers' comp policies effective on or after July 1. Jan Frank, president and CEO of the State Fund, said the principal driver of the premium increase is medical inflation. According to the most recent report published by the Workers' Compensation Insurance Rating Bureau of California, medical treatment costs have increased 16 percent annually for the past three years.

Despite the recommended increase, officials from the State Fund noted that premium levels have fallen significantly since 2003 when the Legislature implemented comprehensive reforms to the state's workers' comp system. Frank said that even after this increase, premiums will still be 46 percent below pre-reform levels.

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"We understand the strain that California's businesses are experiencing in the current economic situation," Frank said. "State Fund offers group discounts, a merit rating plan, and lower-than-average premiums in some classifications and industries."

In April, the WCIRB issued a revised filing that called for a 23.7 percent increase in pure premium rates, also citing skyrocketing medical costs and the potential impact of decisions by the state's Workers' Compensation Appeals Board. At the time, Insurance Commissioner Steve Poizner urged the bureau to withdraw the recommendation. He pointed to the board's announcement that it would reconsider its en banc decisions in Almaraz v. Environmental Recovery Services, Guzman v. Milpitas Unified School District, and Ogilvie v. City and County of San Francisco. Many believe these decisions could significantly impact the amount of future permanent disability awards. Poizner is also planning a series of hearings on the rise of medical costs in California.

The California Department of Insurance does not have the authority to set workers' comp rates in the state.

June 25, 2009

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