California: Costs increase as medical losses jump for public self-insureds

Rising claim severity, spurred by continued growth in medical costs, are driving up workers' compensation costs for cities, counties, and other public agencies in California.

The California Workers' Compensation Institute recently released a report on the state Office of Self-Insurance Plans' latest data which found that workers' comp costs for public self-insureds increased for the third year in a row. The OSIP's initial summary of public self-insured data offered the first look at the number of claims, total loss payments, and total incurred (paid losses plus reserves for future payments) for the year ending June 30, 2009. The figures are compiled annually by California from workers' comp reports submitted by hundreds of public self-insured entities, including cities and counties, local fire, school, transit, utility, and special districts and joint powers authorities.

Even though the number of covered employees in the latest summary (2.1 million) was up 8 percent from FY 2008, the number of reported claims edged down 1.9 percent to 126,029. However, despite fewer claims, researchers found that public self-insureds' paid losses rose to $311 million, which was an increase of $11.6 million (3.9 percent) from FY 2008 data and up $51 million (19.6 percent) from the post-reform low of $260 million in FY 2006. Most of the increase in public self-insured loss payments over the past three years was fueled by growth in medical losses which have climbed 19.8 percent from the post-reform low of $1,073 to $1,285 last year, putting them back above the pre-reform level. The average indemnity paid per claim rose 6.4 percent from $1,112 to $1,183.

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Researchers from the CWCI said incurred results for public self-insured employers tell a similar story. Comparing initial report data from the last six years shows California public self-insured's incurred losses rose from a post-reform low of $852 million ($369.4 million indemnity plus $483.5 million medical) in FY 2006 to $1.01 billion ($393.7 million indemnity plus $619.8 million medical) in FY 2009 -- up 18.9 percent in three years. The study noted that the increase in total incurred losses since the post-reform low reflects a slight increase in the number of claims reported at the first valuation combined with higher average incurred per claim, primarily on the medical side. In the past three years, average incurred medical per public self-insured claim is up 21 percent -- from $4,065 to $4,918 -- while average incurred indemnity has fluctuated less than $100 per claim over the last four years. Average incurred indemnity came in at $3,124 per claim for FY 2009, up less than 0.6 percent from the $3,106 level reported for FY 2006.

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March 22, 2010

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