California: Workers' comp saw underwriting loss of $1.6 billion in 2010

California's 2010 calendar year direct earned premium totaled $9.7 billion, compared to $9.1 billion in 2009, according to the California Workers' Compensation Insurance Rating Bureau. Incurred losses and expenses were $11.2 billion.

The numbers are included in the WCIRB's report to the governor and legislature, as required by state statute. It is based on data from more than 120 insurer groups.

The picture it paints is slightly different from the calendar year 2009 report. For 2009, the underwriting loss was about 16.4 percent of earned premium, or $1.5 billion.

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Medical continued to be the priciest factor in the workers' comp system and was up to $3.7 billion from $3.6 billion. While physician reimbursement comprised the biggest share, pharmacy saw the biggest increase -- up 6.2 percent to $361 million.

Medical legal costs increased to $169 million from $160 million. Orthopedic evaluations accounted for about 53 percent of the cost of all medical-legal evaluations, the report said. The average cost of a medical-legal evaluation was $1,715 while psychiatric evaluations were the most expensive, averaging $3,220.

Indemnity payments remained stable at $2.8 billion. Temporary disability payments rose to $1.4 billion -- an increase of 3.3 percent -- and comprised half of all indemnity benefits paid. Permanent partial, death, and vocational benefits declined.

Total payments for overhead -- including general expenses and taxes, agency and broker fees, and other acquisition expenses -- increased to more than $2.1 billion. The largest component was general expenses and taxes, totaling $916 billion, up 11 percent.

Payments to adjust and defend claims increased to more than $1.9 billion, up 2.2 percent. Payments to defense attorneys totaled $608 million. Medical cost containment jumped 8 percent to $354 million. That category includes bill review, utilization review, and medical provider networks and other medical network access fees.

WCIRB said insurers' paid losses, combined with a $209 million increase in loss reserves, resulted in total incurred losses of about $7.2 billion, or 74 percent of insurers' 2010 calendar year earned premium.

Read more at the WorkersComp Forum homepage.

July 29, 2011

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