California: Frequency for private self-insureds drops a hair

Rates of medical-only claims declined slightly while lost-time claim frequency edged up among California's private self-insured employers last year. The result was a drop in overall claim frequency of just over 2 percent.

The California Workers' Compensation Institute used data from the California Office of Self-Insurance Plans for its report. It suggests private self-insureds increased their reserves for future losses.

The CWCI report said employer's paid losses held steady, averaging $2,483 in 2011; at the same time, average incurred losses rose 6.4 percent to $8,006. It said an expectation of longer claim durations, continued growth in loss costs, and/or additional reserving for Medicare set-asides might account for the increased reserves.

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"Whatever the motivation for the increased reserves, the bottom line is that even though total first report paid losses for 2011 private self insured claims fell slightly to $192.1 million -- down $1.3 million, or 0.6 percent from 2010 first report level, first report incurred losses increased by $24.8 million (+4.2 percent) to nearly $620 million," the report says.

A pattern of declining claim severity and declining claim volume pushed total losses on private self-insured claims to a post-reform low in calendar year 2005, according to the report. "However, despite a steep reduction in the number of reported claims and relatively stable claim frequency since 2005, continued increases in claim severity have driven private self-insured employers' total paid and incurred losses well above the post reform lows."

For example, the report cites information from the Office of Self-Insurance Plans summary fifth report data measuring up to 60 months of experience on 2007 claims as showing that even though there were nearly 9,000 fewer private self-insured claims reported in 2007 than in 2005, "total paid losses at the fifth report level were nearly $39 million higher on the 2007 claims, as average indemnity payments rose 9.6 percent and average medical payments jumped 19.2 percent."

Read more at the WorkersComp Forum homepage.

September 10, 2012

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