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.
"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."
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September 10, 2012
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