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Archive for the 'Workers comp' Category

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New formula to simplify workers comp calculation

December 24th, 2009, 5:30 am by Jan Norman, small-business columnist

California will use a simpler formula in 2010 to help employers calculate their workers compensation insurance experience modification rates, says Irvine workplace expert Don Dressler.

work-injury-generic-560“California will use a single ’split point’ of $7,000 for each workers comp claim into primary and excess components rather than the current formula for splitting claims,” Dressler says. “Since primary losses effect an employer’s experience modification more than excess losses, this change makes it important for employers to do what they can to hold down the first-dollar costs of each claim.  Any amount saved below $7,000 will help save on their ex mod and their premiums for  the following three years.”

If an injured worker returns to the job the day after an injury, the average claims cost is $870, according to the Workers Compensation Insurance Rating Bureau. But if the worker goes on temporary disability, the average claim is $11,761. If the worker has even a minor permanent disability, the average claim is $38,390, and a major permanent disability, the average cost jumps to $140,680.

We also know from data released earlier this year by the WCIRB that if an injured worker returns to work the day after an injury, the average claims cost is $870 but if there is lost time paid for by temporary disability the average claims cost grows to $11,761.  If there is even a minor permanent disability, the average claims cost grows even further to $38,390, and a major permanent disability claim costs, on average $140,680.

Dressler says Insurance Commissioner approved the changes in the rating formula to simplify the experience rating system and improve its predictive accuracy.

Click here for more information from Don Dressler Consulting. Click here for more from the WCIRB.

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Posted in: Top posts • Workers comp • • • | 2 Comments »

Average workers comp rate hike is 4.1%

December 10th, 2009, 11:30 am by Jan Norman, small-business columnist

The average rate hike beginning Jan.1, will be 4.1% for workers compensation insurance, State Insurance Commission Steve Poizner said.injury-generic

The Department of Insurance has received rate increase requests from 59 of the top 100 companies that write 97% of all workers comp policies, Poizner said.  Of those:

  • 4 filed rate decreases ranging from 1% to 8.4%
  • 13 filed for no overall change (companies don’t have to file if they don’t change their rates)
  • 42 filed rate increases of 0.6% to 12%.

The average of all the rate increases is 4.1% and the average weighted by market share is 4%. This last calculation excludes the5% increase by the State Fund, the largest writer of workers comp policies.

The actual increases are in contrast to the 22.8% increase that the Workers’ Compensation Insurance Rating Bureau of California, requested for the workers compensation claims cost benchmark. Read the rest of this entry »

Posted in: Top posts • Workers comp • • | 7 Comments »

Biggest workers comp insurer to raise rates

November 18th, 2009, 6:00 am by Jan Norman, small-business columnist

The State Compensation Insurance Fund will increase its workers compensation insurance premiums for California businesses an average 5% effective on or after Jan. 1, 2010.work-injury-560-420

The State Fund is the largest workers compensation insurer in California with 170,000 company-clients.

The rate increase comes in between Insurance Commissioner Steve Poizner’s demand that private insurers not increase premiums at all and the Workers’ Compensation Insurance Rating Bureau of California, which recommended a 22.8% hike starting Jan. 1, 2010. Poizner’s staff recommended a 15.4% increase.

Such recommendations are advisory. The state doesn’t control rates for workers compensation insurance, which every employer, by law, must have.

The State Fund increase has been filed with the California Department of Insurance. Although manual rates increased 8% with this filing, other changes to the rate filing will result in an overall 5% increase in collectible premium, the fund said.

The rate is an average. Some companies will have a greater increase and others might even have premiums cut.

“The principal driver of the rate increase is medical inflation,” said Doug Stewart, State Fund interim president and CEO. “We understand the strain that California’s businesses are experiencing in the current economic situation. “State Fund offers group discounts, a merit rating plan, and lower-than-average premiums in some classifications and industries.”

The annual average medical inflation rate has been 14% since 2005, according to the California Workers’ Compensation Institute.

Click here to read the State Fund’s rate announcement.

Click here to read Poizner’s press release rejecting any rate hike for Jan. 1, 2010.

Click here to read the Workers Compensation Insurance Rating Bureau’s rationale for a 22.8% rate hike.

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Posted in: Top posts • Workers comp • • | 9 Comments »

22.8% workers comp rate hike rejected

November 10th, 2009, 6:00 am by Jan Norman, small-business columnist

Proposed hikes in California workers compensation insurance rates has been rejected by state Insurance Commissioner Steve Poizner.work-injury-generic

The Workers’ Compensation Insurance Rating Bureau of California had recommended a 22.8% hike starting Jan. 1, 2010. Poizner’s staff recommended a 15.4% hike.

But Poizner’s recommendation is no increase, citing the state’s 12.2% unemployment rate and his opinion that insurance companies have not fully implemented cost controls of the 2003-2004 reforms.

All of these recommendations are advisory only. Insurance companies can ignore them. Chances are, most will opt for some increase.

Poizner said, “Given the lack of actual data and differing assessments, along with the economic challenges faced by California employers, I believe the proper course of action is to further monitor the data on permanent disability costs.”

However, Irvine workplace expert Don Dressler says  recent trends foretell significant hikes in the cost of workers comp insurance throughout California. Among those trends:

  • The Workers Compensation Insurance Rating Bureau and Dept. of Insurance staff have recommended rate hikes in previous six-month review cycles
  • Insurers that handle the vast majority of the state’s workers comp insurance have announced rate hikes of 4% to 33%.
  • The underwriting ratio for all of California’s workers comp insurers is growing unfavorable.

However, Poizner has given 27 recommendations for efficiencies in the system that he says should be done before increasing rates for employers. Among his ideas:

  • Implement pharmacy networks
  • Regulate doctors’ dispensing pharmaceuticals, which may require a new law
  • Require billing and payment according to a fee schedule

Click here to read Poizner’s press release rejecting any rate hike for Jan. 1, 2010.

Click here to read the Workers Compensation Insurance Rating Bureau’s rationale for a 22.8% rate hike.

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Posted in: Employees • Top posts • Updates • Workers comp • • | 2 Comments »

O.C. owner gets fine, jail time for workers comp fraud

October 30th, 2009, 6:00 am by Jan Norman, small-business columnist

An Orange County business owner and his bookkeeper have pleaded guilty to workers compensation insurance fraud dating back to 2005, according to California  Insurance Commissioner Steve Poizner.justice-scales-generic-560

Sanjiv Mahendra Shah of Placentia and his bookkeeper Abu M. Hossain of Chino Hills will pay $380,126 in restitution to two insurance companies, the State Compensation Insurance Fund and Fireman’s Fund, serve 120 days in jail plus three years’ probation. They will also pay fines that will be determined at their sentencing Jan. 26, 2010.

Shah owns Sonic Foods and United Pizza in Placentia, an umbrella company for a Papa John’s Pizza franchise. Shah has not returned a Register phone call.

The two men have pleaded guilty to 13 counts of fraud and one count of conspiracy in the case filed Oct. 15 in Orange County Superior Court, according to the Department of Insurance.

Shah and Hossain under-reported the company’s payroll more than 60%, totaling $6.71 million from 2005 to 2008, the state said. That under-reporting reduced workers’ compensation insurance premiums by $375,553 over three years.

The State Fund discovered the underpayment in May 2006 and forwarded the case to the Department of Insurance and Orange County District Attorney’s Office for investigation.

“Whether it’s the State Fund or a private insurer, fraud costs all of us dearly,” Poizner said in a prepared statement. “I want to make it clear: If you commit these types of crimes, we will find you and prosecute you.”

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Posted in: Legal • Local companies • Top posts • Workers comp • • | 43 Comments »

State reminds firms of injured-worker reimbursements

October 28th, 2009, 1:00 pm by Jan Norman, small-business columnist

California is pushing its program to help small companies bring injured workers back to their jobs.workplace-injury-generic

The Division of Workers Compensation is sending reminders to companies with fewer than 50 employees that they can be reimbursed up to $2,500 for expenses they have to make workplace modifications, such as buying equipment, so that an injured employee can start working again.

The reimbursement was part of the Workers Comp reforms in 2004.

Among the expenses eligible for reimbursement:

  • Modification to the work site
  • Equipment
  • Furniture
  • Tools
  • Any other necessary costs reasonably required to accommodate your employee’s restrictions

The WC division gives these specific reimbursements:

  • Platform and extended eyepiece for a biological analyst
  • Custom knee pads for a tile setter
  • Computer keyboard tray and document holder for an office administrator

Employers save money by getting injured workers back on the job and injured workers benefit financally and emotionally, according to a study by the RAND Corp., a Santa Monica think tank.

Click here for details about the state’s return-to-work reimbursement program.

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Posted in: Jobs • Top posts • Workers comp • • | 1 Comment »

Proposed workers’ comp hike would ‘devastate’ small firms

October 7th, 2009, 11:00 am by Jan Norman, small-business columnist

A proposed hike in California workers compensation insurance rates would have “a devastating effect on small businesses,” said state Insurance Commissioner Steve Poizner following his hearing Tuesday Oct. 6 on a requested 22.8% increase in the pricing benchmark.

In August, the Workers’ Compensation Insurance Rating Bureau of California recommmended the increase starting Jan. 1, 2010.

The Department of Insurance will accept written testimony through Friday and then Poizner will have 30 days to issue his ruling, said spokesman Darrel Ng.

Poizner noted that over the past two years he has pushed to reduce inefficiencies in the workers’ comp system and rejected previous requests to increase the workers compensation cost claims benchmark.

The benchmark is advisory. Poizner can approve, reject or amend the bureau’s recommendation, but the Department of Insurance does not set workers comp insurance rates.

In 2003 legislative reforms reduced workers comp insurance rates, but recent trends foretell significant hikes in the cost of workers comp insurance throughout California, according to Irvine employers’ consultant Don Dressler. Among those trends:

  • Insurance Commissioner Steve Poizner ignored his own staff’s preliminary rate hike of 13.5%, insisting that  “pure premium rates” shouldn’t change. (His recommendation isadvisory.)
  • The Workers Compensation Insurance Rating Bureau, an industry advisory group, already recommended a 23.5% rate hike beginning July 1, 2009.
  • Insurers that handle the vast majority of the state’s workers comp insurance have announced rate hikes of 4% to 33%.
  • The underwriting ratio for all of California’s workers comp insurers is growing unfavorable.

Click here to read Poizner’s press release.

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Posted in: Economy • Meltdown • Top posts • Workers comp • • | 11 Comments »

Update: Lawsuit seeks to block sale of state workers comp insurer

August 27th, 2009, 2:00 pm by Jan Norman, small-business columnist

Update: California Insurance Commissioner Steve Poizner filed the lawsuit in Sacramento Superior Court Friday Aug. 28.

California Insurance Commissioner Steve Poizner says he will sue the Department of Finance and State Treasurer Bill Lockyer to block the state’s sale of assets of the State Compensation Insurance Fund, California’s largest workers compensation insurance provider.

The State Fund board of directors recently opposed the sale too.

July’s revision to the state’s 2009 budget authorized the Department of Finance to sell State Fund assets for $1 billion to help with California’s budget deficit.

Poizner claims that the sale would hurt construction and agricultural firms and new small businesses, all of which have difficulty getting workers compensation. Construction and agriculture account for 27% of the State Fund’s business.  Small businesses make up 75% of the State Fund’s 200,000 customers.

The insurance commissioner  contends that a sale would violate the state constitution’s provision requiring the legislature to establish a complete system of workers’ compensation insurance, which every employer must have.

State Fund is designated as the insurer of last resort for companies that cannot get workers’ compensation insurance anywhere else. Currently it writes 20% of the workers compensation policies in California.

State Fund is required to be a self-supporting entity whose assets must be devoted solely to providing compensation to injured employees and their dependents. Instead, the sale would benefit the state’s general fund, which Poizner says is unconstitutional.

H.D. Palmer, spokesman for the state Department of Finance, said the governor thinks a portion of the State Fund can be sold in a way that is legal and does not affect the fund’s integrity.

After several years of relief, workers comp insurance rates have started to rise. And the Workers Compensation Insurance Rating Bureau recently recommended a 22.8% rate hike in January, 2010.

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Posted in: Top posts • Workers comp • | 1 Comment »

Workers comp rates to leap 22.8%?

August 14th, 2009, 6:00 am by Jan Norman, small-business columnist

The Workers’ Compensation Insurance Rating Bureau of California is recommending a new 22.8% rate hike starting Jan. 1, 2010.

The bureau’s governing committee ordered the recommendation to be submitted to the state Insurance Commissioner Aug. 18.

Commissioner Steve Poizner rejected the bureau’s earlier recommendation for a 23.7% rate hike as of July 1, claiming the insurance companies were inefficient and hadn’t done all they could to control costs.

In a prepared statement Aug. 13, Poizner said he will closely scrutinize the bureau’s new justification for a double-digit increase.

The rating bureau said its new rate increase is based on two factors:

  • Increased medical costs raising claims’ 16%
  • Three recent decisions by the Workers Compensation Appeals Board that are likely to drive up costs 5.8%

Workers comp insurance has been a hot issue in California for years. After rates skyrocketed in the early 2000s, the legislature and governor agreed to reforms in 2003 and 2004 that lowered the benchmark rate about 60%

But recently,  insurers’ expenses and losses have started rising again.

In July, Poizner urged insurance companies not to raise their workers comp insurance rates after the State Compensation Insurance Fund, which writes almost a fourth of workers comp coverage, raised its rates 15% starting July 1.

Insurance companies are free to set their rates, regardless of the bureau’s or insurance commissioner’s recommendations.

The bureau points out that even if Poizner approves the full 22.8% increase the pure premium rates will still be, on average, 55% lower than July 2003.

Click here to read the bureau’s press release.

Click here to read Poizner’s response.

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Posted in: Top posts • Updates • Workers comp | 4 Comments »

State workers comp trends foretell higher rates

July 28th, 2009, 6:00 am by Jan Norman, small-business columnist

Recent events could significantly raise workers compensation insurance costs for California employers, warns Don Dressler, an Irvine labor consultant.

If nothing is done, insurance companies will pull out of the California market and rates will rise even more quickly than recent filings indicate, he says, pointing to the chart below that shows the trend of insurers’ expenses and losses (click on the image for a larger view):

Source: WCIRB

Source: WCIRB

Insurers can still make money when expenses plus losses total 105% or more of premiums because dividends slightly offset costs, Dressler says.  But 1999 through 2003 were crisis years because the ratio was out of whack.

During that period, workers comp became one of the hottest issues facing California employers.work-injury

“1999 was awful; 27 or 28 (workers comp) insurance companies left California,” Dressler says. “The current trending is troubling because (2006 to 2008) it’s moving in the direction of insurance companies not making any money. Just look at Warren Buffett’s company, Berkshire Hathaway. Some of its companies have already left California.”

The recent events that Dressler thinks foretell significant changes on California’s workers comp rates:

  • Insurance Commissioner Steve Poizner ignored his own staff’s preliminary rate hike of 13.5%, insisting that  “pure premium rates” shouldn’t change. (His recommendation isadvisory.)
  • The Workers Compensation Insurance Rating Bureau, an industry advisory group, already recommended a 23.5% rate hike.
  • Insurers that handle the vast majority of the state’s workers comp insurance have announced rate hikes of 4% to 33%.
  • The underwriting ratio for all of California’s workers comp insurers is growing unfavorable.

The Rating Bureau says that medical costs started rising in 2007 and claims that recent decisions by the Workers’ Compensation Appeals Board to allow injured workers to challenge how permanent disability payments are calculated will add to medical inflation. Click here to read the WCIRB’s report.

The California Applicants’ Attorneys Association, a trade group of lawyers who represent injured workers, says insurers are overstating rising costs to protect their profits.

“Poizner is ignoring the reality of medical inflation,” Dressler says. “He could have recommended less of an increase than WCIRB. But to say ‘no increase at all’ gives him less influence” in companies’ decision making.

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Posted in: Top posts • Workers comp • • • | 2 Comments »

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