A state advisory board on Wednesday recommended a 24 percent increase in basic workers’ compensation insurance rates effective July 1. If approved by state insurance regulators, the increase would likely lead to a huge jump in employer premiums starting in July.
The board cited rapidly increasing medical costs and recent rulings by the Workers’ Compensation Appeals Board, which have allowed claims to be re-opened and disability awards to be recalculated upward. Another factor: declining company payrolls, which translate into smaller premium bases for insurers.
The actuarial committee of the state Workers’ Compensation Insurance Rating Bureau initially recommended a 27 percent increase in what is known as the base or “pure premium” rate. After a three-hour hearing on Wednesday, the full board trimmed that figure slightly.
Under state law, the Workers’ Compensation Insurance Rating Bureau, a quasi-state and insurance industry body, makes recommendations to the insurance commissioner on workers’ compensation insurance rates, using actuarial projections provided by insurance carriers.
Insurance Commissioner Steve Poizner has the power to reject the bureau’s proposal and release his own recommendations. Indeed, last fall, Poizner who has formed an exploratory committee to run for governor next year rejected the bureau’s call for a 16 percent hike and recommended only a 5 percent increase.
Responding to the bureau’s rate hike recommendation, Poizner said he would carefully scrutinize the proposal. “I will not allow California’s job creators to be burdened with unnecessarily high workers’ compensation costs,” he said in a statement.
He also called for a hearing to examine skyrocketing workers’ compensation medical costs. “These soaring costs are unsustainable and must be controlled if we are to prevent a repeat of the workers’ compensation crisis we saw earlier this decade,” Poizner said.
In the deregulated marketplace, the insurance industry is not obligated to follow any rate recommendations. However, the commissioner’s recommendations carry significant weight and often serve as the floor.
Gov. Arnold Schwarzenegger before the meeting wrote to Poizner, urging him to reject the proposed increase.
In his letter, Schwarzenegger said, “The impact of such an increase to business, employees and our state’s economy would be overwhelming. I am confident you will not impose such a tremendous financial burden on California businesses at this time.”
