For the first time in five years, California employers are seeing the cost
of their workers' compensation premiums drop, according to the San
Jose Business Journal.
The first half of 2004 not only saw a decrease in premiums, but also a drop
in the number of injured workers and the arrival of new insurers in the marketplace.
But the Journal also points to two possible threats to the
new trend: continued escalation of everyone's medical costs and ongoing court
challenges to the changes in state law that are credited with lowering WC costs.
Since 2002, the California legislature has approved three major changes aimed
at reforming workers' compensation. They've produced caps on chiropractic care,
physical therapy, limits on medical care and a greater role for employers in
determining care for injured workers, according to the Journal.
The California's Workers' Compensation Insurance Rating Bureau (WCIRB), which
analyzes claims data, reports that the reforms now on the books have resulted
in employers paying an average of $5.76 per $100 in payroll in the first half
of this year--down from $6.40 during the second half of 2003. That's the
first decline in average premiums since 1999.
Moreover, the WCIRB reports:
- The number of claims during the first half of this year fell 12 percent,
compared to the same period last year.
- Rates overall are continuing to decline, and are expected to drop another
10 percent on average next year.
"This has been a wholesale reform of the system," declared Nicole
Mahrt, spokeswoman for American Insurance Association in Sacramento. "This
is a whole new day for California."
More changes are set to take effect in 2005, the Journal
reports. In January, insurers will begin to roll out medical provider networks,
which resemble programs available through group health insurance programs. These
networks are expected to help control medical costs by allowing insurance companies
to negotiate discounts on fees upfront with medical providers.
Another change taking effect next year will modify the permanent disability
rating schedule, adjusting the length of time for which eligible workers may
The reforms are starting to attract more competitors in the workers' compensation
insurance market, and that's expected to help drive costs down further. About
10 companies offer workers' compensation insurance in California, down from
about 25 companies a decade ago, says John Suhr, chief executive officer of
Suhr Risk Services of California, an insurance broker.