While it has little to do yet with the coronavirus, workers’ compensation insurance rates may be going up.
Over the next month, California Insurance Commissioner Ricardo Lara will review rates recommended by the Workers Compensation Insurance Rating Bureau, a nonprofit which evaluates trends, including the costs of potential claims. It hosted a June 7 hearing to discuss rates that would ultimately dictate what an insurance carrier should charge a business for coverage.
Before the annual calendar cycle changed recently from Jan. 1 to Sept. 1, Lara adopted a rate of $1.45 per $100 of payroll at the beginning of 2021.
The rating board has suggested that rate be set at $1.50, which is 2.7% higher.
Mark Priven, the public actuary who represents organized labor and advises the commissioner while working for the Bickmore risk management firm, recommended a rate of $1.34. That’s almost 20 cents lower than the benchmark set Jan. 1, 2020, and less than half the rate set in 2015 at $2.90 in California.
Rates in this competitive market have been going down, according to rating bureau CEO Bill Mudge.
“The good news for employers is they’ve had a really long run (of lower prices). The question is: ‘Is that run running out?’” Mudge said.
California has a competitive insurance market to provide coverage for workers hurt on the job. Nationally, workers compensation is valued at $55 billion, according to Workers Compensation Consultants, a consumer advocacy group.
“(Carriers) may choose to just be competitive. But if carriers feel like they’re having to recover those costs, they may raise the rates — unless they’re just going to be competitive,” Mudge said.
The rating bureau cited costs associated with medical legal and primary care services as factors in its recommendations. The potential effects of COVID-19 that led to a surge in remote work were not considered, despite 117,000 coronavirus-related claims filed in 2020 and 28,000 so far this year with the Division of Workers Compensation. Total annual claims in California most often range between 600,000 and 700,000. About 30% are commonly denied, the bureau concludes.
“California employers have a lot of impacts from COVID. There are all kinds of things that have impacted their ability to pay,” said Bruce Wick, who chimed in as the one public commenter during the hearing. Wick, who said he regularly follows these issues as an industry insider, sided with Priven’s lower rate recommendation.
The insurance commissioner has vowed to keep a steely eye on any changes or challenges to the marketplace.
“With the pandemic continuing to create uncertainty for the near future, we need to continue to review the data along with the impact of both vaccine distribution and additional and necessary public health measures to bend the curve,” Lara said.
That said, Lara added that’s he’s “not persuaded that there is sufficient and reliable data upon which to base an adjustment for COVID-19 costs.”
The bureau is adding a new worker classification in recognition of the pandemic – remote worker.
Jonathon Tudor, a senior vice president for the State Compensation Insurance Fund — a nonprofit insurance underwriter based in Pleasanton with more than 110,000 policyholders — believes the remote work trend is here to stay.
“It’s pretty clear to everyone that this has created a major shift (in how we work),” he told the Business Journal.
Whether the new class of worker affects rates remains to be seen. But aside from an insurance company asking itself: ‘How competitive do we want to be?’; Tudor anticipates rates to go up for California businesses that are all required to have workers comp, no matter the size.
“The raise in (medical expenses) are very likely to drive up an increase in costs,” he said.
“It’s difficult to speculate what will happen — maybe,” said insurance broker Tom Griffith, a vice president with Don Ramatici Insurance in Petaluma, on a possible rise in rates. “My hunch is, I think we’ll wind up with it not being a big deal because we will have reached herd immunity.”
Meanwhile, companies may have new workers comp-related issues to deal with.
California Senate Bill 335 introduced by state Sen. Dave Cortese, D-Campbell, reduces the time claims administrators have to investigate occupational hazards, from 90 to 45 days. The bill, which passed the Senate last week before heading to the Assembly, raises the medical benefits injured workers are paid during the investigation period from $10,000 to $17,000.
The pro-consumer bill poses a troubling issue for a business facing a claim. The California Workers Compensation Institute, a trade group, reported that of the one out of seven claims ultimately denied, 63% remain under investigation at 45 days.
Ashley Hoffman, a California Chamber of Commerce policy analyst, calls the proposed law a “land mine” causing major concerns for the state’s business community.
“Some claims take longer, and there’s a reason they need the extra time,” she said.
From a consumer standpoint, workers may have much to cheer about if the bill passes.
“My initial thought is it’s a win for the injured worker. The increase to $17,000 of the initial money available for medical treatment during this decision time is an uptick in the right direction,” said Will Ferchland, a Santa Rosa attorney who handles workers compensation cases. “Many injured workers say ‘if only I received the medical care I needed at the start of the claim I would be better off now.’”
On the flip side, the change in law may lead to more claim denials since insurance companies will have fewer hours dedicated to looking into the matters, Ferchland speculated. This could result in a “bad situation” for an injured worker.
“Luckily, there are penalties for unreasonable denials,” he said.