North Bay Business Journal

Monday, July 9, 2012, 6:00 am

Workers’ comp rates rising sharply in 2012

Whittling away at reforms, higher utilization behind increases


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    Workers’ compensation insurance rates are climbing sharply in the North Bay, a trend that the region’s brokers attribute to the whittling away at system reforms, rising health care costs and increasing medical utilization that have helped inspire a third round of recommended rate increases by California’s insurance commissioner.

    In an acknowledgment that the market is increasingly tightening, Insurance Commissioner Dave Jones approved  a recommendation by the Workers Compensation Insurance Rating Bureau to boost rates by 8.26 percent, to $2.49 per $100 of payroll for new and renewed policies starting July 1. Experts said that increase comes on top of a 37 percent increase OK’d in January.

    Carriers are free to set their own rates, and the bureau’s rates are merely advisory. Yet experts say the combined increases are leading to 50 percent and sometimes higher increases in rates for some employers.

    Most employers can expect premium increases to the tune of 8 percent to 20 percent, according to Doug Dilley, managing partner at George Petersen Insurance Agency in Santa Rosa. Much of the cost drivers include the cost of health care, an increase in permanent disability claims, increased use of prescription narcotics and an ever-increasing number of liens filed by providers, brokers said.

    “The reason why they’re saying rates should be higher is because at the end of the day, costs are going up,” said Debra Costa, vice president of Heffernan Insurance Brokers in Petaluma. She added that while the reforms of 2004 helped keep costs down, they have been slowly whittled away and that medical inflation has caught up to the reforms. “It’s cyclical in nature. We’re in the beginning of that cycle of costs going up,” she said.

    Mike Ryan, a principal with Edgewood Partners Insurance Center, or EPIC, in Petaluma, agreed, noting that after several years of falling rates following major reforms in 2004, rates have steadily climbed upward.

    “Insurance companies are looking to offset years of increasingly higher costs for medical and indemnity claims,” Mr. Ryan said. “The resultant rate increase is due to a combination of base rate increases punctuated with a marked reduction in credits and premium discounts. This deadly combination can result in substantial increases for some insureds.”

    Last year, insurance companies spent $1.26 on claims and expenses for every dollar taken in from incoming premiums, according to the Rating Bureau.

    “Every comp carrier almost up and down the line is saying the results in California are all underwriting at a loss,” Mr. Dilley said. And while a number of carriers are delaying the increase in rates for July 1, come October or early next year, an increase will be inevitable, Mr. Dilley added.

    In light of the looming rate hikes, brokers urged employers to take a number of measures to try and offset the costs, including taking a close look at hiring practices, adopting effective wellness programs and developing a closer relationship with medical providers.

    “Something that doesn’t happen as much as it should is employers need to have relationships with the providers,” Ms. Costa said. “Employers do have a lot of control, and I don’t think employers do that enough. Just having an interview with the clinic and providing job descriptions, so the clinic knows your company well, can be really helpful.”

    Ms. Costa added: “The more information the clinic has, the more easily they can treat and turn to modified duties. The clinics are a customer of the employer.”

    Mr. Dilley said he’s seen increased attention paid to hiring practices, in an effort by employers to ensure a new employee is competent enough and thus less likely to get injured on the job.

    “There’s absolutely been an increase in that area,” he said.

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    1 Comment

    1. July 9, 2012, 11:12 pm

      by Brent McGillis

      Wow, where were the Employers when they were clearly abusing the seriously injured workers during the Reform era? How come the employers were not complaining about all the pain and suffering that was rained down on innocent men & women who’s only crime was that they went to work and became injured, usually by NO fault of their own.

      If we as a society in North America are ever going to claim that we have a system of open, fair, and timely treatment of Injured Workers with delivery of timely, relevant and quality Health Care for their serious injuries that will ultimately result in the injured Worker suffering less and possibly receiving the necessary Medical Treatment they need, then we are going to have to completely Throw this System of Worker Abuse into the Garbage heap forever.

      It is time the workers got behind a system that is run by the workers, and not by Abusive Employers. This antiquated system has been around too long. In Canada this is a violation of our Charter of Rights and Freedoms, until that battle is fought seriously Injured Workers will continue to be abused by the system. Seriously Injured workers are discriminated against in our legal system, and it is time for real change, that will help Injured Workers and their families. Because at the end of the day, it is the children of the Injured workers who will suffer the most.

      It is time to put a stop to this Government Sponsored Corporate system of abuse that violates the Injured Workers right to proper timely disposition of the settlement of these cases that cause so much pain and suffering of innocent children and their bread winners. This is the information age and it is damned well time we as a society start acting like it.

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