California Insurance Commissioner Dave Jones approved a 8.25% workers compensation advisory pure premium rate hike amounting for new policies and those renewing on or after July 1, 2012.
The decision covers policies incepting on or after July 1, and gives insurance companies represented by the WCIRB all that they were asking for in its filing minus two cents. The minor adjustment is being attributed to the State Compensation Insurance Fund's loss adjustment expenses (LAE), which are typically higher than other carriers' LAE, and hence skew the overall data.
The pure premium rates are advisory and insurers are free to file their own rates. Many follow the advisory, however.
Citing testimony received as part of the rate hearing process, Jones concluded that an increase is necessary as workers' comp costs continue to increase.
"The primary increase in California's workers' compensation costs is with medical costs," Jones says in his decision. "Per unit medical costs do not appear to be increasing much, but medical utilization appears to be the main driver of overall cost increases."
While system costs are continuing to increase, there has been very little change in the average price insurers have charged employers because premiums are being kept in check by market competition, the commissioner said.
“Second, and equally important with increasing costs and the draw-down of surplus and capital, this pricing trend will not continue. Eventually, premiums will increase for employers,” the commissioner said in the order.
He also advised that disagreements between medical providers and payers need to be addressed promptly to increase the timeliness of medical care delivery and decrease the filing of liens for medical payments.