Workers’ Compensation Costs on the Rise Despite 2012 Reforms

California's workers' compensation costs are still rising, despite a 2012 law (SB 863) aimed at lowering medical costs through tighter treatment oversight, according to a report by the Workers' Compensation Insurance Rating Bureau, the Sacramento Bee's "Capitol Alert" reports (Walters, "Capitol Alert," Sacramento Bee, 7/29).

Background

In September 2012, Gov. Jerry Brown (D) signed SB 863 into law.

The law -- by Sen. Kevin de León (D-Los Angeles) and former Assembly member Jose Solorio (D-Anaheim) -- changed the formula used to calculate benefits for injured workers, increasing their compensation by an average of 29%.

It also eliminated benefits for certain health conditions that often are subject to lawsuits, such as psychiatric problems, sexual dysfunction and sleep loss.

The State Compensation Insurance Fund predicted that employers would pay less for workers' compensation insurance under the law (California Healthline, 4/1).

Report Findings

According to the report, the reforms under the law have saved billions of dollars, but medical costs have still gone up.

Medical treatment, at $6.6 billion, makes up the largest share of costs in the workers' compensation system. The next largest factor is cash benefits for workers with disabilities, at $4.5 billion.

The average medical benefit per workers' compensation claim in California is 90% higher than the national median, according to the report.

In addition, the report found that total premiums paid to workers' compensation insurers reached $16.5 billion in 2014, up from $14.8 billion in 2013. According to the report, the increase reflected:

• Higher rates charged by insurers to compensate for rising costs; and
• An increase in employment within the state.

Meanwhile, the report also found that California employers pay an average of $3.07 in premiums per $100 of payroll, up from $2.94 in 2014 ("Capitol Alert," Sacramento Bee, 7/29).