Workers’ Compensation Premium Rates on the Rise After Deregulation
California's deregulation of workers' compensation insurance in 1995 has produced an "unexpected fallout," as premium rates are on the rise, with a 30% increase expected this year, the Wall Street Journal reports. Deregulation eliminated the rate floor insurers could charge for premiums, setting off a "brutal price war" that pushed rates down nearly 50%. Insurers lost $2 billion on workers' compensation underwriting in 1998, and some left the market. Now, the remaining insurers are "rapidly boosting prices," and that could "threaten the health" of some workers, particularly those in "high risk" sectors such as construction and manufacturing, the Journal reports. In construction, for example, rates have increased by as much as 50%. Because of the "squeeze" the premiums are having on employers' profits, employers are cutting back in other areas. Tony Magnone, a division manager at Serra Corp., said, "In order to make up for those lost profits, you end up taking away discretionary-type benefits. Then you have to think about whether to keep the doors open." Meanwhile, insurers "don't want to damage their customers with spiraling increases," according to Robert Young, communications director for the California Workers Compensation Institute. But he added that "you want to make sure prices are sufficient to cover loss costs and keep insurers solvent. We've seen many insurers falter over the last couple of years" (Oster, Wall Street Journal, 8/24).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.