Capitol Alert: Lower costs seen in California workers' compensation overhaul

The workers' compensation overhaul passed by the California Legislature last week and now awaiting Gov. Jerry Brown's signature will result in lower overall costs, even with its increase in benefit payments, the Workers' Compensation Insurance Rating Bureau said Thursday.

However, whether the lower costs will result in lower insurance premiums for employers is still uncertain, the WCIRB report implied, due to "a continued deterioration in insurer loss experience" from previous claims.

The Department of Insurance has postponed hearings on the WCIRB's previous recommendation of a 2.6 percent "pure premium" increase effective next year so that the advisory organization can determine the net impact of the workers' comp overhaul, Senate Bill 863.

SB 863 promises a 30 percent increase in weekly cash benefits to workers with permanent disabilities from job-related illnesses and injuries and offsets the cost with changes in eligibility for benefits and what are described as operational efficiencies, mostly affecting medical and rehabilitation treatment.

The legislation was put together by labor and employer groups but was opposed by workers' compensation attorneys and some medical providers.It continues the tradition of a once-a-decade legislative overhaul of the multibillion-dollar system and overturns, in part, changes enacted in 2004.

The WCIRB said it sees a 4.5 percent cost reduction ($850 million) in 2013 from the bill's provisions and a 1.4 percent ($270 million) increase in costs in 2014 as the expanded benefits kick in. The net effect, the agency said, would be about a 3 percent reduction in the pure premium rate, but it also said that continued deterioration of insurers' losses might justify a 2 percent increase in premiums, on top of the 2.6 percent boost for 2013 previously recommended.

The State Compensation Insurance Fund, a quasi-public agency that's the state's largest issuer of workers' compensation policies, has already said it would reduce premiums due to SB 863's passage.