Capitol Alert: Effect of California workers' comp overhaul hinges on new rules

The Legislature's overhaul of California's workers' compensation system - which provides benefits to workers for job-related illnesses and injuries - will reduce employers' costs, but how much will depend on how Gov. Jerry Brown's administration implements the new rules, the Workers' Compensation Insurance Rating Bureau says.

With pre-reform losses to workers' compensation insurers still mounting, the organization says, it's impossible to make a recommendation to the state insurance commissioner on how premiums should be adjusted, if at all. Therefore, it's recommending that no changes in premiums be made next year until the reforms are implemented and their effect can be weighed.

The wait-and-see attitude is expressed in a filing that the WCIRB made with Insurance Commissioner Dave Jones this week.

In August, the agency had recommended a "pure premium" rate of $2.68 per $100 of payroll for 2013, a 12.6 percent increase over the average rate being charged by insurers at that time. Since then, the WCIRB said in its filing, insurers losses on workers' comp policies had continue to mount, but the Legislature has enacted Senate Bill 863, which both increases cash benefits to permanently disabled workers and tightens other expenses and benefit eligibility.

The WCIRB's preliminary indication is that the legislation, worked out during months of negotiations between employers and unions, will reduce losses and expenses by 4.9 percent, which would moderate the projected increase in premiums, but not enough to completely offset insurer' losses. However, "given the high level of uncertainty surrounding SB 863," including the shape of regulations to be issued by the Brown administration, the WCIRB is telling Jones that insurance premiums should remain unchanged until the regulations "take shape over the next several months..."

Jones will schedule a public hearing on the recommendation.