State of the System: WCIRB perspective
At the WCIRB California Annual Conference, Chief Actuary Dave Bellusci presented their update on the California workers’ compensation system.
- 2015 was the sixth consecutive year of $1 billion premium growth in California. This is expected to flatten or decrease slightly in 2016 because of lower rates.
- In 2015 California accounted for 29% of the total countrywide workers’ compensation premiums.
- The premium growth the last two years has been mostly due to payroll growth. In 2012 and 2013 most of the premium growth was due to rate increases.
- The top 5 carriers in California write 42% of the premiums. 70% is written by national carriers and 21% by California focused carriers. The state fund now writes 9% of the marketplace.
- Average charged rate in 2016 is $2.84 per $100/payroll. This is only 5% below 1978 but has gone up 32% since 2008.
- Charged rates in the marketplace are down around 8% in the first quarter of 2016 compared to first quarter 2015.
- In spite of the rate decreases, California remains the highest rate state based on the Oregon study. California rates are more than 20% higher than the second highest cost state.
- California’s share of covered workers has been stable around 12% of the national total, but yet it accounts for nearly 30% of total workers’ compensation premiums nationwide. This illustrates how much higher rates are in California vs the rest of the country.
- There has been an 83% reduction in claim frequency over the last 50 years.
- Since 2009 claim frequency has been increasing with a cumulative impact of around 15% since that time.
- In NCCI states, frequency has continued to trend downward slightly. The increases in frequency in California go against the nationwide trend.
- California has the highest permanent partial disability frequency in the country. It is 115% higher than the countrywide median.
- California’s proportion of cumulative injury claims has more than doubled over the last decade and is now around 18% of all claims. California is unique in this aspect as cumulative injury claims are not a significant element of the system in other states.
- Average medical severities in California have declined over the last four years. The reforms of SB863 are credited with this.
- This negative trend in decreasing medical severity goes against national trends.
- Although medical severity in California has declined, it is still the second highest cost state in the nation and the costs are 90% higher than the national median.
- In California only 36% of total medical benefits have been paid on claims 3 years after injury. The national median is more than double that. This illustrates the longer tail of California claims.
- 24% of indemnity claims in California are reported more than 12 months after the injury date. Nationally only 1% of claims are reported after 12 months.
- ALAE is up 24% in California since 2012. ALAE accounts for 28% of claims costs compared to the nationwide median around 18%.
- California is more than 60% higher in ALAE costs than the WCRI 18 state median.
- In 1995 34% of total costs were indemnity, medical was 29%.
- In 2015 36% of total costs are medical, 28% indemnity.
- Accident year combined ratios have improved 37 points over the last four years to the current level of 102%.
- With declining rates, the expectation is the combined ratios will climb in 2016.
- After sharp declines after the SB863 reforms, medical liens are starting to increase again. In 2015 medical liens were more than double 2014. They are now back to pre-SB863 levels. In the first quarter of 2016 medical liens are more than 20% higher than first quarter 2015. The fact that liens are increasing again is a concern as one of the savings pieces from SB863 was supposed to come from decreased liens.
- IMR requests have continued to be about 3 times what was anticipated with the SB863 reforms. These seem to be holding steady at this high level.