Costs of Workers’ Compensation on Rise, State Says : Insurance: Analysis by state agency shows rate increase of 11.3% this year after two years of dramatic declines.

The cost of caring for employees hurt on the job in California--a politically charged issue that led to major workers’ compensation reforms in 1993--has begun to rise significantly again after declining dramatically for two years, state officials reported.

The California Department of Insurance released an analysis projecting that costs for workers’ compensation coverage will be up 11.3% for all of 1995. Although the report is only an advisory and does not govern how much insurance companies charge, it signals that employers are likely to face higher premiums when their annual workers’ compensation policies are renewed.

In a news release, Insurance Commissioner Chuck Quackenbush noted that a crackdown on workers’ compensation fraud and abuse, along with other measures, brought down rates by an estimated 41% since January, 1993.

But, he said, the new report “should serve as a warning that we must continue to be vigilant in controlling costs if we are to avoid the problems that helped drive jobs out of California” before the 1993 legislative reforms.

Frank Floyd, a spokesman for the State Compensation Insurance Fund, the state’s biggest workers’ compensation insurer, generally agreed with the insurance department’s finding. “We’re seeing the cost-drivers begin to kick in again,” he said.

Floyd cited renewed inflation in medical costs for diagnosing and treating injured workers. He also pointed to increased payouts for disability benefits and vocational rehabilitation.

At the same time, he expressed concern that insurance companies and district attorneys may be devoting less attention to workers’ compensation abuse. He said now that annual premiums have shrunk to $5.5 billion, from more than $10 billion in 1992, there is less money available for investigating abuses.

On the other hand, Barry Carmody, president of the Assn. of California Insurance Companies, blamed workers’ compensation cost increases largely on bureaucratic delays in the state agency that administers disputed claims, the Division of Workers’ Compensation. “While injuries aren’t up significantly, the cost of administering them is, and that’s scary,” Carmody said.

Backlogs in deciding disputed claims also have been a big issue for injured workers, who say that insurers and employers often take advantage of the system to delay paying benefits.

The state insurance department stopped regulating workers’ compensation insurance charges in January, when California’s minimum rate law was repealed. The analysis is intended only to provide guidance to insurance companies and employers.