Many of California’s 1.3 million employers may pay higher premiums for workers’ compensation insurance next year, after five years of steady rate decreases.
After analyzing costs in the $12-billion market, Insurance Commissioner Steve Poizner on Friday told more than 200 insurers that they would not be out of line if they raised rates by 5% for policies written after Jan. 1.
Companies aren’t legally required to heed the commissioner’s recommendation but over the years most voluntarily have aligned their pricing with the benchmark.
The commissioner’s finding, although modest in size, seems to indicate that the financial windfall for employers created by an overhaul of workers’ compensation laws in 2003 and 2004 could be coming to an end. Average workers’ compensation premiums paid by employers have dropped by 62% to $2.48 per $100 of payroll since July 2003.
“We saw sharp declines in the early years of the reforms, but that downward trend has been reversed,” said Jerry Azevedo, a spokesman for the Workers’ Compensation Action Network, a business advocacy group.
Poizner’s recommendation was less than a third of the 16% increase proposed by the Workers’ Compensation Insurance Rating Bureau, an industry statistical service. But both the commissioner and the rating bureau blamed the possible increase on inflation in the cost of providing medical treatment to victims of workplace injuries.
For his part, Gov. Arnold Schwarzenegger dismissed the possible uptick in insurance premiums as an expected “minor fluctuation.”
The governor is determined “to hold the line on any rollback of the reforms” that have saved employers more than $20 billion, said Rachel Cameron, a spokeswoman for the governor.
And more savings could be on the way despite a jump in medical costs, Poizner suggested. “It is clear that insurance companies remain profitable in California and still have room to reduce the premiums they charge,” he said. He urged insurers and employers to work together to continue to hold down rates.
Poizner’s recommendation acknowledges that California continues to foster a healthy market for workers’ compensation, said Nicole Mahrt, a spokesman for the American Insurance Assn. in Sacramento.
Now that costs have been drastically reduced in the once-troubled workers’ compensation system, employers need to find other ways to keep their claims down, said Mark Webb, a vice president at Employers Direct Insurance Co. in Agoura Hills.
In particular, he said, they must work harder to keep their workplaces accident-free. The message to employers, he said, “is make sure you have a commitment to safety.”