Workers’ Comp Rates Increased 37% by Commissioner Jones – Presented by colleague Dale Debber

Workers’ Comp Rates Increased 37% by Commissioner Jones – Presented by colleague Dale Debber

Against a backdrop of a horrid economy and small businesses in trouble, California Insurance Commissioner Dave Jones today effectively approved a 37% increase in workers’ comp rates for 2012.

The decision means California employers will pay a lot more for workers’ comp next year than they did last year. But Democrat Jones tried using numerical trickery to couch his decision and make it a non-news worthy event.

Couched as a flat rate of $2.30 it is just below the Workers’ Compensation Insurance Rating Bureau’s recommendation of a rate decrease of 1.8%. The 1.8% decrease used a calculation based on currently filed rates to recast a 39.9% increase as a decrease. Now, understanding the calculation is open to criticism, it has been further obfuscated into a blended rate for all employers which is essentially meaningless.

Jones, in a written statement said, "Today, I am pleased to announce that the advisory rate filing proposed by the California Department of Insurance has been approved," said Insurance Commissioner Jones. The advisory claims cost benchmark has been set at $2.30 per $100 of employer payroll."

This past spring, Workers Compensation Insurance Rating Bureau, a private organization owned and run by insurance companies licensed and doing the work of the Insurance Department, filed and then withdrew a 39.9% increase for 2012. Then, Commissioner Jones ordered that WCIRB stop benchmarking the pure premium rates from the previous approved rate and instead benchmark it against the average pure premium rates that carriers have currently filed. That’s how they arrived at the 1.8% decrease or a $2.33 average rate, which has been approved now as a $2.30 rate.

The resultant recommendation from WCIRB – a small decrease – was an enormous swing from what was on the table. WCIRB admitted no change in the underlying methodology, but despite the huge disparity, refused to provide an-apples-to apples comparison to its previous filings. It was stuck between Commissioner Jones and reality, or more proverbially, between a rock and a hard place.

And neither the WCIRB nor the California Department of Insurance will answer questions concerning the difference. The end result is still largely the same–a huge increase.

You can fool some of the voters some of the time but when in the end they have to write bigger checks the truth becomes apparent.

Workers’ Comp Executive will have full coverage of Compline’s analysis of the holes in the Department’s explanation and calculations next week. There promises to be an explanatory tool which producers can use for employers to explain the subterfuge and resultant rate increase.

Filed by Dale Debber in Sacramento, the Workers’ Comp Executive Newsdesk – 11-4-11; With permission from Providence Publications to share

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Tom Bone
Risk Insurance Advisor
ISU Insurance Services
2266 Lava Ridge Court
Roseville, California 95661
Phone 916.960.8758 or 800.823.4852 ext. 8758
Fax 916.773.4484
Mobile 925.285.6790
License #0306692