California Commissioner Wants Workers’ Comp Insurers to Reduce Rates

California Insurance Commissioner Dave Jones issued a formal finding that costs to insurers in the workers’ compensation system are declining and he’s asking workers’ comp insurers to pass those cost savings on to employers in the form of lower rates.

Jones late last month issued a workers’ comp advisory pure premium rate of $2.19 per $100 of employer payroll, which is 13.8 percent lower than the pure premium rates filed by workers’ comp insurers.

Jones, who noted that the state’s workers’ comp reform law, Senate Bill 863, has reduced costs throughout the state’s workers’ comp system, has no authority to regulate workers’ comp rates. He can only make recommendations.

“Insurers’ net costs in the workers’ compensation system continue to decline as a result of SB 863 and other reform laws enacted by the Legislature and Governor Brown, which is good news,” Jones said in a statement. “Workers’ compensation insurers should pass these cost savings onto employers, but there is no legal requirement that they do so, and workers’ compensation insurers continue to file pure premium rates that are higher than the pure premium rate warranted by their costs.”

Jones’ request follows the Workers’ Compensation Insurance Rating Bureau’s pure premium advisory rate filing for Jan. 1, 2017. Data filed by the WCIRB concluded that insurers’ filed pure premium rates are higher than needed.

The commissioner’s newly issued pure premium rate includes projected savings as a result of recent anti-fraud legislation in SB 1160 and AB 1244, which limit the ability of medical and other service providers indicted or convicted of fraud in the workers’ comp system to pursue liens against insurers for alleged failure to reimburse medical expenditures incurred by the indicated or convicted medical or other services providers.

The Association of California Insurance Companies in response to Jones’ request said insurers have been passing along savings from the historic reforms to their customers.

“California’s competitive market keeps insurers charging the most affordable rates they can while covering the losses from their book of business,” an ACIC statement reads. “Each workers’ compensation insurer has to take the pure premium benchmark and balance that with their individual loss costs in order to manage solvency. Employers have seen rates come down from over $6.00 per $100 of payroll because of the important and effective reforms enacted by both Governors Schwarzenegger and Brown.”