California Workers’ Comp Bureau Releases Cost Monitoring Update on Reforms

The Workers’ Compensation Insurance Rating Bureau of California in mid-October issued a prospective estimate of the cost impact of Senate Bill 863, the sweeping workers’ comp reform bill signed into law in 2012.

SB 863 increased benefits effective Jan. 1, 2013, and Jan. 1, 2014, and provided for a number of structural changes to the California workers’ compensation benefit delivery system.

Key findings of the most recent SB 863 cost monitoring update include:

WCIRB estimates that SB 863 has saved $2.3 billion to the California workers’ comp system annually, or 12% of total loss and loss adjustment expense costs.

These savings have accumulated to a total systemwide savings of over $10 billion since SB 863’s implementation, which have largely driven a series of advisory pure premium rate decreases totaling more than 40% and have resulted in the lowest average charged premium rates in the marketplace in more than 40 years.

The indirect SB 863 savings related to indemnity and medical costs are more than twice the increases to permanent disability benefits and are significantly greater than originally projected.