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THE EFFECTS OF MAJOR REFORMS ON WORKERS’ COMPENSATION RATES IN CALIFORNIA. DWC Educational Conference March 2 and March 7 th , 2006 Gregory Trout, MPA Bickmore Risk Services Los Angeles & Oakland, California. Conditions Leading to Reforms. Open Rating: 1995 Claims Cost Increases

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the effects of major reforms on workers compensation rates in california

THE EFFECTS OF MAJOR REFORMSONWORKERS’ COMPENSATION RATESIN CALIFORNIA

DWC Educational Conference

March 2 and March 7th, 2006

Gregory Trout, MPA

Bickmore Risk Services

Los Angeles & Oakland, California

conditions leading to reforms
Conditions Leading to Reforms
  • Open Rating: 1995
  • Claims Cost Increases
  • Premium Increases
  • Insolvencies
conditions leading to reforms1

California Workers' Compensation - Indicated Average Rates

7.00

6.00

5.00

4.00

Average Rate

3.00

2.00

1.00

0.00

Jan-95

May-95

Jan-96

May-96

Jan-97

May-97

Jan-98

May-98

Jan-99

May-99

Jan-00

May-00

Jan-01

May-01

Jan-02

May-02

Jan-03

Sep-95

Sep-96

Sep-97

Sep-98

Sep-99

Sep-00

Sep-01

Sep-02

WCIRB Estimated Pure Premium

Charged Premium Rate

Conditions Leading to Reforms
brs study of reforms
BRS Study of Reforms
  • Authorized by SB 899
  • Initiated by DWC
  • No Cost to Taxpayers (insurance industry assessment)
  • Scope: Impact of Reforms on Claims Costs
    • Charged Premiums
    • Insurance Company Surplus
    • Marketplace/Competition
    • WCIRB/CDI Estimates
scope of study
Scope of Study

Reforms Focused on:

  • AB 749 (2002)
  • AB227/SB228 (2003)
  • SB 899 (2004)
brs study of reforms1
BRS Study of Reforms
  • Background Leading to Workers’ Compensation Reforms
  • Scope and Approach
  • Claims Savings Generated by Reforms
  • Effect of Reforms on Insurance Rates
  • Effects of the Reforms on Insurance Industry Surplus and Solvency
  • Insurance Markets and Competition
  • Adequacy and Accuracy of Workers’ Compensation Insurance Bureau and California Department of Insurance Rates
  • Evaluation of Reforms in Other States
  • Evaluation of Regulatory Structure
  • Areas of Further Research
limitations of study
Limitations of Study
  • Fairness of Benefit Levels and Medical Fees
  • Quality of and Access to Medical Care
  • Effects on Self-Insurers
  • Long Term Effects of Reforms
retrospective impact of reforms1

Exhibit V.3. Estimated Ultimate Losses Less Reported Losses at Successive December 31 Evaluations

  • (After Reflecting the Estimated Impact of AB 227, SB 228, & SB 899 on Unpaid Losses)

As of 9/30/2005

$14

$12.9

$12

$11.4

$11.2

$9.8

$10

$7.8

$8

In Billions

$6.3

$5.9

$6

$4.4

$4

$3.6

$2.3

$2

$1.6

$0.5

$-

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Evaluation Year

Source: WCIRB Quarterly Report at September 30, 2005

Retrospective Impact of Reforms
  • Historical Evaluations
prospective impact of reforms1
Prospective Impact of Reforms
  • Claims Costs: Dollars
prospective impact of reforms2
Prospective Impact of Reforms
  • Claims Costs: Percent
prospective impact of reforms3
Prospective Impact of Reforms
  • Claims Costs by Major Component
prospective impact of reforms4
Prospective Impact of Reforms
  • Insurance Company Rates
prospective impact of reforms5
Prospective Impact of Reforms
  • Insurance Industry Return to Profit
prospective impact of reforms6

Exhibit VI.6. SCIF Market Share, 1998 – 2004

(Percent of Written Premium)

70%

58%

53%

60%

53%

51%

50%

51%

47%

50%

43%

41%

36%

40%

Market Share

33%

28%

30%

22%

22%

20%

10%

0%

1998

1999

2000

2001

2002

2003

2004

2005

Year

Adjusted

Unadjusted

Note: Unadjusted percentages are as reported to CDI. Adjusted reflect adjustments by BRS to amount reported by SCIF due to difference in recognition of written premium.

Prospective Impact of Reforms
  • Insurance Company Market Share
california vs other states
California vs. Other States
  • Loss Rate Comparison
uncertainties remain
Uncertainties Remain

?

  • Future and Retroactive Cost Savings will be impacted by:
  • Changes due to Legal Decisions
  • Legislative Changes
  • Regulatory Changes
  • Changes to System through Voter Initiatives

?

?

areas of further research
Areas of Further Research
  • SCIF’s Role
  • CIGA Funding
  • Review of Regulatory Oversight
  • Cost Savings of Reforms to Public and Private Self-Insurers
  • Need for claims data from Self-Insurers
  • MPN’s
  • Annual Monitoring of the Effects of Reforms and Subsequent Changes
next year s dwc session
Next Year’s DWC Session

Will it be:

  • “The Effects of Proposition 142, 143, and 144 on the Workers’ Compensation System in California”
  • “The Effects of the Revised P.D. Schedule Adopted July 1, 2006 & other changes to Previous Reforms”, or
  • “The Savings Continues From the Reforms of 2002-2004” ???
study availability
Study Availability
  • The Study can be downloaded on the internet from:
  • BRSrisk.com
  • dir.ca.gov/DWC
  • Or by requesting a CD from BRS or DWC