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Nevada says CA businesses still harmed by workers' comp costs

Posted by Cynthia Leon, Policy Director, Workers' Compensation, Human Resources, Health & Safety on Aug. 13, 2009

Last week, economic development officials in Nevada launched yet another recruitment campaign to lure California businesses away from the Golden State. And again, California’s high workers’ compensation costs are featured prominently as a reason to relocate to the much more business-friendly Silver State.

That hurts, especially after all the work done to reform California’s dysfunctional system in 2003 and 2004. After reducing premiums by 65 percent between 2003 and 2008, one has to wonder if we aren’t competitive yet?   The answer is yes and no.

Yes, California’s workers’ compensation costs today are closer to the national average but still rank 14th most expensive.  Whereas in 2004 California’s average rate per $100 of payroll was 236% of the national median, by 2009 that rate had come down to a mere 121% of the national median.


But can California truly be competitive with Nevada for affordable workers’ compensation insurance?  Not likely. In addition to having a lower average rate for workers’ compensation coverage, Nevada’s program caps all employee salaries at $36,000 for the purposes of workers’ compensation.   Remember, workers’ compensation insurance is based on payroll.

Also, Nevada doesn’t ask employers to pay extra fees and assessments on workers’ compensation. In California, fees on workers’ compensation premiums have been targeted to pay for an ever-expanding array of government services, now including the state’s occupational safety and labor inspection divisions. After new assessments levied as part of the most recent state budget, total employer assessments for next year will be well north of $300 million.

There is also growing anxiety about the stability of the reforms in California. Premiums are beginning to increase again, driven by escalating costs for medical treatment. Court decisions – if not overturned on appeal – could dismantle a core component of the reforms intended to rationalize the system for paying permanent disability benefits.   The state’s insurance rating bureau is poised to recommend a 22.8 percent rate increase for next January. 

Then there’s the annual legislative assault on the workers’ compensation system that would add millions – and potentially billions – of dollars of employer costs back into the system. Governor Arnold Schwarzenegger has defended the system by vetoing such bills in recent years, but the gubernatorial clock is ticking.   

All this plays to Nevada’s advantage when trying to recruit employers (and the jobs they create) away from California. The state’s workers’ compensation system isn’t the cancer on California’s economy it was just a few years ago, but there’s still work to be done, at least according to the Nevada recruiters.

 



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