State Fund Files a 3.5 Percent
 July 14, 2008

Filing marks a 57 percent cumulative rate decrease since 2004

SAN FRANCISCO – State Compensation Insurance Fund today announced it filed a July 1, 2008 revision to its rating plan, which it anticipates will result in a 3.5% reduction in collectible premium. While base rates will remain unchanged, State Fund has expanded its merit rating and claims-free discount plans to lower rates for policies with superior safety records.  The new rate filing will affect new and renewal workers’ compensation
policies with an effective date on or after July 1, 2008. 

As State Fund expands its "claims-free" credit, some small employers with
superior safety records will see their claims-free discount increase from 10% to 13% or 15%.  Additionally, for the first time new business accounts to State Fund may also qualify for a claims-free credit based on experience with their prior carrier.   "Promoting safe workplaces is a vital part of State Fund’s mission and small business is the backbone of California’s economy. We feel it is critical to pass on savings that recognize employers for maintaining safe workplaces," said State Fund President and CEO Janet Frank.

In addition State Fund is enlarging the range of accounts that qualify for its expanded merit rating plan allowing its underwriters greater discretion in pricing accounts generating more than $100,000 in premium.  State Fund’s underwriters will be able to base more of the pricing decision on each individual account’s experience, providing the opportunity for deeper discounts on accounts with excellent safety records.

"Since 2003 State Fund’s rates have fallen steadily and this latest filing brings our cumulative decrease to 57% below pre-2004 reform levels" Frank added. "We have seen significant decreases in cost that are directly attributable to the 2004 passage of SB 899, the Governor's reform legislation, as well as AB 227 and SB 228 in 2003.  State Fund has been committed to passing those savings back to employers in the form of lower rates to help California’s economy continue to grow," Frank said. 

Post-Injury Practices Reduce Workers’ Compensation Costs

Statistically, the workplace has become a safer environment. Exposures may still be significant, but the injury prevention practices of employers have reduced the frequency of work related injuries. But while it’s true that the number of workers’ compensation claims is declining, the average cost of workers’ compensation claims continues to increase.  In California, workers’ compensation premiums have dropped to the point where the average cost of claims has created an increase in the loss ratio for companies underwriting workers’ compensation insurance.  This will result in a flattening a workers’ compensation premiums in the near term which has historically been a precursor to rising premiums, especially when investment returns for insurance companies have been eroded.

Employment costs continue to rise. The United States Department of Labor’s Bureau of Labor Statistics reports that $26.86 is the average per hour cost of an employee.  Included in this figure are salary, health benefits expenses, vacation time, and workers’ compensation costs.  Out of that hourly figure, only about $.14 covers the cost workers’ compensation, either in the form of benefit payments or workers’ compensation insurance.

Oftentimes the primary focus of risk control practices in a company’s risk management program centers on preventing losses.  But consideration should also be given to addressing factors that can reduce the cost of a claim once it has occurred. Two key areas for addressing this are medical treatment procedures and return to work programs.

Consistent internal medical referral procedures are vital to the success of any risk management program.  Ensuring that the injured worker receives the most effective medical treatment at the onset of his/her injury is critical to their reaching the optimum recovery point from the injury.  Ensuring these procedures are understood by all employees will ensure that effective treatment is administered at the outset of the injury, including first aid. 

$.14 covers the cost workers’ compensation, either in the form of benefitpayments or workers’ compensation insurance.

Oftentimes the primary focus of risk control practices in a company’s risk
management program centers on preventing losses.  But consideration should also be given to addressing factors that can reduce the cost of a claim once it has occurred. Two key areas for addressing this are medical treatment procedures and return to work programs.

Consistent internal medical referral procedures are vital to the success of any risk management program.  Ensuring that the injured worker receives the most
effective medical treatment at the onset of his/her injury is critical to their reaching the optimum recovery point from the injury.  Making certain these procedures are understood by all employees will ensure that effective treatment is administered at the outset of the injury, including first aid.

Return to Work programs offer many benefits.  They can reduce the disability period for an injured worker.  Helping the employee return to work early in a modified duty capacity has advantages for both the employer and the employee.  For the employer it may reduce their overall claim cost helping to stabilize their workers compensation premiums.  Additionally, there is a productivity benefit. A worker familiar with the operation can make valuable contributions to productivity, even with limitations on the tasks they can perform.  For the employee, being able to come back to work and off of disability can communicate to the employee that he/she is a valuable member of the organization.  Employee morale increases not only for the injured worker but also for his/her co-workers.

For help in developing a Return to Work program, contact the CMTA Workers’ Compensation Group.


 

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