Highlights from California Insurance Rating Bureau Workers Compensation

California Workers’ Comp Insured Loss and Expense Payments Top Earned Premium in 2008

Analysis by California Workers’ Compensation Institute (CWCI) annual report of the Workers’ Compensation Insurance Rating Bureau (WCIRB) noted the following highlights for WC calendar year losses and expenses.
1. California workers’ compensation earned premium fell by $2.3 billion to less than $11 billion last year.
2. Insurers’ loss and expense payments totaled nearly $11.2 billion, resulting in a pretax underwriting loss of $84 million according to a analysis of the annual report to the governor and legislature on workers’ comp calendar year losses and expenses.
3. Earned premium gross of deductible credits or recoveries, not including retrospective rating, dividends or nonstandard coverage, fell from $13.27 billion in 2007 to $10.93 billion in 2008, less than what insurers’ paid for medical, indemnity and administrative expenses.
4. Medical and indemnity payments alone accounted for $6.9 billion of the insurer’s 2008 payments.
5. The total rises to $7.12 billion of the $212 million when payments by the California Insurance Guarantee Association (CIGA) are added in.
6. Insurers also added $35 million in reserves for future claim payments.
7. Excluding the CIGA payments, insurers’ incurred losses was 63% of earned premium.
8. A total 100.5% of earned premium is achieved when overhead, loss adjustment and defense payments are added in.
9. The medical side incurred the biggest increase as total payments jumped $364 million to more than $4.1 billion.
10. In medical payment categories, reimbursements to physicians topped $1.5 billion and remained the biggest medical component, even though that total was down $39 million from 2007.
11. Hospital payments rose $131 million to nearly $1.1 billion.
12. “Other medical costs” were up $104 million due primarily to a $98 million increase in medical payments made directly to injured workers under compromise and release agreements.
13. Medical cost containment (fees for MPN access, bill review and utilization review) jumped $97 million to $284 million.
14. Med-legal evaluation costs increased $52 million to $202 million.
15. Pharmacy payments rose $20 million to $368 million.
16. Aggregate indemnity payments were down $183 million for the year.
17. Permanent disability payments fell $108 million from the 2007 total.
18. Total insured payments for vocational rehabilitation/supplemental job displacement benefits were down $41 million.
19. Temporary disability payments were down $36 million.
20. Death benefits, edging up by $2 million to $71 million last year, were the only indemnity component to increase.

Insurers’ overall loss adjustment and defense payments were up a fraction last year, rising $13 million to $1.824 billion. Insurers reduced their total overhead expenses by $205 million as general expenses and taxes fell by $139 million and declining premium helped push agent and broker fees down $89 million, which more than offset a $23 million increase in other acquisition expenses. (workersxzcompxzkit)

Author: Robert Elliott, J.D.

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