Author, Sam Clayton, Vice President, Construction Group, Rancho Mesa Insurance Services, Inc.

Businesses in California have become accustomed to many changes in legislation and the filings from the Workers’ Compensation Insurance Rating Bureau (WCIRB). 

Changes by the WICRB typically take place at the first of every year and can impact workers’ compensation Pure Premium Rates, Expected Loss Rates (ELR) and Wage Thresholds. However, the WCIRB has amended its filing schedule in 2021 to take effect September 1st.

Below are key changes that businesses should be aware of that can alter Experience Modification Rates (ExMod) and workers’ compensation renewal pricing.

Assembly Bill 1465

The proposed Assembly Bill 1465 (AB 1465) could have significant impact on workers’ compensation rates in the years to come.  If passed, AB 1465 will establish the California Medical Provider Network (CAMPN), a broad and largely unregulated network run entirely by the state that would apply to the workers’ compensation system.  All licensed physicians in good standing who elect to treat injured workers will be included in the network.  Injured workers can choose any provider within the network and can transfer among providers multiple times without any limitation.

If this bill passes and a CAMPN is created, employers can anticipate:

• Doctor shopping by injured workers and attorneys;

• Increase in temporary disability and time to return to work;

• Increase in permanent disability ratings;

• Overall increase in medical costs per claim;

• Poorer quality medical reports due to fewer controls and less oversight.

Workers’ Compensation Rates

The WCIRB recently proposed a 2.7% workers’ compensation rate increase, effective 9/1/2021. This would be the first rate increase since 2015.  Updated fee schedules for med-legal review reports and physician office visits are what is driving this potential increase.

Expected Loss Rates

A characteristic of a Best Practice business is their focus on managing their ExMod. In simple terms, if a business’s ELR increases, it will have a positive effect on their ExMod. Conversely, if their industry’s ELR decreases, it will have a negative effect. While understanding what an ELR is and how it can specifically impact your ExMod is critical, this should be something your insurance advisor is explaining to you and projecting the impact it will have on your ExMod and ultimately your insurance premium.

To put this information at our clients’ finger tips, we have created a Key Performance Indicator (KPI) dashboard to not only show the impact of any changes in the ELR but also provide other key indicators like industry benchmarking, claim trending, and many other critical factors.  Request your customized KPI dashboard.

To stay up to date with these topics and related insurance news, subscribe to our weekly safety and risk management newsletter and podcast. Or, contact me directly at (619) 937-0167 or sclayton@ranchomesa.com to discuss how your company may be affected.