Last week, California Insurance Commissioner Dave Jones adopted an advisory average pure premium rate of $2.70 per $100 of employer payroll for workers compensation rates effective January 1, 2014. The adopted amount is lower than that proposed by the Workers' Compensation Insurance Rating Bureau of California's (WCIRB). The WCIRB's proposed advisory average rate was $2.75 per $100 of payroll. The WCIRB's proposed advisory average pure premium rate is 8.7 percent above the industry's average filed rates as of July 1, 2013 and the adopted pure premium rate is 6.7 percent above the industry's average filed rates as of July 1, 2013.
Much of the difference between the two rates relates to the on-going issue of whether the State Fund’s loss adjustment expenses should be used in determining the advisory rate. The department continues to believe this data should be excluded from the determination. In addition, the department attributes a 2.5 percent savings to the use of independent medical review.
In a press release issued after the Commissioner’s decision, ACIC said that “Commissioner Dave Jones was correct to recognize the increasing costs in the state’s workers compensation system when he made his pure premium advisory rate recommendation.” ACIC noted that many of the reforms containing in last year’s legislation, SB 863, have not been fully implemented so it is too early to determine the actual savings. ACIC further noted that the high costs of opioid use continues to drive costs and there is litigation challenging the lien filing fees that were expected to reduce costs.