If workers’ compensation were an aquarium, most states would be a small to medium sized fish. A couple would be guppies. Some would be dolphins. Illinois would be a shark. And California would be a whale. Representing over 20% of the entire workers’ compensation market, the significance of the state in the overall system is undeniable. 

Thursday the Workers’ Compensation Insurance Rating Bureau (WCIRB) held its annual conference in San Francisco. They spent the day educating their stakeholders on the state of the system and looking at some of the challenges that lay ahead for it. The WCIRB is, according to their website, “California’s trusted, objective provider of actuarially-based information and research, advisory pure premium rates, and educational services integral to a healthy workers’ compensation system.” They essentially are to the Golden State what NCCI is to over 30 states. 

Nationwide California has a reputation as an expensive, complex and unwieldy system. Up close and personal however, there are some very positive trends coming out of the significant reforms that have been made over the last 15 years. Combined ratios have dropped from a jaw dropping 189 in 1999 to 93 in 2018. One of the most recent reforms, SB863, provided injured workers an additional $800 million in PD benefits while at the same time lowering premium rates an average of 25%. The state has seen a period of more than 6 years with combined ratios of less than 100. WCIRB CEO Bill Mudge told the attendees that they looked back many years and could not find a comparable period with such strong results. 

Much of the positive news come from a significant reduction in medical costs, brought about by fee schedules, new review processes and an increased emphasis on battling fraud. It should be no surprise that California frictional costs remain a problem, and in fact have been rising significantly. It is pretty obvious to observers that some of the processes put in place to control costs have resulted in new expenses and delays that increase friction in the system. Some of it is a natural effect of the process requirements, but as seems all too familiar, some of those costs are the result of unethical people taking advantage of new profit opportunities.  

More work remains to be done in that area.

Regional differences are also a continuing concern. The Los Angeles Basin has long been a hotbed of comp activity, with both fraud and overutilization being a continuing problem there. The numbers presented comparing that region to others in the state clearly indicate that they would have much better numbers overall if LA just slid into the Pacific Ocean one night. That not being a realistic option, the challenges in that region remain significant and well entrenched.

This was my first time attending the WCIRB Annual Conference. I’m glad that I took the opportunity to do so. There was some very interesting information presented that I will be detailing over the next couple weeks. A “Speed Networking” session on workers’ comp fraud was of particular interest. I may end up dedicating a week of posts to that alone. 

Trust me. It will be a whale of a discussion.

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