Workers' Comp Executive Newsdesk

Monday, December 20, 2004


California Remains Workers' Comp Cost Sinkhole

Although the 2004 reforms have the confidence of most of the major stakeholders, workers' comp still costs employers more in California more than ever. California ranked number one in workers' comp costs with employers paying almost 38 percent more in premium than the second closest state, according to a recent nationwide study.

According to a biennial study done by Oregon's Department of Consumer and Business Services, workers' comp costs California employers an average of $6.08 per $100 of payroll. Alaska was second at $4.39 per $100 of payroll. According to DCBS, its study is the only one of its kind that's update regularly and used as a benchmark by other states.

The study which looked at all 50 states and the District of Columbia keeps California in the number one spot and ranks North Dakota the lowest at $1.06 per $100 of payroll. Oregon's cost of premium along with California's other neighbors ranks closer to the bottom. Oregon paid $2.05 per $100 of payroll. Washington paid $2.20 per $100 of payroll and Nevada paid $2.58 per $100 of payroll.

According to data as of June from California's Workers' Compensation Insurance Rating Bureau, the ratio was $5.76 per $100. According to the Bureau this is 10 percent lower than in the first six months of 2003, but still higher than other states.

The Bureau's data also demonstrates why costs are so high in California: The average indemnity claim, (and almost all of these claims have applicants' attorney involvement), in 2003 was $52,000 – 4 percent higher than in 2002 and that's after estimating the impact of the workers' comp reforms.

It's hoped by the industry and employer community after the new permanent disability schedule is adopted and the reforms have had some time to sink that this trend can be reversed.