On Aug. 5, the Workers' Compensation Insurance Rating Bureau of California (WCIRB) released its first-ever “State of the System” report, offering an outstanding, in-depth look at the trends and cost drivers in California workers' compensation. I encourage you to read the full report HERE. Given that California now constitutes 25% of the total nationwide workers' compensation premiums, these issues have a significant impact on larger employers that do business in the state.

I have been involved with California's workers' compensation system for years, including participating in many discussions on potential legislative reforms. One thing I have always found frustrating is that California has a tendency to evaluate its progress on workers' compensation issues based on its history alone, without comparing itself to other states. That's why I found the most compelling information in the report to be the comparative analysis of California to other jurisdictions. It didn't paint a pretty picture.

According to 2009 data, California ranks eighth in indemnity claim frequency per 1,000 employees—more than 46% higher than the median state. The recent trending makes this even more troubling since, in 2009, the nationwide trend has been a decrease in frequency rates while California has been increasing.

California ranked seventh in the percentage of indemnity claims with permanent disability benefits paid—13% above the median. Once again, the trending makes this much worse as every state that ranked higher than California has passed legislation aimed at reducing workers' compensation costs. SB 863, passed in California two years ago, increased permanent disability benefits and there has been a corresponding increase in the percentage of claims receiving these benefits.

Finally, California ranked third in incurred medical benefits per indemnity claim, with costs that were over 70% higher than the median state. SB 863 focused on reducing frictional costs to the system caused by medical treatment and billing disputes. It did nothing to change the physician behaviors that continue to drive medical costs higher. According to WCRI and CCWC research, nearly half of all pharmacy prescriptions were physician-dispensed, and prescriptions for Schedule II and Schedule III opioid pain medications have continued to rise.

Employers looking to open a new manufacturing or distribution facility are looking at comparisons between different state workers' compensation systems, and other states are using workers' comp reform to make their states more attractive to businesses and job growth.

My hope is that the WCIRB report serves as a starting point for California to compare itself to other states when evaluating its workers' compensation system and where reform is needed. We need to move past the idea that things are just done differently in California because that is the way it has always been.

Finally, the WCIRB study provides a great lead-in for the California Workers' Compensation & Risk Conference, set for Sept. 10-12 in Dana Point, Calif. Check out the conference agenda HERE. I will be moderating the opening panel at this conference, which features a variety of stakeholders debating the impact of SB 863 and offering suggestions for improving California's workers' compensation system.

Special Reports /

Not So Golden? The State of California's Workers&rsquo; Compensation Insurance System

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Not So Golden? The State of California's Workers’ Compensation Insurance System