California State Comp Fund Rates To Jump Up 15%

NU Online News Service, June 1, 12:05 p.m. EDT

Citing medical costs as the reason, the California State Compensation Insurance Fund has filed for a 15 percent increase in premium rates.

The announcement Friday of the increase for a midyear rate plan will apply to new and renewal workers' compensation policies effective on or after July 1, the state-created insurer said.

SCIF, a self-supporting nonprofit, accounted for more than 22 percent of the workers' comp market in 2008.

Jan Frank, State Fund chief executive officer and president, in a statement said medical treatment costs have increased 16 percent annually for the past three years, according to the most recent report published by California's Workers Compensation Insurance Rating Bureau.

The rating bureau, a nonprofit association of the state's comp insurers and California's designated statistical agent for the comp system, last month submitted a request for a 23.7 percent rate increase that Insurance Commissioner Steve Poizner balked at after a hearing.

Mr. Poizner remarked that while increased medical treatment costs may be justified, the information provided at the hearing "did not adequately support the request." He has schedule another hearing for next Monday.

Whatever rate is eventually set by the commissioner is only advisory, although he can step in if an insurer's pricing is actuarially unsound.

SCIF, in announcing its hike, noted that its premium levels are still 46 percent below what they were before 2003 legislative reforms to the comp system.

Mr. Frank said, "We understand the strain that California's businesses are experiencing in the current economic situation. State Fund offers group discounts, a merit rating plan, and lower-than-average premiums in some classifications and industries. Because of our size and role in the marketplace, State Fund serves as a stabilizing force in the California economy.

"State Fund is committed to our promise to California. We will continue to maintain our financial strength, our open-door policy of providing workers' compensation insurance for any employer who needs it, and to provide gold standard service to our broker community and policyholders."

SCIF spokesperson Jennifer Vargen said she did not believe the rate increase was any surprise and it was communicated to brokers and insurer trade groups.

Although SCIF is aware of the difficulty that a rate increase poses for businesses in the current economy, Ms. Vargen said SCIF has a "huge responsibility" to be a steadying influence on the marketplace. "We price for long-range stability," she said, noting that prior to the legislative reforms SCIF rates had skyrocketed, but at the same time 26 comp carriers had gone out of business.