For the third year in a row, California Insurance Commissioner Ricardo Lara has rejected the Workers’ Compensation Insurance Rating Bureau’s proposal for a workers’ compensation rate increase, and has ordered instead that benchmark rates remain the same.
Lara rejected the WCIRB’s proposal that benchmark rates increase 7.6% for policies incepting on or after Sept. 1, saying that there was not enough data to support such a large increase. That means the average benchmark rate will remain unchanged at $1.45 per $100 of payroll over the next year, compared to the $1.56 per $100 of payroll the Rating Bureau had recommended.
The commissioner also rejected a proposal to include a 0.008 cent add-on to account for costs of COVID-19 claims. “Taking into account the unpredictability around COVID-19’s future impact on the workers’ compensation insurance system, and given the very modest indication, I do not believe an additional charge for COVID-19 is warranted at this time,” he said.
The benchmark rate — also known as the pure premium rate — is an average across all of California’s 500-plus class codes. The pure premium rate is a base rate that carriers can use as a guidepost to price their policies.
The rate only takes into account the cost of claims and administering them, and does not take into account other factors such as insurance company overhead and profits.
Insurers are not required to follow the benchmark rate and they can choose to use it or not when pricing their policies. That said, most carriers follow the rate closely, as evidenced by the continuing low pricing for workers’ comp policies in California.
COVID-19 claims
Lara also approved the Rating Bureau’s proposal to include COVID-19 claims in the computation of employers’ experience modifications (X-Mods) for claims, starting Sept. 1.
In 2020, at the start of the pandemic, Gov. Gavin Newsom ordered that illness claims for COVID-19 infections contracted in the workplace be covered by workers’ compensation and that those claims not be included when calculating an employer’s X-Mod.
At the time, the reasoning was that employers had no experience in limiting transmission in the workplace and that COVID-19 infections among workers did not reflect a company’s safety efforts.
Accordingly, only those COVID-19 claims occurring on or after Sept. 1, 2022 would be factored into the calculation of an employer’s experience modification.
The WCIRB asserted that it is reasonable to prospectively include COVID-19 claims in experience rating since the virus is becoming endemic and will be an issue that employers will be dealing with for the foreseeable future.
Like many other workers’ comp hazards, COVID-19 is now part of the ecosystem, and employers can do things to mitigate the risk and protect their workers. The spirit and intent of experience rating is to provide a direct financial incentive to promote workplace safety, and the amendment would advance that goal, according to the Rating Bureau.
How rate decision affects your policy
Whether an employer’s insurance rate stays the same, increases or decreases will depend on its claims history, industry and location. Some employers may still see rate increases if they’ve had claims, especially ones that require costly medical treatment.
Workers’ comp rates are complex. The good news is that with VMA’s experience in the print, creative agency, and manufacturing industry, we are successful in reducing workers’ compensation costs 75% of the time. Please contact Shannon Wolford, VMA Director of Sales and Membership to discuss at 415-710-0568 or shannon@visualmediaalliance.org.