California Comp Costs Spiral Upward Again

The California Manufacturers Association is citing new evidence that workers' compensation costs in the state are increasing at an alarming rate.

The California Manufacturers Association (CMA) is citing new evidence that workers' compensation costs in the state are increasing at an alarming rate.

CMA is concerned that workers' compensation will spark job losses and business flight if lawmakers fail to reject legislation to further increase benefits.

"If the Legislature forces employers to shoulder a $2.7 billion benefit hike, on top of projected system increases of $1.8 billion, the impact on job creation and growth would be devastating. Heaping another $4.5 billion on employers will eventually be felt by consumers and taxpayers, which, under any scenario, threatens California's economic boom," CMA President Jack M. Stewart said.

The Workers' Compensation Insurance Rating Bureau (WCIRB) has asked the insurance commissioner to increase "pure premium rates" 18.4 percent for new and renewal policies as of Jan. 1. These rates are intended as guidelines to develop marketplace premiums.

Also, Senate Bill 320 would increase benefits for temporary total disability, permanent total disability and permanent partial disability, as well as death and life pension benefits. WCIRB has estimated that the cost impact of these benefit increases would be $2.7 billion, resulting in a rate increase of 27.1 percent over a three-year period.

Despite efforts in 1993 to overhaul the system, Stewart believes that the underlying costs of workers' compensation again are spinning out of control. "Not only is a $2.7 billion benefit hike too much, but given what we know about the system's lingering problems, any proposed changes must not be passed without fundamental fixes to the system," he said.

The state-mandated workers' compensation insurance system is completely employer funded. WCIRB estimates that employers (insured and self-insured) will pay $10.4 billion in 1999 to provide workers' compensation insurance. Of this total, $6.9 billion is estimated to represent earned premiums paid by insured employers doing business in California.

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