Skyrocketing medical costs blamed for proposed workers' comp. increase

Chris Rizo Aug. 16, 2008, 7:34am

Steve Poizner (R)

SACRAMENTO, Calif. (Legal Newsline)-An increase in medical costs in California could begin to cost businesses in the Golden State in the way of increased workers' compensation premiums.

The state Workers' Compensation Insurance Rating Bureau on Friday filed a proposal for a 16 percent increase in the pure premium rate, which insurance companies use to determine how much to charge employers.

Officials said rising medical costs are partially to blame for the proposed increase, while tort reform advocates say the rise in medical costs is tied to the bevy of frivolous lawsuits that are filed in the state.

An increase in the pure premium rate does not mean that every business in California will see an increase in their workers' compensation premiums. It is simply a benchmark for insurers.

The California Department of Insurance will consider the proposal Sept. 15. State Insurance Commissioner Steve Poizner will then have 45 days to either accept or modify the proposal.

"The commissioner has determined that it is unknown whether there will be a significant adverse economic impact on businesses as a result of the proposed changes to the pure premium rates," the statement of reasons says. "Adjustments to the pure premium rates are advisory only and it is left to workers' compensation insurers to determine what adjustments to make to their pure premium rate."

Last year, the Republican commissioner rejected a proposal for a 4.2 percent increase. If he approves an increase this year, the new rate would take effect in January.

Workers' compensation rates in California have fallen 65 percent since 2003.

In November, Poizner called on insurance carriers to keep their workers' compensation rates in check.

"Workers' compensation insurers are enjoying a robust market and extraordinary profitability," Poizner said in a statement at the time. "Costs to insurers have plummeted 70 percent since 2003. This represents a tremendous savings that should allow insurers to give businesses additional relief in the form of lower rates."

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