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Senate Bill No. 863 Cost Monitoring – Current UpdateW o r k e r s’ C o m p e n s a t i o n I n s u r a n c e R a t i n g B u r e a u o f C a l i f o r n i a®
Senate Bill No. 863 Cost Monitoring – Current Update
Dave BellusciWCIRB California
State Senate Committee on Labor and Industrial RelationsMarch 25, 2015Sacramento, California
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Senate Bill No. 863 Cost Monitoring – Current Update
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The information provided in this Presentation was developed by the Workers’ Compensation Insurance Rating Bureau of California (WCIRB) solely for the purpose of discussion during this Presentation. The WCIRB shall not be liable for any damages, of any kind, whether direct, indirect, incidental, punitive or consequential, arising from the use, inability to use, or reliance upon information provided in this Presentation.
© 2015 Workers’ Compensation Insurance Rating Bureau of California. All rights reserved.No part of this work may be reproduced or transmitted in any form or by any means, electronic or mechanical, including, without limitation, photocopying and recording, or by any information storage or retrieval system without the prior written permission of the Workers’ Compensation Insurance Rating Bureau of California (WCIRB), unless such copying is expressly permitted by federal copyright law.
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Senate Bill No. 863 Cost Monitoring – Current Update
Overview
Average Workers’ Compensation Premium Rates Since 1978 Countrywide Comparison of Average Premium Rates Senate Bill No. 863 Update
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Senate Bill No. 863 Cost Monitoring – Current Update
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California Premium Rating System
• Pre-1995 Minimum Rate Law – Uniform Set of Full Premium Rates Approved by Insurance Commissioner
• Post 1995 – Advisory Pure Premium (Loss Cost) Rates Approved by the Insurance Commissioner
– Insurers file their own premium rates and plans with Commissioner – Very competitive market (over 400 insurers licensed))
Senate Bill No. 863 Cost Monitoring – Current Update
Estimated Average Charged Insurer Rate Per $100 of Payroll
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1978 1983 1988 1993 1998 7/03-12/03 2008 2013 2014$0.00
$2.00
$4.00
$6.00
$8.00
$2.99$3.24
$4.21 $4.40
$2.33
$6.29
$2.15
$2.86 $2.93
Policy Period
Sources: WCIRB Aggregate Financial Data Calls and Unit Statistical Submissions
Average charged rate is 2% below 1978 and 53% below the 2003
level, but is up 36% since 2008
Senate Bill No. 863 Cost Monitoring – Current Update
0.00
0.25
0.50
0.75
1.00
62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
83% Reduction in claim frequency in the past 50 years from 1 in 5 injured to 1 in 25
Long-Term California Claim Frequency Indexed to 1962
6
Source: Based on reported unit statistical claim counts to reported payroll adjusted for wage inflation.
1962 1978 1996 2012
Senate Bill No. 863 Cost Monitoring – Current Update
Overview
Average Workers’ Compensation Premium Rates Since 1978 Countrywide Comparison of Average Premium Rates Senate Bill No. 863 Update
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Senate Bill No. 863 Cost Monitoring – Current Update
Rate Comparison Based on Oregon Studies California* vs. National Median Average Charged Rate
$2.58
$2.04
$2.92
$3.48$3.34
$2.68$2.72
$4.13
$6.08
$5.23
$2.26$2.42
$2.26$2.48
$1.88 $1.85
$0.00
$2.00
$4.00
$6.00
1/1/00 1/1/02 1/1/04 1/1/06 1/1/08 1/1/10 1/1/12 1/1/14
Rate Effective Period
California National Median
*The information is based on the state of Oregon biennial rate comparison and is based on the state of Oregon classification mix and, as a result, the California average rates shown on this exhibit differs from other measures of the average California rate.
Projected
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In 2014 California is only state in the Oregon study with an average rate over $3.00 per $100
Senate Bill No. 863 Cost Monitoring – Current Update
Countrywide Estimated Permanent Partial Disability Claims per 100,000 Employees
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DC MI VA MA ME LA AL AZ NH UT FL GA PA AR TX MS MN IN KY SD ID NC DE MT VT NE MD HI AK NM TN NV RI CO SC WI KS IA OR NJ CT MO NY IL CA OK0
200
400
600
800
California has the second highest perma-nent partial disability frequency in the
country 120% higher than the Countrywide median
707
Source: 2014 NCCI Annual Statistical Bulletin for 2010 policy year at first report level.
Median = 320
Senate Bill No. 863 Cost Monitoring – Current Update
Countrywide Incurred Medical Benefits per Indemnity Claim
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RI MA HI DC MI OR ME TX NV MO WI CO AR CT ID MD OK IA GA IN MS FL AZ PA NC NE NY NM TN NH VT NJ SC MN SD KS MT IL KY AL UT VA LA AK CA DE$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$46,940
Source: NCCI Annual Statistical Bulletin for 2010 policy year at first report level.
Median = $26,124
California has the second highest medical cost per indemnity claim in the country
80% higher than the Countrywide median
Senate Bill No. 863 Cost Monitoring – Current Update
Average Benefit Delivery Costs; Claims with 7+ Days of Lost Time California vs. WCRI 16 State Median (at 36 Months)
AR FL IA IL IN LA MA MI MN NC NJ PA TX VA WI Median
CA2,000
4,000
6,000
8,000
10,000
$4,417
$6,763
$4,401
$5,776
$3,746
$8,588
$4,308$4,470
$4,790
$6,152 $6,331$6,124
$5,368
$4,774
$3,498
$5,079
$8,529
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Source WCRI Compscope Benchmarks, 14th Edition for claims arising from October 1, 2008 through September 30, 2009 evaluated as of March 31, 2012.
California is nearly 70% higher than the WCRI median
Senate Bill No. 863 Cost Monitoring – Current Update
Overview
Average Workers Compensation Premium Rates Since 1978 Countrywide Comparison of Average Premium Rates Senate Bill No. 863 Update
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Senate Bill No. 863 Cost Monitoring – Current Update
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SB 863 Summary
• Signed by the Governor on September 18, 2012• Includes Benefit Increases Effective 1/1/2013 and 1/1/2014• Series of Structural Reforms to Benefit Delivery System• Initially Evaluated by WCIRB as Small Net Savings• WCIRB Retrospectively Evaluating Cost Impacts
Senate Bill No. 863 Cost Monitoring – Current Update
WCIRB Prospective Cost Evaluation of SB 863Summary of WCIRB Initial Prospective Estimates ($’s in billions)
SB 863 Provisions Impact on Statewide Claim Costs
% Impact on Claim Costs
2013 & 2014 PD Benefit Level Changes +$1.2 +6.4%Liens ($0.5) -2.5%IMR (Impact on Frictional Costs & TD Duration) ($0.4) -2.1%Other Reforms ($0.5) -2.7%Total Estimated Impact of SB 863 ($0.2) -1.1%
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Senate Bill No. 863 Cost Monitoring – Current Update
Senate Bill No. 863 Cost Monitoring
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Emerging Better Than Projected
Emerging Worse Than Projected
Reductions in Liens Claim Frequency Increases
More IMRs than Projected
Loss Adjustment Expenses Per Claim Increasing
Average Indemnity Cost Per Claim
Average Medical Cost Per Claim
Senate Bill No. 863 Cost Monitoring – Current Update
2011 2012 2013 20140
200
400
600
800
1000
1200
398.3
1,059.9
166.0 166.3
65.5
119.4
20.2 23.8
Los Angeles AreaRest of State
1.2 million liens filed in 2012
186K liens filed in 2013
460K liens filed in 2011
190K liens filed in 2014
Number of Liens Filed
Calendar Year/QuarterSource: EAMS Liens Data
In Thousands
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2014 lien filings down more than 80% from 2012 and almost 60% from 2011 as compared to 40%
projected reduction
Senate Bill No. 863 Cost Monitoring – Current Update
Cumulative Change in Average Cost Per Indemnity Claim in 2013 & 2014
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Indemnity Medical-15%
-10%
-5%
0%
5%
10%
15%
20%
11.3%9.7%
7.0%
-8.3%
ProjectedActual (Current Estimate)
Medical Costs Per Claim Emerging Much Lower than Projected
Senate Bill No. 863 Cost Monitoring – Current Update
Senate Bill No. 863 Cost Monitoring
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Emerging Better Than Projected
Emerging Worse Than Projected
Reductions in Liens Claim Frequency Increases
More IMRs than Projected
Loss Adjustment Expenses Per Claim Increasing
Average Indemnity Cost Per Claim
Average Medical Cost Per Claim
Senate Bill No. 863 Cost Monitoring – Current Update
Changes in Estimated Indemnity Claim Frequency from 2011 to 2014
0
3
6
0.9
4.9
ProjectedActual (Current Estimate)
Accident Year
Indemnity claim frequency since 2012 emerging higher than projected
% As of December 31, 2014
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Senate Bill No. 863 Cost Monitoring – Current Update
Counts of 2014 IMR Filings
IMR Requests Valid IMR Requests Projected 0
50,000
100,000
150,000
200,000
250,000
220,000
135,000
50,000
IMR Counts
IMR requests are more than four times higher than projected and valid IMR requests are almost three times higher
Source: DWC collected from IMR vendor
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Senate Bill No. 863 Cost Monitoring – Current Update
Changes in Average Loss Adjustment Expense Per Indemnity Claim
ALAE 2013 & 2014 ULAE 2013-15%
-10%
-5%
0%
5%
10%
15%
20%
-9.6%-12.3%
18.7%
3.8%
ProjectedActual (Current Es-timate)
Loss adjustment expenses are in-creasing sharply rather than declining as projected
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Actual ALAE changes are projected ultimate changes in private insurer ALAE per indemnity claim as of December 31, 2014 for 2013 and 2014, while the actual ULAE change is the changes in private insurer calendar year paid ULAE per indemnity claim for 2013.
Senate Bill No. 863 Cost Monitoring – Current Update
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SB 863 Provisions WCIRB Original Cost Estimates
($’s in billions)Updated WCIRB
Assessment2013 & 2014 PD Benefit Changes +$1.2Liens ($0.5)IMR (Impact on Frictional Costs) ($0.4)Other Reforms ($0.5)Indemnity Claim Frequency Small IncreaseIndemnity Severities IncreaseMedical Severities Small IncreaseALAE and ULAE Severities Significant DeclinesTotal Estimate – All Items ($0.2)
WCIRB SB 863 Cost Monitoring – Updated WCIRB Assessments