CWCI Report Documents Increasing Workers’ Comp Losses For California Public Self-Insureds

A new California Workers’ Compensation Institute analysis of more than 10 years’ worth of data compiled by the California Office of Self-Insurance Plans (OSIP) shows that for the fifth year in a row, increases in the average loss per claim, led by escalating medical losses, pushed up total workers' compensation costs for cities, counties and other public agencies in the state last year.

OSIP's latest summary of claims data for fiscal year 10/11, issued January 30, 2012, provides the first look at California public self-insureds’ claims volume, total loss payments and total incurred (paid losses plus reserves for future payments) for the year ending June 30, 2011. OSIP compiles the data annually from reports submitted by hundreds of public self-insured entities other than the state of California itself -- including cities and counties, local fire, school, transit, utility and special districts and joint powers authorities. The FY 10/11 summary shows these employers provided workers' compensation coverage to 1.92 million California public workers whose wages and salaries totaled $95.6 billion for the 12 months ending June 30, 2011.

The number of claims reported by public self-insured fell 1.9% last year to 119,007 cases, but that was less than the 5.9% reduction in the covered workforce, so public self-insured claim frequency rose from 5.9 to 6.2 claims per 100 workers in FY 10/11, only the second increase in the last decade. Even with the declining number of claims, public self-insureds' total paid losses at first report increased for the fifth year in a row, climbing to nearly $343 million, which was up $24.7 million (7.8%) from the comparable figure for FY 09/10, and up nearly $83 million (31.9%) from the post-reform low of $259.9 million in FY 05/06. Breaking out the first report average paid losses by benefit type, the Institute found that the increase in public self-insured loss payments over the past five years has been led by growth in medical losses, which have risen 37.4% from the post-reform low of $1,073 to $1,474 last year (which is well above the level noted prior to enactment of the 2002-2004 workers’ compensation reforms), while over the same period the average amount of indemnity paid at first report has increased 26.4% from $1,112 to $1,406.

Comparing initial report incurred data over the same timeframe tells a similar story, as California public self-insureds’ incurred losses at first report jumped from a post-reform low of $852.9 million ($369.4 million indemnity + $483.5 million medical) in FY 05/06 to $1.08 billion ($435.3 million indemnity + $645.7 million medical) last year - up 26.7% in the last five years. There were only 78 more first report claims last year than in FY 05/06, so the $228 million increase in total incurred from the post-reform low was due almost entirely to the steady escalation in the average amount incurred per claim – again, led by increasing medical losses. In the past five years, average incurred medical per public self-insured claim has jumped 33.5%, from $4,065 to $5,426, while average incurred indemnity has risen 17.8% from $3,106 to $3,658.

CWCI has published a Report to the Industry that examines OSIP's latest public self-insured data on FY 10-11 claims reported to OSIP along with more developed data (2nd, 3rd, 4th, and 5th reports) for the most recent 10 years available. The report is posted in the Research section of the CWCI website, www.cwci.org. OSIP also compiles private self-insured claims data, but it is reported on a calendar year basis, so updated figures from California's private self-insurers will be released later this year. The OSIP summaries for private and public self-insured employers are posted at http://www.dir.ca.gov/SIP/StatewideTotals.html.