Initial Data on 2012 Private Self-Insured Claims Show Stable Claim Frequency, Declining Severity

Initial Data on 2012 Private Self-Insured Claims Show Stable Claim Frequency, Declining Severity

Workers’ compensation claim frequency among California’s private self-insured employers showed almost no change in 2012 as a slight increase in the incidence of medical-only claims was offset by a slight reduction in indemnity claim frequency according to a California Workers’ Compensation Institute (CWCI) analysis of data compiled by the state Office of Self-Insurance Plans (OSIP).

OSIP’s annual summary of private self-insured data, released October 30, provides the first snapshot of California private, self-insured claims experience for cases reported in 2012, including the total number of covered employees, medical-only and indemnity claim counts, and total paid and incurred losses on those claims through the end of the year. The latest summary reflects the experience of private self-insured employers who covered 2.12 million California employees last year (vs. 2.11 million in the 2011 initial report), and who reported a total of 77,557 claims in 2012 – nearly unchanged from the 77,386 claims noted in the 2011 initial report. That translates to frequency rate of 3.65 claims (2.33 medical-only + 1.32 indemnity) per 100 employees – almost identical to the 2011 rate of 3.66 claims (2.29 medical-only + 1.37 indemnity) per 100 employees. Total wages and salaries for private self-insured employees totaled $83.6 billion last year, up 3.2 percent from 2011.

Though the number of reported private self-insured claims has dwindled over the last decade, and claim frequency has shown little change since 2005, average paid and average incurred losses on private self-insured claims remain above the pre-reform levels recorded a decade ago. The initial results for 2012, however, show that last year was the first time since 2005 that both average paid and average incurred losses per private self-insured claim declined, with all of the year-to year reduction in the average paid and most of the reduction in average incurred due to declining medical losses. With claim severity declining, and almost no change in claim volume, total paid losses for 2012 private self-insured claims at the first report fell to $186.2 million, $6 million less than in the 2011first reports, while first report incurred losses fell by $25 million to $594.6 million.

The Institute also reviewed more developed loss data from private self-insured’s 2nd through 5th reports on 1999 to 2011 claims which all indicated that private self-insured claim severity (the average loss per claim) fell sharply following the 2002-04 reforms, but after bottoming out with calendar year 2005 claims, began to increase rapidly. As a result, even though claims volume has declined and claim frequency has been flat, total losses for California private self-insured employers measured at the 24-, 36-, 48-, and 60-month benchmarks have continued to trend up.  

OSIP’s 2012 summary of private self-insured data, which reports on calendar year data, follows the March release of public self-insured claims data, which is reported on a fiscal year basis. Thus, the data from public self-insured employers now lags the private self-insured data by six months, reflecting claims and losses reported through June 2012 rather than through December. The OSIP annual summaries for both private and public self-insured claims from each of the 10 most recent years are posted online at http://www.dir.ca.gov/SIP/StatewideTotals.html.  CWCI members and subscribers may also log on to the Institute’s website to view an Institute Bulletin that includes more details and graphics.