California Self Insureds’ Average Claim Costs Jump as Medical Losses Increase

California Self Insureds’ Average Claim Costs Jump as Medical Losses Increase

Calendar year 2008 data issued by the state Office of Self Insurance Plans (OSIP) last week shows average paid and incurred losses on California workers’ compensation self-insured claim rose sharply last year, led by a big jump in medical payments.

The state’s initial summary of 2008 private self-insured data, gives the first look at self-insured claims experience for calendar year 2008, tracking among other things, the number of medical-only and indemnity claims filed, as well as the total amount paid and the total incurred losses on those claims through December 31 of last year. Compared to initial summaries from earlier years, the 2008 report showed California’s private self-insured work force increased 4.3% to 2.39 million workers in 2008, though that total was 3.3% less than in 2003 – the last year prior to enactment of SB 899, the legislative overhaul of the state’s workers’ compensation program signed by Governor Schwarzenegger.

The private self-insured employers reported 91,715 claims last year, only 36 more than in the 2007 initial report, though that was the first increase of any kind in 17 years. As of December 31, aggregate payments on the 2008 claims totaled $191.4 million ($73.7 million indemnity + $117.7 million medical), compared to $170.8 million in private self-insurers losses noted in the initial report for 2007 claims – a year-to-year increase of 12.1%. Those figures translate to average payments of $2,087 on the 2008 claims at the end of the calendar year, up 12% from the comparable figures for 2007, and up 20.6% since self-insured claim costs hit a post-reform low of $1,730 in 2005. A closer look reveals that private self-insureds averaged $804 in indemnity payments on their 2008 claims, 5.7% more than in 2007 and 10% more than the recent low of $731 in 2006; while medical payments on the 2008 claims rose to $1,283, 16.4% more than in 2007 and 29.2% more than the 2005 post-reform low of $993.

The year-end incurred loss data also shows the growth in private self-insured claim costs. As of December 31, aggregate incurred losses on the 2008 claims totaled $583 million, 6% more than the post-reform low of $550 million noted in the initial report for 2007 claims. There was little change in the number of private self-insured claims, so the increase was mostly due to higher incurred costs per claim, which increased to $6,360 in 2008, the highest level since reforms were enacted, and 13.8% more than the post-reform low of $5,588. Medical costs were again the biggest cost driver, as average incurred medical jumped to $4,149 in 2008, the highest level since 2003 and 20% more than the post-reform low of $3,450 in 2005.

OSIP also compiles public self-insured claims data, which is reported on a fiscal year basis rather than a calendar year basis, so the public self-insured data now lags the private self-insured data by 6 months. Updated data from the public self-insurers must be submitted to the state by October, so the next report on their experience should be released by early next year. In the meantime, CWCI has issued a bulletin that includes tables and analysis on the public self-insurer experience through FY 2007-2008, which also show recent increases, as well as the newly released data on private self-insurer claims experience through the end of last year.  Institute members and subscribers may access the bulletin by logging on to http://www.cwci.org/.  The OSIP has posted its annual summaries for both private and public self-insured employers from each of the eight most recent years on its website at http://www.dir.ca.gov/SIP/StatewideTotals.html