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California private self-insured indemnity claim frequency increased 7.6% in 2013, but the incidence of medical-only claims declined 4.7%, so the overall claim frequency rate for private self-insured employers showed little change from the 2012 level according to a CWCI analysis of data compiled by the California Office of Self Insurance Plans (OSIP).

OSIP’s annual summary offers the first look at private, self-insured claims experience for calendar year 2013, tracking a number of variables, including medical-only and indemnity claim volume as well as total payments and total incurred losses on those claims through the end of last year. The summary of 2013 claims experience covered 2.09 million workers employed by California private self-insured employers, which was down about 2% from 2012, but down nearly 26% from the 2.81 million employees covered in the initial report for 2005 – the first year following enactment of SB 899. Private self-insured employers reported a total of 76,015 claims last year, 1,542 fewer than in the 2012 initial report, and the lowest first report tally in the last 10 years.

To control for the effect of year-to-year changes in the number of covered employees on claim counts and to determine the claim frequency trend for the past decade, CWCI used the OSIP first report data from 2004 to 2013 to calculate the number of private self-insured claims per 100 employees. The results show a sharp decline in private self-insured claim frequency in the wake of the 2002-2004 reforms, followed by an increase from 2005 to 2007 as the medical-only claims rate rose. Since 2007, overall claim frequency for private self-insured employers is down 8.8%, primarily due to reductions in the medical-only claims rate. In contrast, from 2006 until last year, indemnity claim frequency remained relatively flat, ranging between 1.32 and 1.37 claims per 100 employees; but, in 2013, it registered the biggest increase in 10 years, jumping 7.6% to 1.42 claims per 100 employees – the highest level since 2005.

The decline in the covered work force also affected the total paid losses for 2013, as private self-insured employers reported that as of the end of the year they had paid $180.9 million ($76.7 million indemnity + $104.2 million medical) on 2013 claims — 2.8% less than the $186.2 million recorded in the initial report for 2012 claims. That translates to an average payment of $2,380 for the 2013 claims at the end of the calendar year, less than 1% below the average for 2012, and only 4.2% below the 10-year high of $2,485 noted in the first reports for 2010 claims. A closer look at the first reports reveals that the private self-insureds averaged $1,009 in indemnity payments on their 2013 claims, 2.6% more than in 2012 and the highest level in the last 10 years; while medical payments on the 2013 claims averaged $1,371, 3.3% less than in 2012 and 8.6% less than 10-year high noted in 2010 — but still 38.1% more than the post-reform low of $993 from 2005.