The Workers’ Compensation Insurance Rating Bureau (WCIRB) has prepared a new report containing estimated California workers’ compensation costs for 2017 based on insured employer experience. The report also reflects payments made by the California Insurance Guarantee Association (CIGA)
Key findings in the report include:
Total insurer combined losses and expenses incurred in 2017 were $16.2 billion, or 91% of calendar year premium, compared to $16.9 billion (or 94% of calendar year premium) in 2016.
Calendar year 2017 earned premium totaled $17.7 billion (as compared to the $18.0 billion of premium earned in 2016).
Medical losses paid in 2017 were $4.7 billion, or 56% of total loss payments. Of these payments, $1.3 billion were paid for physician services, $1.3 billion were payments made directly to injured workers, $0.7 billion were paid for inpatient or outpatient services, $0.2 billion were paid for pharmaceuticals, and $0.3 billion were paid for medical-legal evaluations.
Beginning with claims incurred on policies incepting on or after July 1, 2010, the cost of medical cost containment programs is required to be reported to the WCIRB as allocated loss adjustment expense rather than as medical loss.The total cost of medical cost containment programs in 2017 was $443 million compared to $468 million in 2016.
Indemnity benefits paid in 2017 were $3.7 billion, or 44% of total loss payments. Of this amount, temporary disability benefits paid totaled $1.8 billion and permanent partial disability benefits paid totaled $1.5 billion.
Medical-legal cost data for 2017 shows that orthopedic evaluations accounted for about 55% of the cost of all medical-legal evaluations. The exhibits also show that the average cost of a medical-legal evaluation was $1,496. Psychiatric evaluations were the most expensive, averaging $3,268.
Incurred loss adjustment expenses (allocated and unallocated) in 2017 were $3.3 billion, or 19% of earned premium. (This includes the full cost to insurers of administering, adjudicating and settling claims.) Incurred loss adjustment expenses include $894 million in defense attorney expenses incurred in 2017. (For comparison purposes, in 2016, incurred loss adjustment expenses were 16% of earned premium, including $827 million in defense expenses.)
In total, California insurers have incurred about $6.7 billion in expenses in 2017, or 38% of 2017 earned premium. (For comparison purposes, in 2016, total incurred expenses were 34% of earned premium.)
Although generally part of incurred indemnity losses rather than expenses, the amount paid in 2017 to applicant attorneys was derived from the WCIRB’s Annual Expense Call. In 2017, applicant attorneys were paid $413 million. (In 2016, applicant attorneys were paid $408 million.)