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The Workers’ Compensation Insurance Rating Bureau has prepared its annual report containing estimated California workers’ compensation costs for 2019. The report in general terms explains how much money came into the system in premiums, and then discusses how it was spent. The report does not include self-insured costs and expenses.

Insurer Losses, Expenses and Profits – Calendar year 2019 earned premium totaled $16.1 billion (as compared to the $17.4 billion of premium earned in 2018). Total insurer paid losses in 2019 were $8.3 billion, or 51% of calendar year earned premium. California insurers incurred $5.4 billion in expenses in 2019, or 34% of 2019 earned premium. (For comparison purposes, in 2018, total incurred expenses were 34% of earned premium).

So how was the remaining 66% of the earned premium spent?

Physician and Medical-Legal Costs – In 2019, $4.6 billion, or 55% of total loss payments, were for medical services.

Indemnity Benefits – In 2019, $3.8 billion, or 45% of total loss payments, were for indemnity benefits (including vocational rehabilitation benefits).

Vocational Rehabilitation Benefits – About $73 million in vocational rehabilitation-related benefits were paid in calendar year 2019. This was 1.9% of all indemnity payments in 2019, of which 97% was for non-transferable education vouchers. (For comparison purposes, in 2018, vocational rehabilitation benefits paid was $87 million or 2.3% of all indemnity payments, of which 97% was for non-transferable education vouchers).

In total, incurred losses and expenses in calendar year 2019 were $13.2 billion, or 82% of earned premium. Based on insurer statutory Annual Statement information, the WCIRB estimates policyholder dividends incurred in 2019 to be 0.2% of 2019 earned premium, resulting in an underwriting profit of $2.9 billion, or 18% of premium. (For 2018, the underwriting profit was 23% of earned premium, or $4.1 billion.)

Fees Paid to Applicant Attorneys – Although generally part of incurred indemnity losses rather than expenses, the amount paid in 2019 to applicant attorneys was derived from the WCIRB’s Annual Expense Call. In 2019, applicant attorneys were paid $446 million. (In 2018, applicant attorneys were paid $386 million.)