The Workers’ Compensation Insurance Rating Bureau has just published its 2020 Geo Study – A Report on California Regional Differences. There are sharp differences in cost characteristics across regions of the state. This report highlights those differences.
Key findings include:
— Even after controlling for regional differences in wages and industry mix, indemnity claim frequency is significantly higher in the Los Angeles (LA) Basin and significantly lower in the San Francisco Bay Area.
— Regional differences in indemnity claim frequency have been fairly consistent over time and across industries. During all available years, the LA/Long Beach region has had the highest frequency, and the Peninsula/Silicon Valley region has had the lowest. The difference between these regions has grown over time. Since 2013, the largest improvement in relative indemnity claim frequency is in the Fresno/Madera region, and the greatest deterioration is in the Imperial/Riverside and the San Luis Obispo (SLO)/Santa Barbara regions.
— Pharmaceutical costs throughout the state have dropped dramatically over the last several years, and the prevalence of opioid prescriptions for claims with pharmaceutical payments has also dropped dramatically. The largest decreases in pharmaceutical costs have occurred in Southern California regions, which had the highest pharmaceutical spending at the beginning of the study period. This has decreased the differences in pharmaceutical costs across regions over time.
— The share of cumulative trauma claims as a percent of all claims is much higher in the LA Basin than in other parts of the state, and that gap has generally widened over time.
— Medical-legal costs are significantly higher in the LA Basin and Santa Monica/San Fernando Valley regions than in the remainder of the state.
— Paid allocated loss adjustment expenses (ALAE) are significantly higher in Southern California regions.
— The share of open indemnity claims has decreased substantially in all regions since 2013. The largest decreases have been in the LA Basin regions that had the highest initial open indemnity claim shares. These changes have narrowed regional differences over time.
— The share of indemnity claims with incurred costs greater than $250,000 at third report level is higher in regions that tend to have lower indemnity frequency.
— The share of total claims that arise out of exposure to COVID-19 is higher in regions with lower relative indemnity frequency.