The recommendation has been sent to Insurance Commissioner Ricardo Lara, who will hold a hearing in July on the filing, after which he can approve the filing or reject it and either order a different rate hike or a benchmark rate decrease.
His decision will affect California employers who are just beginning a recovery from the financial effects of the COVID-19 pandemic. If approved, the filing would be the first rate hike since 2015.
The benchmark rate – also known as the pure premium rate – is a base rate that insurers can use as a guidepost for pricing their policies. It includes the cost of claims and claims-adjusting costs, and does not take into account other expenses insurers face.
The recommended 2.7% hike from the Jan. 1 rate is an average across all class codes. Rates will vary from employer to employer.
The recommendation comes as the number of workers’ compensation claims plummeted 23% during the pandemic in 2020 from 2019, according to the WCIRB.
The Rating Bureau is not using any data from COVID-19 workers’ comp claims, as it considers the event a distortion to industrial accident and illness claims and costs.
WCIRB chief actuary Dave Bellusci said that, to reflect the unique impact of the COVID-19 pandemic claims, the Rating Bureau excluded all claims arising from a COVID-19 diagnosis from the analysis and largely relied upon pre-pandemic experience to project future costs.
The drivers of the rate hike request are:
Changes to California’s official workers’ compensation Medical Fee Schedule, which lists the prices that hospitals can charge for various services. The changes are expected to increase average medical costs per claim by 2.4%, the WCIRB says.
Expectations that injury numbers will start climbing as the economy heats up.
The COVID-19 claims story
Workers who contract COVID-19 on the job are eligible for workers’ compensation benefits in California, including medical treatment costs and indemnity pay for time they miss from work due to a positive diagnosis.
Despite the surge in COVID-19 claims among workers, overall workers’ comp claims still plummeted in 2020.
There were 142,513 COVID-19 workers’ compensation claims filed in the state between January 2020 and March 2021, according to the California Workers’ Compensation Institute.
Those illness claims include 883 workers in California who died from COVID-19 complications.