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California Workers' Compensation Reforms Will Cut Costs by $300M Annually: Fitch

S.B. 863 was signed into law Sept. 18 and takes effect Jan. 1. It is expected to boost permanent disability benefits for injured workers while implementing several measures to help reduce comp costs for insurers and employers.

September 21, 2012
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California's latest workers' compensation reforms are expected to cut the state's comp costs by about $300 million, or 1.4 percent, annually, Fitch Ratings Ltd. said Sept. 20.

S.B. 863 was signed into law Sept. 18 and takes effect Jan. 1. It is expected to boost permanent disability benefits for injured workers while implementing several measures to help reduce comp costs for insurers and employers.

In a statement, Fitch cited estimates from the California Workers' Compensation Insurance Rating Bureau, which expects decreased claim frequency to lower costs by $900 million, or 4.5 percent, in 2013. The savings would be offset by $600 million in increased disability benefits in 2014, Fitch said.

"These changes will help to avert market crisis conditions similar to those experienced in the early 2000s that saw several insurer insolvencies and expansion of the State Compensation Insurance Fund to 53 percent market share in 2003," the statement said. "However, the modest anticipated savings also indicate that further price increases are required in the California workers compensation market to return the market closer to an underwriting profit and attract underwriting capacity to the state."

Sheena Harrison writes for Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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