Workers' Compensation Update

As a member of the WCAN coalition, IBA West is pleased to pass along the following summary prepared by WCAN to keep you informed of recent events and trends affecting California’s workers’ compensation system. 

State lawmakers are back at the Capitol, and pundits think the stage is set for the next “political donnybrook" over workers’ compensation issues. Sacramento Bee columnist Dan Walters points to new cost data from the Workers’ Compensation Insurance Rating Bureau, which shows insurers paying $1.4 billion more from medical treatment and cash benefits than they did in 2005. Since 2005, the average cost per workers’ compensation claim has increased by 40% to more than $60,000 and California’s system is once again among the costliest in the nation.

After several years of stable workers’ compensation rates for California employers, analysts say say rates will increase in 2012 to reflect the higher costs.

A new report sheds light on what’s driving increased costs in California’s system. The report from the Workers’ Compensation Research Institute (WCRI) looks at multiple states and finds that workers’ compensation costs in California have grown more rapidly than in recent years. Average cash benefit costs per claim increased 8% in California in 2009.

According to WCRI, factors included a one-week increase in how long injured workers are receiving temporary disability payments and an increase in the number of claims where benefits are collected for more than one week. For medical costs, the report points to fee schedule increases, increases in services per visit for physical medicine, and more complex office visits with higher prices being billed more frequently.

Finally, the State of California announced two efforts to crack down on workers’ compensation fraud in 2012. A law passed last year targets employers who deliberately misclassify employees as independent contractors in order to save on workers’ compensation costs. Fines start at $5,000 and range as high as $15,000 per violation. If the employer is found to have engaged in a "pattern or practice" of misclassification, these fines increase up to a minimum of $10,000 per violation, with a cap of $25,000 per violation. Additionally, the California Department of Insurance is joining with the Department of Industrial Relations (DIR) and other allied agencies to create the Labor Enforcement Task Force to focus on employers that underreport payroll or misclassify employees in order to obtain a lower rate for workers' compensation coverage.

Please contact IBA West at or WCAN at if you have any questions or comments.