Why do we talk so much about safety? 

A recent study released in the state of Oregon placed California as the most expensive state in the nation for workers' compensation premiums.  The fact is, we cannot talk enough about safety.  Injury claims do occur, and once you suffer the increased premiums due to that injury, you will understand why there is never enough attention paid to safety.

While the CA Department of Industrial Relations may not agree with the report, the cost of workers' compensation insurance in California is increasing.  And the difference between number one CA and number 2 Connecticut is significant.

A list of state rankings for workers’ compensation premiums shows a slight drop in premiums in the last two years, and that a number of states are close in terms of how much employers are paying. The list put out by the Oregon Department of Consumer and Business Services once every two years, and analyzed in an Insurance Journal article, shows the 2014 median value of workers’ comp premiums paid was $1.85 per $100 of payroll, a drop of 2 percent from the $1.88 median in the 2012 study.

National premium rates range from a low of 88 cents in North Dakota to a high of $3.48 in California, the report shows.

The list also shows 21 states within 10 percent of the median and the range from highest and lowest rankings has been shrinking, according to Jay Dotter, who put the report together. The effect is that it makes the list more "volatile," Dotter said, adding that it’s important to note that volatility because some states use the list to measure the performance of their workers’ comp system. "A small change in the index rate can give you a larger change in ranking," he said.

As an example of a state that relied on the list to make changes Dotter pointed to Hawaii’s workers’ comp administrators, who noted their top 15 ranking in the 2006 report and put notice of the poor performance on a state’s website and publicized it to help champion reforms that were eventually passed. The state was ranked 27th on the latest report.

Oregon’s workers’ comp system was in sad shape when the state began to compile the list in the 1980s in order to evaluate itself and push for reforms that were eventually passed. The state went from 6th place on the list and was 43rd on this year’s list, its best performance to date, according to Dotter.

The study puts states’ workers’ comp rates on a comparable basis using a constant set of risk classifications for each state. This study used classification codes from the National Council on Compensation Insurance. Following California’s $3.48 per $100 in payroll was not even close to Connecticut ($2.87) at No. 2 on the list, coming in it at 155 percent above the national median workers’ comp premium. New Jersey ($2.82), New York ($2.75), and Alaska $2.68) rounded out the top five.

North Dakota (88 cents) was at the bottom of the list, which makes is the cheapest state for employers. It has traditionally ranked lowest, and the state retained it’s ranking from the 2012 list and also saw a drop in premiums from $1.01. Other states where workers’ comp is far below the national median for workers’ comp premiums are Indiana (at 50 percent of the national median), Virginia (61 percent), Arkansas (64 percent) and Massachusetts (68 percent).

Despite major workers’ comp reforms signed into law in 2012 California easily tops the 2014 Oregon Workers’ Compensation Premium Rate Ranking Summary.

It’s an unacceptable position to be in considering all the reforms that were made two years ago, said Workers’ Compensation Action Network spokesman Jerry Azevedo. "Try as we might to reform California’s workers’ compensation system, employers here continue to bear the heaviest cost burden in the nation - by a wide margin," Azevedo said. Azevedo noted that the same study has consistently ranked California among the most expensive states for more than a decade. In the 2012 report California was third on the list with $2.92 per $100 of payroll, so in the two years since Gov. Jerry Brown signed into law the reforms of SB 863 premiums have jumped 56 cents.

Not surprisingly, California’s Department of Industrial Relations Director, Christine Baker is taking a bit of umbrage with the study.  Baker called out some issues she had with the study.  “It’s good for Oregon, but it isn’t fair to California,” Baker said.

Baker said the report compares different occupational classes, and it fails to include adjustments resulting from the application of deductible plans or the return of policyholder dividends.  “It is such a completely different distribution,” she said, adding that the industrial mix and the size of California’s employment ranks are not comparable to other states in the study.

Also not taken into account in the report are the reforms to California’s workers’ comp system ushered in by Senate Bill 863 in 2012, “many of which have yet to take effect,” Baker said.  Projections indicate that without SB 863, workers’ compensation costs would have spiked more sharply in 2013 and 2014, and that insurance prices had already begun to rise in 2012.

According to Jay Dotter, who put together the study, anyway you slice it the report doesn’t bode well for California’s workers’ comp system.

Study Shows California Has Highest Comp Rate in Nation

Reprinted by permission, the Law Offices of Floyd, Skeren & Kelly