CMA Warns of Higher Workers' Comp Costs; New Evidence Shows System's Costs Spiraling -- Again.

SACRAMENTO, Calif.--(BUSINESS WIRE)--Aug. 16, 1999--

The California Manufacturers Association is citing new evidence showing that California's workers' compensation costs are increasing at an alarming rate.

Once again, workers' compensation will spark job losses and business flight if lawmakers fail to reject legislation to further increase benefits.

"State legislators cannot turn a blind eye to evidence showing that workers' compensation costs are on the rise again," said Jack M. Stewart, President of the California Manufacturers Association. "If the Legislature forces employers to shoulder a $2.7 billion benefit hike, on top of projected system increases of $1.8 billion, the impact on job creation and growth would be devastating. Heaping another $4.5 billion on employers will eventually be felt by consumers and taxpayers, which under any scenario threatens California's economic boom."

The Workers' Compensation Insurance Rating Bureau (WCIRB) has asked the Insurance Commissioner to increase "pure premium rates" 18.4 percent for new and renewal policies effective January 1, 2000. These rates are intended as guidelines to develop marketplace premiums. The WCIRB blames rapidly rising claim costs for benefits and medical and vocational rehabilitation services for this increase.

Also, Senate Bill 320 (Solis), would increase benefits for temporary total disability, permanent total disability and permanent partial disability, as well as death and life pension benefits. The WCIRB has estimated that the cost impact of these benefit increases would be $2.7 billion, resulting in a rate increase of 27.1 percent over a three-year period.

"Despite everyone's best efforts in 1993 to overhaul this system, the underlying costs of workers' compensation are once again spinning out of control," said Stewart. "Not only is a $2.7 billion benefit hike too much, but given what we know about the system's lingering problems, any proposed changes must not be passed without fundamental fixes to the system."

The state-mandated workers' compensation insurance system is totally employer funded. The WCIRB estimates that employers (insured and self-insured) will end up paying $10.4 billion to provide workers' compensation insurance in 1999. Of this total, $6.9 billion is estimated to represent earned premium paid by insured employers doing business in California. According to a study by Oregon's Department of Consumer and Business Services (published April 1999), California insured employers pay the highest workers' compensation premium rates in the nation.

The California Manufacturers Association represents nearly 1,000 small to large manufacturing businesses throughout the state. California manufacturers directly contribute more than $250 billion annually to the state economy and employ more than 2 million workers.