Worker's compensation premiums start trending upward again.

For three years, California employers have been celebrating falling workers' compensation rates - with premiums dropping an average of 40 percent.

But now, the party appears to be over, especially for smaller firms and industries that traditionally file high numbers of claims.

Workers' comp premiums during the first quarter of 1996 were, on average, between 1 percent and 2 percent higher than in the first quarter of 1995, according to David Bellusci, senior vice president and chief actuary for the state Workers' Compensation Insurance Rating Bureau, which gets the first look at insurer claims and balance sheets.

"The cost of claims turned down in 1992 and 1993 and continued to drop in 1994, thanks to anti-fraud efforts and the workers' comp reforms," Bellusci said. "But last year, the cost of claims was flat. Meanwhile, the prices the carriers were charging last year were too low to cover the costs; some are still too low. During the first quarter, we started to see things fall more into line. The trend line has flattened out."

Bellusci said rising medical treatment costs and higher weekly benefit levels that took effect in January 1995 have put upward pressure on costs, offsetting the cost reductions from anti-fraud efforts and the 1993 reforms.

With the advent of the open workers' comp insurance market in January 1995, a price war erupted among carriers as they tried to grab lucrative accounts. Premium prices - which already had been ordered down 28 percent before the market was deregulated - fell another 15 percent on average last year, with some companies experiencing larger drops in their premiums.

However, this year's policy renewals are telling a different story.

"A majority of our clients are seeing no change in their rates during this round of renewals," said Ray Piantanida, vice president of risk and organizational management for Anderson and Anderson, an Irvine insurance broker. "Most of the rest are seeing modest increases; very few are seeing their rates go down substantially."

Many companies initially have been hit with higher premium quotes, but, in the new deregulated environment, have been able to use their bargaining power to keep rates in check, Piantanida said.

A typical example is Coatings Resource and Seaside Corp. in Huntington Beach, which makes industrial coatings. Owner Ed Laird said that the initial quote from his carrier was up 5 percent from last year's price of $4,500 a month.

"My agent told our carrier that he would shop around for a better rate; at that point, our carrier came back and held the line," Laird said.

He added that the company's premium per employee is 27 percent below the 1992 peak.

Some companies are seeing their premiums go up substantially.

For example, at American Metal Bearing Co., a Garden Grove maker of metal bearings for marine and industrial use, the workers' comp premium for its 26 employees jumped 7 percent from $3,500 a month to $3,750 a month, according to controller Roger Garten. This increase comes in spite of an improvement in the company's claims picture, which re suited in its experience rating dropping from 128 to 116 (100 is standard).

"We expected there would be a shake-out in the market and that we would likely see an increase in premium," Garten said. "It does not affect our liquidity, but it does subtract from the bottom line."

Garten noted that despite the increase, American Metal Bearing is paying 46 percent less than the $7,000 a month it paid during the height of the workers' comp crisis in 1992.

Small companies like American Metal Bearing that saw their rates drop so sharply over the last three years are among the hardest hit with increases now, Piantanida said. "Their rates are so low that they have become loss leaders for insurance carriers. Few carriers will take them on because there's little money to be had; a carrier who does take them on has to raise prices if they want to make even a little money."

The picture is different for larger companies that are in industries with low injury risk and that have relatively injury-free records. Those companies are fought for keenly by insurers and still are seeing their rates go down, according to Jerry Mendelsohn, senior vice president at Brakke, Schafnitz Insurance Brokers Inc.