For the first time in five years, California employers are seeing the cost of their workers' compensation premiums drop, according to the San Jose Business Journal.

The first half of 2004 not only saw a decrease in premiums, but also a drop in the number of injured workers and the arrival of new insurers in the marketplace.

But the Journal also points to two possible threats to the new trend: continued escalation of everyone's medical costs and ongoing court challenges to the changes in state law that are credited with lowering WC costs.

Since 2002, the California legislature has approved three major changes aimed at reforming workers' compensation. They've produced caps on chiropractic care, physical therapy, limits on medical care and a greater role for employers in determining care for injured workers, according to the Journal.

The California's Workers' Compensation Insurance Rating Bureau (WCIRB), which analyzes claims data, reports that the reforms now on the books have resulted in employers paying an average of $5.76 per $100 in payroll in the first half of this year--down from $6.40 during the second half of 2003. That's the first decline in average premiums since 1999.

Moreover, the WCIRB reports:

• The number of claims during the first half of this year fell 12 percent, compared to the same period last year.
  
  
• Rates overall are continuing to decline, and are expected to drop another 10 percent on average next year.

"This has been a wholesale reform of the system," declared Nicole Mahrt, spokeswoman for American Insurance Association in Sacramento. "This is a whole new day for California."

More changes are set to take effect in 2005, the Journal reports. In January, insurers will begin to roll out medical provider networks, which resemble programs available through group health insurance programs. These networks are expected to help control medical costs by allowing insurance companies to negotiate discounts on fees upfront with medical providers.

Another change taking effect next year will modify the permanent disability rating schedule, adjusting the length of time for which eligible workers may be compensated.

The reforms are starting to attract more competitors in the workers' compensation insurance market, and that's expected to help drive costs down further. About 10 companies offer workers' compensation insurance in California, down from about 25 companies a decade ago, says John Suhr, chief executive officer of Suhr Risk Services of California, an insurance broker.

Links

• San Jose Business Journal article, via MSNBC.com