State Fund Files for 8.9% Increase

California's State Compensation Insurance Fund announced it filed a Jan. 1, 2009 revision to its rating plan, which it anticipates will result in an average 8.9% increase in collectible premium. Premiums for individual employers will also vary based on the experience of their particular rating class and experience modification, so individual employers will inevitably see more or less than the average change.

The principal driver of the rate increase is medical inflation. Over the past two years workers' compensation medical costs have been rising at a rate of about 12% per year, according the most recent report published by California's Workers Compensation Insurance Rating Bureau.

"This inflation did not affect rates while claims frequency was falling at double digit rates, but it appears that frequency declines have dropped off to about 2% per year," said Jan Frank, State Fund CEO and president.

"These are uncertain times for the economy, which makes rate setting challenging. We felt it was important to take a conservative approach to pricing," Frank continued, "While rate increases are difficult, it is important to remember that State Fund premium levels have fallen significantly since 2003, and even after this increase, will still be 52% below pre-reform levels."

State Fund's rate filing will apply to new and renewal workers' comp policies with an effective date on or after Jan. 1, 2009.