Table 3 - California Workers’ Compensation Industry Average Charged Rate per $100 of Payroll
$ Dollars
6.29
6.05
5.94
6.00
5.49
Figure 2: CaliforniaWorkers’ Compensation industry Average Charge Rate per $100 of payroll
4.96
4.66
4.36
4.00
3.50
3.46
3.04
2.85 2.75
2.90 3.00
2.69
2.87 2.85 2.67
2.47 2.59
2.30
2.30
2.15 2.10 2.25 2.32
2.00
0.00
1999 2000 2001 2002 1/03- 6/03
7/03- 12/03
1/04- 6/04
7/04- 12/04
1/05- 6/05
7/05- 12/05
1/06- 6/06
7/06- 12/06
1/07- 6/07
7/07- 12/07
2008 2009 2010 2011 1-12- 6/12
7/12- 12/12
2013
2014 1/15- 6/15
7/15- 12/15
1/16- 6/16
7/16- 12/16
Policy Year
cancer, hospital, accident and critical illness plans. Dental, life, vision, and disability continue to be popular benefits with employees. Conclusion The insurance industry remains in a solid financial position. Despite the costs of the hurricanes, rates on average should be consistent, if not trending down slightly. The industry, however, has a good memory and has not forgotten the mediocre returns experienced from 2008 to 2012. Most underwriters still want more rate but the industry’s capacity (as measured by surplus) continues to have a downward effect on pricing. While the health of the insurance market will directly affect what you pay for insurance, a much more important element is your Risk Profile. When an underwriter considers your account, they will evaluate your overall operations, your human resources practices, safety culture, and overall safety practices, as well as your loss history. A positive Risk Profile will result in substantially better pricing than a poor Risk Profile. This underscores the importance of proactively man- aging your cost of risk. The only way to lower your insurance premi- ums and the total cost of risk in the long run is to reduce the frequency and severity of the claims that drive this risk. While you cannot control the insurance marketplace, you can directly control your Risk Profile. JEFF CAVIGNAC, CPCU, RPLU, ARM; JAMES P. SCHABARUM II, CPCU, AFSB; PATRICK CASINELLI, RHU, REBC, CHRS; AND MATT NOONAN, CIC, RHU, CHRS, CCWS are principals of Cavignac & Associates (www.cavignac.com), a risk management and commercial insurance brokerage firm providing a broad range of insurance and expertise to design and construction firms. Founded in 1992, the firm currently employs a staff of more than 50 people at offices in San Diego.
that, to stay in compliance with the ACA’s metallic tier guidelines, they must change plan benefits every year. The ACA guideline gave a percentage requirement for each tier — 90 percent = Platinum, 80 percent = Gold, 70 percent = Silver and 60 percent = Bronze. As costs increase, the value of the percentage changes and, therefore, the plan benefits change. Using the Platinum Plan as an example, if the actuarial value of a plan this year was $1,000, then the Platinum Plan has to cover 90 percent ($900) and pass 10 percent ($100) to the plan member. In the second year, if the actuarial value goes up to $1,100, 10 percent ($110) can be passed to the plan member and the benefits will change. This will al- ways be a moving target until the values are fixed or the law is changed. The provider networks are still changing and are offering a lower number of choices for doctors and medical groups. The industry calls them skinny networks. Often, the price looks good, but your employ- ees will have very few choices for doctors. Be sure to run a report to compare current providers to those associated with any programs you are considering. Insurance carriers continue to seek greater discounts from hospitals, medical groups, and doctors and are offering patient exclusivity in return. Some insurance carriers will allow skinny net- works to be offered side-by-side with full networks, with the price and contribution being set by the employer to favor one or the other. In 2018, businesses will see an overall zero to 10 percent rate increase and benefit changes for “small” employers and 5 percent to 15 percent for “large” employers. Captives, self-funding, and partially self-funded plans are becoming more popular and should be considered for companies with more than 50 employees. Industry trust plans for all size of employers could lower the overall cost and stabilize the benefits. Other ways to reduce costs include buying a Bronze Level Plan and supplementing it with
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