New Study: California Has Highest Workers’ Compensation Rates
Oct. 24, 2014: California businesses concerned about labor-related costs are learning that their state now has the most expensive workers’ unemployment rates in the nation. That finding is despite reforms that were designed to lower costs from when the state also had the worst ranking in the past. The high-cost states following behind California are Connecticut, New Jersey, New York and Alaska, in that order.
The least expensive states were North Dakota, Indiana, Arkansas, Virginia and Massachusetts.
Workers’ Compensation Premium Index Rates
The source of the rankings (and the map) is a study issued by the Oregon Department of Consumer and Business Services, which updates such work every two years and provides the findings to the Oregon legislature. The agency has been conducting such studies since 1986.
According to the Los Angeles Daily News, Jerry Azevedo, a spokesman for the California-based Workers’ Compensation Action Network, said:
“California’s workers’ compensation system is incredibly inefficient. It does not do a good job of achieving its goal. For as much as employers pay, they don’t get a lot out of it. … You would think that since California has the highest cost system that we’d also have the most generous benefits — but we don’t. We plow a lot of money into the system but too little of it ends up in the hands of injured workers.”
Much of the money goes to lawyers who dispute medical treatments, while other money goes to commissions paid to brokers and various administrative costs, Azevedo said. The Daily News reported that California’s system is experiencing more claims — particularly in the Los Angeles region. See more of the story at California ranks highest for workers’ compensation costs.
The researchers provided a comparative column that shows at a glance how far up or down the scale a state has moved since the last report in 2012, which is shown below.
|Workers’ Compensation Premium Rate Ranking|
|45||47||Dist. of Columbia||1.31||70%||11/01/13|
|(A) In Oklahoma, the dates are 1/1/12 for the State Fund and 1/1/14 Private|
|Notes: Starting with the 2008 study, when two or more states’ Index Rate values are the same, they are assigned the same ranking. The index rates reflect adjustments for the characters of each individual state’s residual market. Rates vary by classification and insurer in each state. Actual cost to an employer can be adjusted by the employer’s experience rating, premium discount, retrospective rating, and dividends. Link to previous reports and summaries.|
|Employers can reduce their workers’ compensation rates through accident prevention, safety training, and by helping injured workers return to work quickly.|
|Source: Oregon Department of Consumer & Business Services, Information Technology and Research Section|
The study is based on methods that put states’ workers’ compensation rates on a comparable basis, using a constant set of risk classifications for each state. The study used classification codes from the National Council on Compensation Insurance (NCCI) with a focus on 50 classification codes. Certain weightings were assigned to control for differences in industry distributions among the states.
The full report will be published later this year, but a summary is available here.
Information about how the study was done can be found here.
Joe Vranich of Spectrum Location Solutions helps companies find great locations in which to grow. Joe also is a keynote speaker on the challenges and benefits of businesses relocating out of high-tax, high-cost, over-regulated states. More information is available at Biography and Speaking Availability.
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