- Press Release
July 19, 2012
California Private Self-Insured Claim Frequency Was Flat in 2011, But Incurred Losses Rose $25 Million
California workers' compensation private self-insured claim frequency showed little change in 2011 as the incidence of medical-only claims edged down slightly, while lost-time claim frequency registered a marginal increase according to a California Workers' Compensation Institute (CWCI) review of data released by the state Office of Self-Insurance Plans (OSIP). Initial results for 2011 show the number of new claims reported by private self-insured employers fell 2.1% last year, with medical and indemnity payments on those claims through the end of the year totaling $192 million, also about 2% less than the comparable figure for 2010 claims. On the other hand, total incurred losses (paid benefits plus reserves for future payments) on the 2011 claims rose to nearly $620 million, up $24.7 million, or 4.2 percent more than the initial incurred amount reported for 2010 claims, as average amounts incurred per claim for both indemnity and medical benefits continued to grow.
The OSIP initial summary of private self-insured data, issued July 10, offers an initial look at California private, self-insured claims experience for cases reported in 2011. The summary includes medical-only and indemnity claim counts, and the total paid and incurred amounts on those claims through December 2011. The new report summarizes the experience of private self-insured employers who covered 2.11 million employees last year (vs. 2.15 covered employees in the first report for 2010 claims), and who reported a total of 77,386 claims in 2011 - compared to 79,075 claims in the 2010 first report. That translates to a claim frequency of 3.66 claims (2.29 medical-only + 1.37 indemnity) per 100 employees, vs. 3.68 claims per 100 employees in 2010 (2.33 medical-only + 1.35 indemnity). Wages and salaries for the private self-insured employees totaled nearly $81 billion in 2011, or 1.5% more than the $79.7 billion noted for self-insured employees in the 2010 first report.
Even though the total number of reported claims continues to dwindle, over the past decade, private self-insured loss experience in California has tracked with insured claims experience, with both paid and incurred losses on private self-insured claims now well above the post-reform low of 2005, driven up by sharp increases in claim severity (the average loss per claim). The growth in medical losses has been the biggest cost driver since 2005, though indemnity losses for private self-insured employers have jumped as well. OSIP's initial summary of 2011 results shows that at the end of the year, paid losses for all 2011 California private self-insured claims (medical-only and indemnity claims) averaged $2,483, only $2 off the 10-year high noted in 2010, and up 43.5% from the post-reform low, as average paid indemnity at first report is up 33% from 2005, and average paid medical is up 51%. At the same time, total incurred benefits per claim at the first report level climbed to $8,006 last year, up 6.4% from 2010, and 43% above the post-reform low, as average incurred indemnity was 31% higher than in 2005, and average incurred medical was 51 percent higher.
CWCI's review of more developed loss data derived from private self-insured's 2nd through 5th reports on 1998 to 2010 claims (12 to 60 months' worth of claims experience) found very consistent patterns showing that private self-insured claim severity bottomed out with calendar year 2005 claims, followed by steep increases in the average losses per claim, which despite continuing reductions in the number of reported claims, have driven private self-insured total paid and incurred losses well above the post-reform levels.
OSIP's 2011 summary of private self-insured data, which reports on calendar year data, follows the January release of public self-insured claims data, which is reported on a fiscal year basis. Thus, the data from public self-insured employers now lags the private self-insured data by six months, reflecting claims and losses reported through June 2011 rather than through December. The OSIP annual summaries for both private and public self-insured claims from each of the 10 most recent years are posted online at http://www.dir.ca.gov/SIP/StatewideTotals.html. CWCI members and subscribers may also log on to the Institute's website to view an Institute Bulletin that includes more details and graphics.