Changes to California Workers’ Compensation Premium Assessments…And what the heck are premium assessments anyway?
Nick Langer, Turner Surety & Insurance Brokerage Inc.
On November 30, 2017 the California Department of Industrial Relations issued a notice to “All Insurers Authorized to Transact Workers’ Compensation in California” which detailed the 2018 workers’ compensation premium assessments. The new premium assessment rates ultimately increase the total cost of workers’ compensation for employers. If you are like most other employers, the premium assessments listed on your insurance policy most likely go over looked. Let’s take a step back to fully understand what “premium assessments” are and how they affect your workers compensation costs.
When you’re not out trying to solicit new clients, manage your employees and juggle expenses, take a moment to dust-off the actual worker’s compensation policy that your company maintains. Thumb through the pages until you reach the “Declarations Pages.” Within the Declarations you will stumble across the classification and/or rating schedule. At the bottom of this page you will see various line items labeled some version of “CA […..] Assessment.” Labor Code Sections 62.5 and 62.6 authorize the Department of Industrial Relations to assess employers for the costs of the administration of the workers’ compensation, health and safety and labor standards enforcement programs. According to the California Department of Industrial Relations, “These assessments provide a stable funding source to the support operations of the courts, to ensure safe and healthy working conditions on the job, to ensure the enforcement of labor standards and requirements for workers’ compensation coverage.”
Some of the Workers’ Compensation Premium Assessment (WCPA) began in 2008 due to a budgetary crisis in California. The WCPA was a funding shift designed by the California legislature to stabilize funding for the Department of Industrial Relations (DIR) operations, which includes the Divisions of Workers’ Compensation, Occupational Safety and Health and Labor Standards Enforcement. The Assessments were intended to continue funding the efforts of Division of Occupational Safety & Health (DOSH) and Division of Labor Standards Enforcement (DLSE). DOSH & DLSE rely upon stable budgets to provide California employers with benefits including:
- Enforcement of programs to eliminate the underground economy
- Labor law enforcement activities to ensure a more competitive business environment by pursing employers who break employment laws
- Pursuing uninsured employers who fail to carry workers’ compensation coverage for their workforce
- Ensuring workplace safety
- Providing compliance assistance to employers who are striving to increase safety on their jobsites
- Decreasing injuries, illnesses and fatalities at jobsites across the state
Insurance carriers must advance these assessments to the Department of Industrial Relations and are required to collect the assessments from policyholders during the policy term. Assessable Premium is the premium the insured is charged after all rating adjustments (experience rating, schedule rating, premium discounts, expense constants, etc.) except for adjustments resulting from the application of deductible plans, retrospective rating or the return of policyholder dividends.
Included below are comparison charts of the assessment factors to be applied to the estimated annual assessable premium for 2018 and the previous assessment factors for 2017.
| 2018 Workers’ Compensation Premium Assessment Rates – Insured Employers | |||
| FUND | 2018 Rate Factor | 2017 Rate Factor | Variance (%) |
| California Workers’ Compensation Administrative Revolving Fund (WCARF) | .008146 | .003128 | 160% |
| California Occupational Safety & Health Fund (OSHF) | .002655 | .002305 | 15.18% |
| California Workers’ Compensation Fraud Assessment (FRAUD) | .00255 | .001675 | 52.24% |
| California Uninsured Employers Benefits Trust Fund(UEBTF) | .000573
|
.000721 | -20.52% |
| California Subsequent Injury Benefits Trust Fund (SIBTF) | .003599 | .001335 | 170% |
| California Insurance Guarantee Association (CIGA) | .0200 | .0200 | — |
| California Labor Enforcement & Compliance Fund (LECF) | .00215 | .001918 | 12.10% |
| TOTAL of all Assessments | .039673 (3.97%) | .031082 (3.11%) | 27.64% |
| Rate Factors are charged on “Assessable Premium” | |||
| 2018 Workers’ Compensation Premium Assessment Rates – Self-Insured Employers | |||
| FUND | 2018 Rate Factor | 2017 Rate Factor | Variance (%) |
| California Workers’ Compensation Administrative Revolving Fund (WCARF) | 0.032620
|
.025226 | 29.31% |
| California Occupational Safety & Health Fund (OSHF) | 0.011066
|
.012111 | -8.63% |
| California Workers’ Compensation Fraud Assessment (FRAUD) | 0.008790
|
.009262 | -5.10% |
| California Uninsured Employers Benefits Trust Fund(UEBTF) | 0.007006
|
.004707 | 48.84% |
| California Subsequent Injury Benefits Trust Fund (SIBTF) | 0.011754
|
.006927 | 69.68% |
| California Labor Enforcement & Compliance Fund (LECF) | 0.008882
|
.010479 | -15.24% |
| TOTAL of all Assessments | .080118
(8.02%) |
.068712
(6.87%) |
16.60% |
| Rate Factors are charged on “Assessable Premium” | |||
Let’s take a look at what these funds actually support.
WCARF – Workers’ Compensation Administration Revolving Fund adds funding to the administration of the workers compensation system which includes the return to work program, and employers’ workers’ compensation coverage compliance enforcement. Additional funding comes from fines, fees, and penalties. California Labor Code Section 62.5
OSHF – Occupational Safety and Health Fund provides funding to state safety and health agencies, to implement and enforcement of current occupational health and safety laws, and promoting safe and healthful working conditions. California Labor Code Section 62.5
WCFA – Workers’ Compensation Fraud Assessment funds investigating and prosecuting worker’s compensation fraud. California Labor Code Section 62.6
UEBTF – Uninsured Employers Benefits Trust Fund pays benefits to employees injured while working for illegally uninsured employers. California Labor Code Section 62.5
SIBTF – Subsequent Injuries Benefits Trust Fund pays for workers who have suffered serious injury and who are suffering from permanent disabilities or physical impairments that were present before the injury. California Labor Code Section 62.5
LECF – Labor Enforcement and Compliance Fund. ABX4-12 (2009) founded the LECF which enforces Employer Compliance with labor standards and secures worker compensation insurance by funding the Division of Labor Standards Enforcement (DLSE). California Labor Code Section 62.5
CIGA – California Insurance Guarantee Association. Created in 1969, CIGA settles unpaid claims of insolvent insurers that are licensed to do business in California. CIGA consists of three separate funds that guarantee different lines of insurance: workers’ compensation; personal lines (auto, homeowners, personal liability); and other (commercial property, liability, products liability, supplemental and pollution). CIGA is not an insurance company. CIGA was created to provide only a limited form of protection in the event of insurer insolvency. California Insurance Code Section1063.5
Circling back to the 2018 workers compensation premium assessment rates, it is easy to see that California Employers will be spending more money this year on workers’ compensation expenses. In summary, insured employers will be paying assessments at a rate of nearly 4% on top of “assessable premium” which is a 28% overall increase for assessments over 2017. Self-Insured employers are experiencing a 17% increase.
If you have additional questions regarding the assessments on your workers compensation policy we encourage you to discuss these items with your insurance broker/agent or to contact the California Department of Industrial Relations whom oversees the collection of these assessments. DWC@dir.ca.gov Phone: 1-844-522-6734
