California insurance companies will spend an estimated $6.5 billion to compensate employees for on-the-job injuries suffered in 1992, a $1-billion decline from the previous year's total, a new report says.
In a separate batch of reports, insurance officials say the reason for the trend--an abrupt drop in costly workers' compensation injury claims--has continued into 1993.
The developments could translate into stable or even lower insurance rates for employers, many of whom complain that California's workers' compensation problems have badly hurt the state's business climate.
The news could also stir debate in Sacramento, where--after two years of failed efforts--momentum appears to be building for major reforms of California's much-maligned workers' compensation system. A Senate-Assembly conference committee began meeting this week to consider proposals.
Reform proponents say major changes in California's $11-billion system are still necessary because expenses remain too high, benefits for seriously hurt employees are too low and the drop in costly injury claims, though encouraging, might only be temporary.
"Claim frequency goes up, and claim frequency goes down. That's not the issue," said Stanley Zax, chairman and chief executive of Woodland Hills-based Zenith Insurance Co.
"The desire for reform is generated by the fact that the system is far too costly for the business community and is interfering with job creation in the state."
The projected decline in insurance company payouts for 1992 comes from the Workers' Compensation Insurance Rating Bureau of California, the industry group that makes rate recommendations to the State Insurance Department.
David Bellusci, senior vice president and chief actuary of the rating bureau, called last year's results a "very significant improvement over 1991, which was the worst year since 1970," when the bureau began keeping its statistics. But Bellusci added that 1992 still was "much worse than an average year."
While Bellusci said insurance rates remain inadequate, the state insurance department reserved judgment. "We're taking a hard look of our own at the figures to see if there's any possibility of a rate decrease at mid-year," said Gladys Ikeda, a special assistant to Insurance Commissioner John Garamendi.
The reason for insurers' improving fortunes is the decline in costly injury claims for cash and medical benefits.
Authorities attribute the decline in these claims--a fall that emerged dramatically in late 1992--to the state's weak job market, crackdowns on fraud and abuse, underreporting by employers, improved safety programs and other factors.
Experts say many workers are deterred by the fear that they will be fired for filing claims--even though retaliatory dismissals are illegal--and that they won't be able to find new jobs because of the slumping economy.
They say claims are also declining because of growing vigilance by insurers, employers, workers' compensation judges and government agencies against bogus filings. The crackdown has struck particularly hard at so-called medical mills that, critics say, run up excessive charges for evaluating and treating workers' compensation patients.
"The medical mills are closing down left and right, and the ones that aren't closing are trying to go legit," said James A. Dorman, executive vice president of Comco Management, a firm that handles claims for self-insured employers.
In addition, authorities say more and more unscrupulous employers may be underreporting their workers' compensation cases to head off rate increases by their insurers.
Also, the changing mix of the California work force--with employment generally declining in high-injury areas such as manufacturing but more stable in low-injury service industries--could be reducing the number of claims.
The nonprofit State Compensation Insurance Fund, which is by far California's biggest workers' compensation insurer, said its injury claims from workers seeking cash and medical benefits fell 33.7% during the first four months of 1993. The injury claims totaled 16,810, down from 25,358 a year earlier.
Renee Koren, a spokeswoman for the state fund, said part of the drop was because of reduced business volume, but factors such as the weak economy and fraud prevention appear to have played larger roles. The fund covers nearly one-quarter of all workers in California.
Self-insured employers--and the "third-party administrators" that handle their workers' compensation claims--have noticed a downturn too. At Associated Claims Management, one of the state's biggest third-party administrators, workers' compensation claims for cash benefits fell about 10% to 12% in Southern California during the first quarter, said Mary Johnson, a vice president.
The self-insured firms, which employ one-quarter to one-third of California's work force, "are all praying in their hearts" that the drop reflects a long-term trend, said Mark B. Ashcraft, the state's regulatory chief for employers with self-insured programs.