Pub. 4 2015-2016 Issue 1

Summer 2015 29 1. What is the overall industry average charge rate per $100 of payroll? 1/1/1998 to 12/31/1998 = $2.33 1/1/2005 to 6/1/2005 = $4.96 1/1/2014 to 9/1/2014 = $2.93 2. What is the average attorney involvement inWorkers’Compensation Claims? All Claims = 11.6% Lost Time Claims = 38%; LA County = 46% Permanent Disability Claims = 80%; LA County = 83.8% 3. What percentage of all Paid Indemnity ClaimCosts in the California Workers’ Compensation Institute (CWCI) sample had Attorney Involvement? Per the CWCI: Attorneys were involved in: 38.1% of all indemnity claims. 82% of all claims paid out; i.e., $6.26 billion of the $7.6 billion paid. 4. What is the projected Ultimate Medical per Indemnity Claim? Per the California Workers Compensation Insurance Rating Bureau (WCIRB): 1998 = $22,375 2005 = $31,787 2013 = $47,354 5. What is the projected ultimate Allocated Loss Adjustment Expense (ALAE) per Indemnity Claim? Per the WCIRB: 1998 = $3,989 2005 = $6,139 2013 = $11,768 6. What is the Projected Ultimate Total Loss and ALAE per Indemnity Claim in Workers’ Compensation? Per the WCIRB: 1998 = $47,539 2005 = $56,767 2013 = $85,373 Healthcare &Obamacare: Healthcare costs have outpaced general inflation significantly andWC costs have followed a similar trajectory. We note, WC costs involve medical care and indemnity which is based on salary of the injured employee. Obamacare has made health insurance mandatory for all employees and as such there are no uninsured individ- uals on dealership full-time payroll. Without health insurance coverage, an employee was more likely to label a personal injury as work related injury so as to obtain treatment. With proper health insurance coverage, an employee is not likely to follow that path and fraudulent WC claims would be reduced. DISCLAIMER: Employers must consult with their WC Insurance brokers for a better understanding of their WC premiums and safety consultants for matters related to safety. Terry Cressman of SullivanCurtisMonroe contributed towards premium estimates and John Kallas of Smart Comp contributed with the numbers published by the California Workers Compensation Insurance Rating Bureau (WCIRB) in the Questions You Want to Ask section of the newsletter. The contents of this newsletter are for informational purposes only and not to be considered as legal advice. The premium numbers are for discussion purposes and actual numbers for ex-mod and premium calculations may vary on a case by case basis. The article was authored by Sam Celly of Celly Services, Inc. who has been helping automobile dealers comply with EPA & OSHA regulations since 1987. Sam received his BE (1984) and MS (1986) in Chemical Engineering followed by a J.D. from Southwestern University School of Law (1997). Our newsletters can be accessed at www.epaoshablog.com. Your comments/questions are always welcome. Please send them to sam@cellyservices.com . Premium Based on Employee Count & Payroll Experience Modification Total 2015 Premiums (before credits) Employer I $264,500.00 85 $224,825.00 Employer II $264,500.00 151 $399,395.00 Table B: Injury Data & Losses Paid per Injury Table C: Estimated Premium Costs Year Claim # Type of Injury Incurred Losses Type of Injury Incurred Losses 2011 1 Cut Finger 1 Back Injury $50,000.00 2011 2 Cut Finger 1 Back Injury $7,500.00 2011 3 Broken Finger $ 10,000.00 Broken Finger $10,000.00 2011 4 Cut Finger 1 Elbow Sprain $5,000.00 2011 5 Head Injury $ 5,000.00 Head Injury $5,000.00 2012 6 Arm Rash 1 Fatality* $175,000.00 2013 7 Back Injury/Cum. Trauma $ 25,000.00 Back Injury/Cum Trauma $25,000.00 2013 8 Arm Rash $ 5,000.00 Arm Rash $5,000.00 Total $ 45,004.00 $ 282,500.00 Employer I Employer II *Death benefits are statutorily limited in certain states. For California, death benefits are capped at $320,000 but only $175,000 is used in the ex. mod. calculation. Note 1: Wages and employee count for employees in Table A are fictitious and used illustratively. Note 2: Experience Modification in Table C uses California rates and formulas calculated on July 27, 2015 for a policy beginning Jan. 1, 2015. Calculations for other states may vary. Note 3: Table C premiums are before underwriter’s “risk adjustment” debits, credits, or premium discounts (if any). Note 4: Cumulative Trauma has replaced psychological disorders (psych), which were common in the past. Psych is not a ratable disability whereas Cumulative Trauma is. Hence Cumulative Trauma is more lucrative to plaintiff counsel.