Workers’ Compensation Costs Are Highest in California, but System is Inefficient

some of the money

Workers’ compensation can cost businesses a pretty penny, and that’s especially true in California. According to a recent report cited in the Sacramento Business Journal, workers’ compensation costs more in California than anywhere else in the country.

The Workers’ Compensation Premium Rate Ranking Summary, which compiled these findings, was conducted by Oregon’s Department of Consumer and Business Services. It discovered that for every $100 the average California business spends on payroll, they spend $3.48 on costs related to workers’ compensation.

To get a comparative sense of how much that is, consider that the median cost for all 50 states was $1.85; North Dakota, the state with the lowest costs, only spent 88 cents for every $100 of payroll. This means that California’s costs are about 188% more than the median, and far above the cheapest state.

The Sacramento Business Journal added that costs in California aren’t just high: they’re rising. The state ranked fifth-highest in 2010 and third-highest in 2012, before jumping to number-one ranking it holds today.

Christine Baker, director of the California Department of Industrial Relations, disputed these numbers as reductive, since they didn’t account for the variety of industries and other factors present in California.

However, Jerry Azevedo, spokesperson for the California Workers’ Compensation Action Network, confirmed the problems of California’s Workers’ Compensation system to CaliforniaHealthLine.org. According to Azevedo, workers’ compensation premiums have risen by 41% from what they cost as recently as 2009.

Unfortunately, neither workers nor employers benefit from these high-cost programs. Most of the money goes to brokers, lawyers, and administrative overhead. Employers may go out of their way to avoid making payouts, which means that injured employees are unlikely to benefit from the 30-day time limit an employer has to file an answer to a claim before it’s automatically considered admitted.

“California’s workers’ compensation system is incredibly inefficient,” Azevedo told CaliforniaHealthLine.org. “For as much as employers pay, they don’t get a lot out of it.”

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