In a recent post. "Lower Still", I wrote about the precipitous decline in written premium in California's workers' comp insurance industry:
http://www.workerscompzone.com/index.ph ... 604-075757

I noted that comp premium has fallen to $6.9 billion from over $16 billion in 2004. You don't pay premium on workers who aren't working or on business you don't have.

I noted that as premium declines, allocated and unallocated loss expenses climb as a percentage of premium. And I noted that it's likely we'll see high ratios of overhead expenses in proportionto benefits paid out to or on behalf of injured workers.

Surprise, surprise.

According to a report posted online by the astute folks at Workers' Comp Executive (wcexec.com for those who don't know it), the chief actuary of the WCIRB, Dave Bellusci has indicated that the "combined ratio" has increased to 118.2%. Bellusci was apparently speaking to the WCIRB actuarial committee.

Crudely stated, you can think of the combined ratio as the combination of losses and expenses relative to premiums collected.

Apparently (I say apparently because I don't have primary source documents on Bellusici's presentation) the "loss ratio" (ratio of indemnity and medical paid to or on behalf of workers) was 74.6% in 09, up from 2008.

The expense ratio (which includes allocated and unallocated loss expenses, broker commissions, taxes & other operating expenses) was apparently 43.1%. That's over half of the benefits paid to or on behalf of injured workers.

So as premiums fall, overhead rises as a proportion of premiums.

We have a very expensive system to deliver indemnity and medical benefits to workers.

What was also striking was word from the wcexec.com piece that the State Compensation Insurance Fund "combined ratio" ended in 2009 with a ratio of 161.5%.

As SCIF has lost market share, its overhead reductions have apparently not kept pace with its premium losses. If those numbers are for real, it's not sustainable and there's going to be a big problem soon.

With Insurance Commish Steve Poizner now a lame duck, it'll be interesting to see how the politics play out and whether the WCIRB pushes for a rate increase soon.

And at some point will the interests of insurers and employers diverge?

Stay tuned.

Julius Young
www.boxerlaw.com

All indications are that public employee pensions will be a major issue in the upcoming Whitman Vs. Brown race. Workers' comp is unlikely to be high on the radar, but the public pension issue is being pitched by both Schwarzenegger and Whitman.

At a time of crushing budget shortfalls, PERS and STRS are said to be in need of additional funds. CalPERS recently delayed billing the state for an additional $600 million, but that may be a temporary respite. Cash strapped counties and public agencies have high pension costs.

For those of you out there interested in the issue, there's now a website, pensiontsunami.com, devoted to promoting the concept of reform. Another site that tracks the issue is calpensions.com.

It's a difficult issue for politicians and groups who have ties to public employee unions.

Is this an issue in states other than California? You bet.

How are other states dealing with the issue? Dale Kasler's piece in the Sacramento Bee, "Benefits Embattled Across U.S." gives us some answers:
http://www.sacbee.com/2010/06/13/281860 ... s=Business

Kasler notes that Arizona, Illinois, Mississippi, Virginia and Michigan have instituted reduced pension benefits for new hires. Some of those are very conservative states of course, But some are very "union friendly".

Its an issue which Jerry Brown will need to address as the campaign proceeds. After announcing his candidacy, Brown indicated he would consider pension reform but oppose any move to privatize pensions.

Julius Young
www.boxerlaw.com

To the ramparts! All hands on deck!

We're under attack again....from Nevada. Californians-and our legislature-are pictured as a group of Orangutans.

Nevada? Things aren't going well there. With an unemployment rate of 13.6%, Nevada's jobless stats are worse than California's 12.7% rate.

Las Vegas has suffered some of the worst housing price declines in the nation. Is it really the "Capital of the new Mega-West"?

On a recent visit to the Nevada side of Lake Tahoe, the casino business looked truly sad. Large areas of cavernous casinos were roped off. Business can't be good at the Bunny Ranch.

Winnemucca is still, well, Winnemucca.

But what better way to dig out of a hole than attack your fellow state?

Here, for your viewing pleasure are the videos in the just released "Kiss Your Assets Goodbye" campaign from the Nevada Development Authority. Unlike the previous campaign, these do not mention workers' comp costs:
http://www.move2vegas.biz/media_NDAcampaign_10.html

Stay tuned.

Julius Young
www.boxerlaw.com

In two key California Democratic primary contests yesterday, candidates backed by labor and environmental advocates won tight victories over "business Democrats".

In Fremont, council member Bob Wieckowski eeked out a win over Garrett Yee. Yee, who had been a Republican several years ago, reaped large contributions from insurance industry interests. Wiekowski was supported by nurses, environmental groups, trial lawyers, and many applicant attorneys.

Yee, drawing lots of support in the Asian community, may yet have a future in politics.

But in this showdown (in what appears to be a likely solid Democratic district come November elections), Wieckowski prevailed. Bright and energetic, Wiekowski is likely to be a significant player on the Sacramento scene barring some unexpected electoral debacle.

Meanwhile, in San Diego, Assemblywoman Mary Salas nudged out former Assemblyman Juan Vargas in a Democratic primary battle to establish the likely successor for the California Senate seat of Senator Denise Ducheny, who will be termed out. The same forces that lined up in the Wieckowski-Yee race lined up in the Salas-Vargas race.

Insurance interests have sought to put legislative seats "in play" in an effort to get more leverage in future battles.

Another race to watch will be the June 22 special election on the central coast that pits Republican Sam Blakeslee against former Democratic Assemblyman John Laird. Democrats would love to pick up a California Senate seat in their quest to obtain a 2/3 majority.

Meanwhile, yesterday's legislative tests did score a number of wins for Assembly Speaker John Perez and California Senate Pro Tem Darrell
Steinberg. They'll be part of the key negotiatiors-part of the "Big Five"- in negotiations with either a Brown or Whitman administration.

It's all part of the geography of politics, the big game that ultimately turns policy battles over workers' comp into the sausage of legislation.

Stay tuned.

Julius Young
www.boxerlaw.com

This is a week of anticipation.

Come June 10th, we'll finally see the Almaraz/Guzman case put to a test.

That's the day the California Court of Appeal 6th District hears arguments on the petition for writ that was filed. Whatever the 6th District court does may not be the final answer.

But the 6th District could set the pace for the future of A-G II. A decision upholding Guzman could mean that the decision will be with us for a long time, undermining those who seek to discount the WCAB en banc holding.

The writ in Almaraz has never been granted by the 5th District. That district has apparently decided to hold off for now.

Also on the horizon this week are important legislative races with comp overtones.

Among the races to watch:

In San Diego there's a Democratic primary race between Mary Salas and former assemblyman Juan Vargas. Vargas was the floor manager for SB 899 in 2004 and had a career as a lobbyist after leaving the legislature.

In Fremont there's a hotly contested primary for an open Assembly seat.
facing off for that seat is Garrett Yee and Fremont councilman Bob Wieckowski. Yee. employed by the Workers Compensation Insurance Rating Bureau, has assumed the mantle of a "business Democrat" and has presumed ties to the insurance industry. Large "independent expenditures" have been made by business groups on behalf of Yee's candidacy. Unions and much of the Democratic party power structure has backed Wieckowski.

The efforts by insurance and Chamber of Commerce interests in these districts is part of a strategy to move some Democratic seats into a Blue Dog Democratic group, changing the political calculus in Sacramento even if Jerry Brown is elected.

The stakes for future comp legislative efforts are high.

Keep your eye on these races.

Stay tuned.

Julius Young
www.boxerlaw.com