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AB 749 and AB 486 - Major Changes in Worker's Compensation
Assembly Bills 749 and 486 mark the first significant workers' compensation legislation since the landmark 1993 reform package. That legislation deregulated the market and ushered in a new era for the world's largest workers compensation system.
AB 749 and 486 attempt to bring equilibrium to a system in which overall costs historically have been ranked among the highest, and benefits for inured workers among the lowest. Effective January 1, 2003, the acts raise the temporary and permanent disability rates for injured employees and include incentives for employers to reduce the net cost of workers' compensation insurance. The acts also increase rates on policies with inception dates occurring before the January 1, 2003, effective date. However, the increase in premium cannot exceed the pure premium rate increase that the insurance commissioner approved as a result of the new legislation.
During the past several years, the rates and financial strength of carriers have been the focus of much legislative debate. Part of the 1993 reform was to replace mandatory minimum rates with a competitive-rate law. Some carriers set unrealistic rates to gain market share. Subsequently, a number of private carriers became insolvent or were conserved-in part due to inadequate rates or reserves. AB 749 and AB 486 are not considered a panacea for California's workers compensation insurance system. However, supporters of the legislation believe it represents a step toward stabilizing the system, partially mitigating the "crisis" of the past several years and ensuring that the system works for all stakeholders.
What these changes mean to California employers is increased costs of insurance. The extent of premium increases has been felt over the past year and most likely will continue to rise, maybe NOT to the great extent that has been seen recently by employers. However, California employers are being asked to bear the brunt of these costs.
For more information about this important legislation and its significant benefit changes to injured workers, please contact one of our insurance professionals here at Wraith, Scarlett & Randolph Insurance Services.
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