After analyzing costs in the $12-billion market, Insurance Commissioner Steve Poizner on Friday told more than 200 insurers that they would not be out of line if they raised rates by 5% for policies written after Jan. 1.
Companies aren't legally required to heed the commissioner's recommendation but over the years most voluntarily have aligned their pricing with the benchmark.
The commissioner's finding, although modest in size, seems to indicate that the financial windfall for employers created by an overhaul of workers' compensation laws in 2003 and 2004 could be coming to an end. Average workers' compensation premiums paid by employers have dropped by 62% to $2.48 per $100 of payroll since July 2003.
"We saw sharp declines in the early years of the reforms, but that downward trend has been reversed," said Jerry Azevedo, a spokesman for the Workers' Compensation Action Network, a business advocacy group.
Poizner's recommendation was less than a third of the 16% increase proposed by the Workers' Compensation Insurance Rating Bureau, an industry statistical service. But both the commissioner and the rating bureau blamed the possible increase on inflation in the cost of providing medical treatment to victims of workplace injuries.