Beginning in September, companies across California will learn whether they will be paying more for workers’ compensation insurance next year.
For some doing business in the Golden State, it will be an unwelcome surprise. The increase could be significant.
The potential rate changes are due to a rule approved last year by California Insurance Commissioner David Jones. Beginning in 2017, the formula to determine an organization’s “experience modification,” the rate used to calculate workers’ comp pricing, will change.
The rationale for the change was to level the playing field for small businesses. Previously, the one-size-fits all formula had the potential to unfairly penalize smaller organizations. A few claims had a dramatic affect on their workers’ comp premiums, a consequence usually not seen with larger businesses.
For many, the new formula will likely result in little change in their workers’ comp premium. However, it’s likely that some large and small employers with a higher frequency of claims will see a dramatic impact.