How it affects CA employers 2017 Workers’ Comp Updates How it affects CA employers

Rancho Mesa Insurance Services Established 1998 National Best Practices Agency (10 years) Local Independent Insurance Agency Liability, Property, WC, Surety, Benefits “Developing solutions, Building trust, Protecting clients… One relationship at a time”

Why Have Workers’ Comp? It’s the law Pays for an injured worker’s medical bills Pays partial disability benefits Pays permanent disability benefits Pays death benefits Pays for mileage Benefits are not taxable income

Facts: Courtesy of The California Workers’ Compensation Institute San Diego claims account for 8.1% of all WC claims in the state, but only 6.2% of benefits paid San Diego County has the highest percentage of claims filed by women in the state Average benefit payments on the San Diego claims were more than 10% less than in the rest of the state San Diego claims are more likely to be medical-only cases and less likely to result in permanent disability Litigation rates are lower than the CA average

What’s new in CA? AB 2883 First Aid reporting requirement Experience Modification Rating change Proposition 64: Recreational Marijuana

AB 2883 (Assembly Insurance Committee) Effective January 1, 2017, AB 2883 makes certain changes to the definition of employee and exclusions to the definition of employee Officers and members of boards of directors will be covered employees unless the officer or member of the board of directors owns >15% Working members of a partnership or LLC receiving wages irrespective of profits from the partnership or limited liability company will be covered employees unless the individual is a general partner of a partnership or a managing member of a limited liability company.

AB 2883 (Assembly Insurance Committee) In each case, the person in question must execute a written waiver The provisions of AB 2883 are applicable to all in-force policies as of January 1, 2017 Any individual that had been exempted from will need to be added to the coverage provided by the insurer until such time as a duly executed waiver is received and accepted by the insurer.

Reporting First-Aid Medical Only or Medical Claims Only: amended to clarify that all claims for which any medical care is provided, including those involving first aid, must be reported to the WCIRB The WCIRB always required carriers to report first aid claims, but regulatory language was ambiguous. This clarifies the matter. How does this impact CA employers?

Experience Mod Formula Change Prior to 1/1/17: The first $7,000 in losses for each claim is considered primary and counts fully in an employer’s X-Mod. Any losses above $7,000 are considered excess and have less weight in the experience rating formula.

Experience Mod Formula Change Amended to change the experience rating split point from $7,000 to a variable Primary Threshold The Primary Threshold is now determined by Expected Losses (calculated based on reported payroll)

Experience Mod Formula Change Under the 2017 formula, loss amounts above the split point will no longer factor into the experience modification calculation. Excess losses, which represent the severity of claims, can vary widely based on factors that may not be under the control of the employer. The variable split point plan places increased weight on the frequency of claims better predictor of future claims may be more controllable by the employer.

Experience Mod Formula Change Results (courtesy of Workers’ Comp Executive) 7% of risks remained the same 45% increased 48% decreased

Proposition 64 25 states allow medical marijuana Only 5 states exempt workers’ compensation payers from liability for medical marijuana CA does not require any health care service plan to be liable for reimbursement Cash business: payment cannot involve federal banking system

Proposition 64 California: Law precludes compensability for injuries caused by intoxication. If a CA employer can prove that marijuana is the cause of work-related injury, then the injury is not compensable. Proving Marijuana caused the accident presents a hurdle. Impairment cannot be objectively measured.

Proposition 64 According to a study by the National Institute on Drug Abuse: Postal employees testing positive on pre-employment drug test had 55% more industrial accidents, 85% more injuries, and a 75% increase in absenteeism

Proposition 64 Working Through the Haze: Implications of Legalized Marijuana for California Workers’ Compensation System By Ellen Sims Langille, General Counsel California Workers’ Compensation Institute CWCI.org

What can I do? Create a Return-to-Work program (10% credit) Hiring Practices, Hiring Practices, Hiring Practices! Steer employees to the medical provider network Keep in touch: enhances employee recovery Alternative financing options: captive, ded, SIG

What can I do? Understand the stats: Frequency, Severity, Indemnity How do you compare to your industry? Identify trends Know your best possible xmod

Broker role: what should a broker do for you? Advocate: claims, classification, pricing Education Introduce Resources Understand the market Identify trends Know and address your exposure to risk Manage risk

Thank you Sam Brown Vice President Rancho Mesa Insurance Services (619)937-0175 sbrown@ranchomesa.com www.Ranchomesa.com