P&C Perspectives: Self-insured entities and the California workers’ compensation reforms — The changes affect you

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By Guy A. Avagliano, Michael L. DeMattei, Stephen J. Koca | 24 January 2013

Senate Bill 863 (SB 863), the workers' compensation reform act that passed in the California legislature in 2012, was designed to increase permanent disability benefits for workers while reducing systemwide costs to employers. For many self-insured companies, the new law also contains provisions that will likely increase the cost of collateralizing the self-insured obligations with the state.

Early in December 2012, the state Department of Industrial Relations (DIR) issued a set of emergency regulations governing the reporting and collateralization for 2012. The emergency regulations require every self-insurer to retain an independent actuary to prepare an actuarial estimate of its self-insured obligations as of December 31, 2012. The actuarial report is due May 1, 2013, and must include provisions for future claim payments as well as certain program costs. The new requirement applies to all private employers that are or were qualified workers’ compensation self-insurers in California, even those that now have other insurance arrangements.