California! Again!
Early this week, Oregon’s Department of Consumer and Business Services published its biannual rankings of state workers’ comp costs (by the way, did you know that “biannual” means both twice a year and once every two years? English is a funny language). Kudos to Jay Dotter and Mike Manley for once again separating the wheat from the chaff.
Since 2006, we’ve written about Oregon’s rankings, as well as those of the actuarial consulting firm, Actuarial & Technical Solutions (ATS) and the National Foundation for Unemployment Compensation and Workers’ Compensation (UWC) headquartered in Washington, DC. If you’re so inclined, see our in depth 2006 report, our 2009 report highlighting Massachusetts and our 2010 report.
Following the Oregon release the blogosphere was quick to note that California, leapfrogging Connecticut and Alaska, had won the 2014 gold medal for most costly state in the nation. People, this was not a surprise.
We have been watching the Golden State’s periodic workers’ comp train wrecks since the late 1980s. Here’s how things usually go.
1. Costs go through the roof
2. Vested interests run around with their hair on fire
3. Legislature enacts reforms
4. Costs drop precipitously (everyone takes credit)
5. Lawyers figure out how to outflank the reforms
5. Costs go through the roof
6. Repeat the process
This has happened at least three times in the last 20 years, most notably during the administration of the Terminator, Arnold Schwarzenegger, when annual costs exceeded $29 billion dollars (you read that right). After reform, costs dropped to around $14 billion. Everyone declared victory and left the field until the sky fell again.
Alex Swedlow and the California Workers’ Compensation Institute have done a marvelous job tracking costs and, through solid research, shining a light on possible ways to lower costs going forward. Nonetheless, to say that California’s workers’ compensation costs are continually volatile seems indisputable.
A couple of other notes on the Oregon rankings:
1. Although lagging far behind California, Connecticut retains its place of honor at Number Two in the ranking. It’s costs are 155% of the median costs for all states and the District of Columbia;
2. In addition to Connecticut, it’s worth noting that four of the other six New England states, Vermont, Maine, New Hampshire and Rhode Island rank in the top 20;
3. And, you might ask, what about the sixth New England state, the Commonwealth of Massachusetts, the home of the bean and the cod. Well, it may be the proverbial broken record, but I’m proud to note that Massachusetts, our home state, at 48th most costly, holds the distinction (again) of being the least costly of any major manufacturing state. This has been the case for the last 15 years. Why other New England states, for that matter all other high cost states, don ‘t take a leaf from the Massachusetts book is beyond me.
I’m betting that California, the state, which, if it were a country would have the fifth highest GDP in the world, will continue its up and down roller coaster ride as time marches on. It’s just too big with too many highly entrenched vested interests to do otherwise.
