California Workers’ Compensation Market Update (2025)

Overview:

The California Workers’ Compensation Insurance Rating Bureau (WCIRB) provides comprehensive data and insights into the state’s workers’ compensation system. (As do a few other states like New York and Pennsylvania, California uses its own rating bureau instead of the NCCI, which we also report on in this issue.) The latest report highlights key trends and metrics for 2025, reflecting the ongoing evolution of the market and the impact of various legislative and regulatory changes.

Premium and Rates:

• Premium Levels: Premium levels increased by 1% in 2023 and increased modestly in 2024. The average insurer charged rate for the first quarter of 2024 is slightly below that for 2023, indicating a stable market. Employers should anticipate further modest increases in 2025 due to rising claim costs and inflationary pressures.
• Advisory Pure Premium Rates: The WCIRB has recommended a slight increase in advisory pure premium rates for 2025. This recommendation is based on the rising costs associated with claims, particularly medical expenses and indemnity payments.

Claim Frequency and Severity:

• Claim Frequency: Changes in claim frequency in 2022 and 2023 have been modest and consistent with pre-pandemic trends. However, the WCIRB notes that certain sectors, such as healthcare and logistics, have experienced higher claim frequencies due to the nature of their work and ongoing challenges related to COVID-19.
• Claim Severity: Average indemnity costs continue to rise, driven by increasing average wage levels and the complexity of claims. Average medical costs are also increasing due to longer claim durations, advancements in medical treatments, and inflationary updates to medical fee schedules. Employers should be prepared for these rising costs and consider implementing robust return-to-work programs to mitigate claim durations.

Mental Injury-Related Legislation:

California has seen a significant increase in legislation addressing workers’ compensation for workplace-related mental injuries, particularly PTSD. The state has expanded coverage to include more types of workers, following the trend of other states like Connecticut and Nevada. In 2025, several bills were introduced to further enhance mental health coverage, with a focus on providing support for employees affected by workplace trauma. These efforts reflect a broader recognition of the importance of mental health in the workplace and the need for comprehensive support systems.

Marijuana Reimbursement:

California continues to debate the issue of marijuana reimbursement for workers’ compensation treatment. In 2025, legislation is being considered that would allow for reimbursement under certain conditions, though it has not yet been enacted. Employers should stay informed about these developments, as changes in marijuana laws could impact their workers’ compensation programs and drug policies.

Hallucinogens and Psychedelics:

The legalization of substances such as LSD, mescaline, psilocybin, and peyote for medical use is an emerging trend in California. These substances are being considered for potential treatment of PTSD, anxiety, and depression. In 2025, several bills were introduced to regulate and research the use of these substances in medical treatments. While these bills generally do not directly impact workers’ compensation, they signal a growing interest in alternative treatments for mental health conditions that could eventually influence workers’ compensation practices.

Key Considerations for Employers:

1. Stay Informed: Keep up with changes in premium levels and advisory pure premium rates.
2. Accurate Classification: Ensure proper classification of employees to avoid misclassification risks.
3. Track Claims: Maintain accurate records of claim frequency and severity to manage costs effectively.
4. Monitor Legislation: Stay updated on mental injury-related legislation and potential changes to marijuana reimbursement policies.
5. Proactive Management: Implement robust return-to-work programs and mental health support systems to mitigate claim durations and costs.

Conclusion:

The California workers’ compensation market continues to evolve, with increasing premium levels, rising claim costs, and ongoing legislative changes. Employers must stay informed and proactive to navigate these changes successfully and ensure compliance with state regulations. By adopting comprehensive strategies and staying updated on legal developments, employers can create a fair, compliant, and supportive work environment for their employees.

In this issue:

Costliest Work Comp Claims Still Come from Car Crashes

California Workers’ Compensation Market Update (2025)

2025 NCCI Annual Updates on State Workers Comp Regulations and Legislation

Insurance Industry Trade Associations Plan to Lobby for Mitigation of Third-Party Litigation Funding in 2025

How Employers Can Prepare for Pay Equity Scrutiny

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