Despite Drop, “Frictional” Workers’ Compensation Costs Remain High in California

According to a report from Business Insurance, so-called “frictional” workers’ compensation costs are down in 2021—but they still remain high in California. In fact, the frictional costs of the workers’ compensation system in California is nearly twice as high as the national average. Here, our Fresno workers’ compensation defense attorneys highlight the key things to know about frictional workers’ compensation costs.

What are Frictional Workers’ Compensation Costs?

Broadly defined, the term “frictional costs” describes administrative expenses. In the context of workers’ compensation, frictional costs are all of the costs other than those that directly go towards the benefits of injured workers.

In November, the Workers’ Compensation Insurance Rating Bureau of California (WCIRB) released its report on frictional costs in the workers’ compensation system for 2021. The WCIRB found that it costs $0.48 in administrative costs for every $1.00 of workers’ compensation benefits paid in California.

Frictional Costs are Down More than 4%, But Remain High in California

The WCIRB estimated that it cost $0.50 to deliver $1.00 of workers’ compensation benefits in California in 2020. The frictional cost of workers’ compensation fell in 2021—with it being more than 4% lower than the previous year. That being said, frictional costs are still quite high in California. In the median U.S. state, the frictional cost of workers’ compensation is nearly 50% lower than in California. Nationwide, it costs about $0.25 to deliver $1.00 of workers’ compensation benefits.

Four Reasons Why Frictional Costs are Higher in California

The WCIRB and other interested parties have put a lot of time and effort into studying California’s workers’ compensation system. As part of their report, they note that there are several different reasons why the frictional costs associated with delivering workers’ compensation benefits are higher in our state. Here are three notable reasons emphasized by the independent organization:

  • California has a significantly larger total volume of permanent disability claims than most other states;
  • California has a significantly higher percentage of cumulative trauma claims than most other states; and
  • Workers’ compensation claims tend to remain open—take longer to process—in California.

It is worth noting that the frictional costs of workers’ compensation are not the same throughout the entire state. Certain regions of California have heightened frictional costs. The WCIRB finds that the frictional costs are substantially higher in Southern California—particularly in Los Angeles—than they are in the rest of the state. They are the lowest in the far north, including Yuba City and Redding.

Contact Our Fresno, CA Workers’ Compensation Defense Lawyer for Immediate Help

At Yrulegui & Roberts, our California workers’ compensation defense lawyers strive to resolve cases in a cost-effective, time-efficient manner. We are here as a resource when you need guidance. Give us a call now or reach out to us online to arrange your confidential case review. Our law firm provides workers’ compensation defense representation throughout the area, including in Fresno, Merced, Turlock, Modesto, Tulare, Hanford, Porterville, Bakersfield, Salinas, and Sacramento.