Increase in Loss Adjustment Spending Outpaces Medical Cost Growth

Loss adjustment expenses — the amount payers dole out to cut claim costs — were one of the leading cost drivers in the California workers’ compensation system last year, according to a report from the Commission on Health and Safety and Workers’ Compensation. LAE spending rose 18.9% from $3.3 billion in 2012 to $3.9 billion in 2013, according to the commission’s 2014 annual report. That outpaced the growth of medical costs, which rose 7.9% from $7.3 billion to $7.8 billion, as well as indemnity payments, which increased 4.7% from $4.8 billion to $5 billion. ...