Workers’ compensation laws across the United States are not uniform in how the states design their jurisdictional systems. It is a federal law that mandates states provide the coverage system, and then state legislatures decide how the programs should be structured. While some states only allow for one insurer, others allow private insurance companies to provide coverage as well with the state’s primary workers’ comp company being the insurer of last resort. This is the model that California uses.
However, insurance rates are also specific to the particular industry as well with the most dangerous occupations experiencing the highest premiums based on the primary state insurer’s rates. The amount of profit the program has cost operators has historically been high, but it is about to get worse in California for tree trimmers.
New law focus
A new law passed in California with respect to workers’ compensation insurance program solvency forced the state insurance agency to look at payouts versus premium input cashflows. This evaluation resulted in premiums for those who chose the state workers’ compensation program doubling immediately. And it even gets worse for new companies because they are often denied private insurance due to the lack of an acceptable safety record.
Unsustainable added expense
The doubling of workers’ comp insurance premiums is a significant shift in the industry. The prior percentage of total income for tree trimming companies before the change had already reached 25% of total income. Now, it sits at 50% for those insured with the state agency, which could effectively put many companies out of business.
What appears as the ultimate result of the new program solvency requirement is relatively simple. While the price of practically all goods and services goes up in the overall U.S. inflationary economic scenario, tree trimming costs for property owners increase exponentially as well.