Workers' compensation costs for California employers are expected to increase by $1 billion in 2003 and more than $3 billion by 2006 under a bill signed into law by Gov. Gray Davis earlier this year.

The new law increases the maximum injured worker benefit from $490 to $602 a week next year and to $840 by 2005. It also doubles the death benefit for the families of workers killed on the job from $160,000 to $320,000.

State Department of Insurance officials said despite the fact that the number of workers filing injury claims had dropped in recent years, sharp increases in medical costs, combined with the weak condition of many of the state's private workers' compensation insurers, made the hike necessary.

In 2000, Superior National, California's largest private workers' compensation insurer, was found to be insolvent and its assets were liquidated. Fremont Compensation, another large insurer, was taken over by the state because its financial condition also made it vulnerable to collapse. The companies' problems were caused in part from not charging premiums adequate to cover expenses, insurance department officials said.

While the bill's opponents and many employers said the cost increases were excessive, Davis and supporters said insurance reforms in the bill would partially offset the hikes. The new law establishes fee schedules for prescription drugs and outpatient facilities and creates a state-sponsored program to encourage injured workers to return to work sooner.