Businesses Should Expect ‘Modest’ Workers’ Compensation Insurance Premium Cuts, State Fund President Says

Businesses should expect "modest" reductions in workers' compensation insurance premiums this year, State Compensation Insurance Fund President Dianne Oki said at a hearing of the Senate Insurance Committee on Thursday, the Los Angeles Times reports. State Fund writes 53% of the state's workers' compensation insurance policies, so it is "being watched by insurers, employers, union leaders and politicians for evidence" that the recently enacted workers' compensation reform law (SB 899) "will result in notable savings in the cost of treating injured workers -- and lower premiums for business owners," the Times reports (Lifsher, Los Angeles Times, 5/21). The law will provide for immediate medical care for injured workers; require injured workers to choose from a network of employer-selected physicians for treatment or petition a medical review panel to see a physician of their own choice; require use of American Medical Association guidelines to rate impairments to injured workers; implement provisions to encourage injured workers to return to work; and allow employers to apportion workers' compensation payments to cover only work-related injuries. In addition, the law will require employers and workers to be considered equal before the law; limit temporary disability payments to two years instead of the current five years; increase benefits for workers who are more than 70% disabled; give small businesses a state reimbursement of as much as $2,500 for necessary workplace changes to allow an injured worker to return to work; require workers to prove that an injury exists; and eliminate payments for claims of back pain and other pains (California Healthline, 5/14). According to Oki, State Fund has not decided how much to reduce premiums, adding that specific numbers would not be released until after Insurance Commissioner John Garamendi (D) issued his nonbinding rate recommendation Wednesday, the Times reports. She added, "We are not promising a big rate decline on July 1," when workers' compensation carriers must file rates for premiums that are written or renewed in the second half of the year.

Oki's prediction of modest workers' compensation premium cuts "didn't sit well with some committee members," the Times reports. State Fund is "the leade[r] of the pack, so it's disconcerting when I hear them say that workers' comp rates are going to come down only modestly," Assembly Speaker Fabian Nuñez (D-Los Angeles), said, adding, "If State Fund does not reduce rates, it sends a message to the entire industry that they should follow suit." Sen. Jackie Speier (D-San Mateo) used the hearing to begin an investigation into State Fund's management, adding, "You can't impose the kind of reforms we've imposed over the last six months and not have them be reflected in premiums." Speier also called on Gov. Arnold Schwarzenegger (R) to persuade the State Fund to further reduce its rates. Jay Hansen, who was appointed by the Assembly to one the State Fund's three nonvoting seats, said that he will closely monitor the insurer's rate reduction. "We don't want modest cuts; we want big cuts," Hansen said. Garamendi, who attended the hearing, said that he will recommend that insurers reduce workers' compensation premiums by 18% to 20% (Los Angeles Times, 5/21).