Garamendi: Reduce Workers’ Compensation Premiums by 16%
Insurance Commissioner John Garamendi (D) on Wednesday recommended that premiums be reduced by 16.4% for workers' compensation policies that begin or renew in July, the Los Angeles Times reports. Insurers typically follow Garamendi's recommendations.
If insurers reduce rates by the suggested amount, premiums will have declined by 55.1% since the Legislature adopted workers' compensation reforms in 2003 and 2004. However, industry experts say the recommendation could be the last substantial reduction "for a while," as savings from the reforms are bottoming out, according to the Times.
Department of Insurance actuaries recommended an 18.9% rate reduction, but Garamendi said he is recommending a smaller reduction to compensate for an expected increase in the cost of claims during the second half of the year (Lifsher, Los Angeles Times, 6/1). The 16.4% reduction was calculated by the Workers' Compensation Insurance Ratings Bureau (Herrera, Riverside Press-Enterprise, 6/1).
Garamendi said costs could increase because of lawsuits filed by injured workers and state regulations that make it harder for insurers to deny care.
According to Scott Hauge, an insurance broker and director of the employers' advocacy group Small Business California, "It seems that some [insurers] have said they are not going to go along with the full 16% reduction," but decreases will "mostly be in the double digits."
Since the workers' compensation reforms were passed, insurance industry earnings are at their highest point in 30 years. Premiums paid by employers in July 2005 totaled $4.53 per $100 in payroll, compared with $6.47 per $100 in payroll in July 2003, according to the ratings bureau (Los Angeles Times, 6/1).
Garamendi also called on Gov. Arnold Schwarzenegger (R) and the Legislature to make changes to the workers' compensation laws, saying the most severely injured workers "may not be receiving fair compensation" and the review system "is now being overused to delay and deny medical care."
The Schwarzenegger administration will review the law this summer (Chan, Sacramento Bee, 6/1).