Group Presents Workers’ Compensation Analysis to Insurance Commissioner

The Workers' Compensation Insurance Rating Bureau on Thursday formally presented to Insurance Commissioner John Garamendi (D) its analysis of the recently enacted law (SB 899) to reform the state workers' compensation insurance system, the Sacramento Bee reports (Chan, Sacramento Bee, 5/14). 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. The law took effect when it was signed last month because it was passed by a two-thirds majority of the both the Assembly and Senate (California Healthline, 5/12).

The WCIRB analysis found that the new law should allow workers' compensation insurance carriers to reduce premium rates by 13% to 15%. In addition, WCIRB found that the cost of benefits and medical treatment for injured workers would decrease 17.9% from July 2003 (Sacramento Bee, 5/14). However, the WCIRB analysis did not reflect the new law's changes to permanent disability benefits because they will not be finalized until next year (California Healthline, 5/12). After hearing the WCIRB analysis, Garamendi said that workers' compensation insurance premium cuts "should be in the range of somewhere between 15% to 20%. That is clear to me at this point." Within the next two weeks, Garamendi will use the projections to recommend premiums for workers' compensation insurance policies that are written or renewed between July 1 and Dec. 31, the Bee reports (Sacramento Bee, 5/14). However, workers' compensation insurance carriers do not have to follow Garamendi's recommendation (Lifsher, Los Angeles Times, 5/14).

Charles Bacchi, a lobbyist for the California Chamber of Commerce, said, "Significant savings are developing quickly. What this means to employers in California is they are going to have rate reductions this summer" (Sacramento Bee, 5/14). However, Willie Washington, a legislative advocate for the California Manufacturers and Technology Association, said that premiums likely will not decrease soon enough to appease employers whose workers' compensation insurance bills will be due before Jan. 1, the Times reports (Los Angeles Times, 5/14). Nicole Mahrt, a spokesperson for the American Insurance Association, said, "No one can anticipate what individual carriers are going to do. We didn't get into this situation overnight," adding, "You can't really turn a tanker on a dime. It's going to take some time" to significantly reduce premiums. Assembly Speaker Fabian Nunez (D-Los Angeles) said that workers' compensation insruance premiums should be cut by 25%, adding, "The Legislature cut billions out of the system over the past two years, but so far, insurance companies have pocketed the savings instead of passing them along to California businesses." Democratic lawmakers and labor leaders have said that they will push for legislation to give the insurance commissioner the authority to regulate workers' compensation insurance premium rates if premiums are not reduced enough, the Bee reports (Sacramento Bee, 5/14).