Group Says Recently Enacted Law Could Reduce Workers’ Compensation Insurance Premium Rates by 13.9%
The Workers' Compensation Insurance Rating Bureau on Tuesday released its analysis of the recent law (SB 899) to reform the state workers' compensation insurance system, saying that the law could reduce short-term workers' compensation costs by 13.9%, saving employers about $3 billion over a 12-month period, the Los Angeles Times reports (Lifsher, Los Angeles Times, 5/12). 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, 4/30). The WCIRB analysis did not reflect the new law's changes to permanent disability benefits because they will not be finalized until next year, the Times reports.
Insurance Commissioner John Garamendi (D) will officially receive the WCIRB projections at a hearing Thursday in San Francisco. Garamendi will then use the projections to recommend premiums for workers' compensation insurance policies that are started or renewed between July 1 and Dec. 31. However, "it's anyone's guess how much premiums actually will decrease" because workers' compensation insurers do not have to accept Garamendi's rate recommendations, the Times reports (Los Angeles Times, 5/12). For example, WCIRB last year recommended an average workers' compensation premium reduction of about 3%. Garamendi said that workers' compensation reforms signed in 2003 justified a reduction of 14.9%, but insurers reduced rates by an average of 3.6% (Abate, San Francisco Chronicle, 5/12). On Tuesday, Garamendi said that State Compensation Insurance Fund, which provides workers' compensation insurance to more than 50% of California employers, and other workers' compensation insurance carriers should implement rate reductions expediently, the San Jose Mercury News/Contra Costa Times reports. "They have the obligation of immediately implementing those parts of the law that are in effect now ... and then passing the savings on to business in California," Garamendi said (Lohse/Folmar, San Jose Mercury New/Contra Costa Times, 5/12).
Nicole Mahrt, a spokesperson for the American Insurance Association, said that despite the WCIRB recommendation, some insurers might reduce workers' compensation premium rates by only 2.6% because workers' compensation claims have not decreased by as much as Garamendi had predicted in the first several months of 2004 (Los Angeles Times, 5/12). However, Vince Sollitto, a spokesperson for Gov. Arnold Schwarzenegger (R), said that the WCIRB projections "are encouraging, considering they appear to recognize substantial savings even as significant reforms have yet to take effect" (Gittelsohn/Johansson, Orange County Register, 5/12). Tom Rankin, president of the California Labor Federation and member of WCIRB, said that the projected savings are too low (San Francisco Chronicle, 5/12). Rankin added that state regulation of workers' compensation insurers is necessary because "this is all voluntary. Garamendi has no authority, no tool to regulate the rates" (San Jose Mercury News/Contra Costa Times, 5/12). Regardless of the short-term premium rate reductions, "much greater savings should materialize" after the implementation of the new regulations for permanent disability benefits, the Times reports. Frank Neuhauser, a workers' compensation analyst at the Survey Research Center at the University of California-Berkeley, said that the new regulations for permanent disability benefits will save an additional 7% to 8% from the total cost of the state workers' compensation system. He added that with the new regulations, insurers should be able to charge premiums that are as much as 25% lower than in 2003 and still earn a profit (Los Angeles Times, 5/12).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.