Insurance Commissioner Recommends Workers’ Compensation Insurance Rate Cut
Insurance Commissioner John Garamendi (D) on Friday recommended that workers' compensation insurance carriers reduce their premium rates by 20.9% based on expected savings from the recently enacted workers' compensation reform law (SB 899), the Los Angeles Times reports (Lifsher, Los Angeles Times, 5/29). Garamendi estimated a total savings of $7.75 billion in costs in the $24-billion-per-year state workers' compensation system -- $5.5 billion from last year's reform measures and $2.25 billion from SB 899, the San Francisco Chronicle reports. Insurers are not required to adopt the rate recommendation, but they often use it as a benchmark. The recommendation applies to rates on workers' compensation insurance policies written or renewed after July 1.
Garamendi said, "Our work is not finished. We must now do everything in our power to ensure that all of the savings go to premium relief for employers and not to insurers' bottom lines" (Berthelsen, San Francisco Chronicle, 5/29). However, Garamendi's recommendation is not "being embraced by insurers, employer organizations or even Gov. Arnold Schwarzenegger (R)," the Times reports. Nicole Mahrt of the American Insurance Association said, "The bottom line is there will be savings, but how much is a little uncertain" (Los Angeles Times, 5/29). "We need to make sure cost savings materialize," Mahrt added (San Francisco Chronicle, 5/29).
According to the Times, the Schwarzenegger administration on Friday "pointedly shied away" from endorsing Garamendi's recommendation or the 17.8% premium rate cut recommended by the Workers' Compensation Insurance Rating Bureau earlier in May. Vince Sollitto, a spokesperson for Schwarzenegger, said that the governor "expects that there will be immediate relief" from the reform measure he signed in April but that he would not specify an exact amount. Labor and employer groups say that Schwarzenegger might be refraining from making "promises of immediate, significant savings" because his administration is responsible for issuing "the hundreds of regulations needed to put [SB 899] into practice," the Times reports. The Schwarzenegger administration has "a lot on its shoulders in terms of making this work," Tom Rankin, president of the California Labor Federation, said, adding, "They may be worried that they can't produce the savings they promised." Willie Washington, a lobbyist for the California Manufacturers and Technology Association, said that the Schwarzenegger administration does not "want to champion too much" (Los Angeles Times, 5/29).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.