State Compensation Insurance Fund To Reduce Workers’ Compensation Premium Rates by 2.9%

State Compensation Insurance Fund, which provides workers' compensation insurance to more than half of California employers, will reduce its premium rates by 2.9% in 2004, "far short" of the 14.9% reduction that state Insurance Commissioner John Garamendi (D) recommended earlier this year, sources familiar with the issue said on Tuesday, the Los Angeles Times reports. The anticipated rate cut will give Gov. Arnold Schwarzenegger (R) "powerful ammunition" in his attempt to reform the "troubled system," according to the Times (Dickerson, Los Angeles Times, 12/3). As part of continued efforts to reform the workers' compensation system, the Senate Labor and Industrial Relations Committee last week voted to approve a bill (SBX4 1) that would repeal workers' compensation reforms enacted earlier this year. Former Gov. Gray Davis (D) in September signed into law two bills (AB 227 and SB 228) that establish fee schedules for treatments and prescription drugs; limit chiropractic and physical therapy visits; implement reviews that use national standards to determine the proper amount of care for certain injuries; and increase penalties for employer fraud from $50,000 to $150,000. Garamendi recommended the 14.9% cut because the laws are expected to result in a one-time, $5 billion savings to the state workers' compensation system, with a additional annual savings of $5.4 billion (California Healthline, 11/26).

Vince Sollitto, a spokesperson for Schwarzenegger, said that the workers' compensation insurance premium rate filings to date "show how much further we have to go" on workers' compensation system reform. He added, "Those limited reforms the Legislature passed are just that -- limited. We have a system that's greatly out of whack" (Los Angeles Times, 12/3). Garamendi said that State Fund's planned premium rate reduction indicates that rates are no longer "on an up escalator," adding, "Rate filings of 95 companies, 68 of which are reducing their premiums, make it very clear that we've turned the corner" on workers' compensation (Lohse, San Jose Mercury News, 12/3). Garamendi is expected on Wednesday to announce the State Fund rate change as well as the rate changes of more than 100 other workers' compensation insurance carriers (Los Angeles Times, 12/3).