State Fund Proposes Decrease in Workers’ Compensation Insurance Rates

State Compensation Insurance Fund on Monday announced a proposed 5% premium rate decrease for workers' compensation insurance policies issued or renewed beginning Jan. 1, the Los Angeles Times reports. Combined with two earlier rate decreases, rates for employers renewing workers' compensation insurance policies in the first six months of 2005 will be about 12% lower than 2004 rates (Tamaki, Los Angeles Times, 11/30).

According to the Sacramento Bee, the decision by State Fund, which provides workers' compensation insurance to more than half of the California market, is "key in efforts" to reduce premiums (Chan, Sacramento Bee, 11/30). The rate reduction is nearly twice the 2.2% decrease recommended by Insurance Commissioner John Garamendi (D) on Nov. 17 (Abate, San Francisco Chronicle, 11/30).

About 18 other insurers have submitted rate filings, ranging from a 10.4% decrease to a 6.5% increase. According to the Times, the majority of workers' compensation insurers have filed the recommended 2.2% reduction (Los Angeles Times, 11/30).

According to State Fund President Dianne Oki, the new rates will "achieve [the] objective" of building a surplus to cover future claims, while balancing employers' demands for lower premiums (San Francisco Chronicle, 11/30).

State Fund spokesperson Jim Zelinski said, "We understand California employers need further rate relief. This is an attempt to give them some relief and for us to charge enough" (Los Angeles Times, 11/30).

Garamendi said, "California's workers' compensation costs are headed in the right direction -- down. However, State Fund, with some 55% of the market, must be a leader" (Calbreath, San Diego Union-Tribune, 11/30). He added, "With greater efficiencies and planning, State Fund could realize further savings that more closely reflect the more than 22% reduction in loss costs that has occurred within the system since July 2003."

Charles Bacchi, a lobbyist with the California Chamber of Commerce, said, "It's certainly a step in the right direction. We think it's proof the reforms are working, but there's still more to be done."

David Schwartz, president of the California Applicants' Attorneys Association, said the decrease was not sufficient. "For employers who have had their rates go up 100%, 200%, 300%, it's absurd to talk about a 5% decrease," he said, adding, "We've proposed a 24% decrease given the savings the carriers have had based on new bills that have passed" (Los Angeles Times, 11/30).