Workers’ Compensation Insurance Rates Decrease by 27% Over Two Years
Workers' compensation insurers have reduced baseline rates in California by an average of about 27% during the past two years, according to a Department of Insurance report on how rates have been affected by three workers' compensation reform bills enacted since 2003, the San Francisco Chronicle reports (Abate, San Francisco Chronicle, 8/9).
Insurance Commissioner John Garamendi (D) said claims paid out for work-related injuries have fallen by 36.5% since mid-2003, about 10% more than the overall base-rate reductions reported by insurers (Lawrence, AP/San Diego Union-Tribune, 8/9).
According to the report, premiums for workers' compensation insurance have decreased by an average of 14.6% for policies written or renewed after July 1 (Lifsher, Los Angeles Times, 8/9). In addition, the report found that insurers' average amount paid per dollar collected in premiums decreased from 87% in 2002 to 41% in 2005 (San Francisco Chronicle, 8/9).
Garamendi said industry price reductions appear to be lagging about six months behind his advisory rates (AP/San Diego Union-Tribune, 8/9). "Employers have received some much-needed relief, but it hasn't come fast enough, and it doesn't reflect the tremendous savings to insurers," Garamendi said in a statement (San Francisco Chronicle, 8/9).
During a conference call with reporters, Garamendi said, "Employers have not seen the full benefits of the reforms" (Chan, Sacramento Bee, 8/9).
Vince Sollitto, a spokesperson for Gov. Arnold Schwarzenegger (R), said, "The reforms have worked and costs have come down for employers. We expect that to continue" (Los Angeles Times, 8/9).
Sam Sorich, president of the Association of California Insurance Companies, said insurers are uncertain about whether courts might overturn provisions of the rule changes and are determining how to put some cost-cutting regulations into practice. Sorich said in a statement, "[D]espite these uncertainties, the reforms are progressing" (AP/San Diego Union-Tribune, 8/9).
Stanley Zax -- president of Zenith National Health Insurance, which has reduced premiums by 22% since 2003 -- said the new rules have "made things a lot better" and have created "a deeper, more robust, competitive market." Zax added, "The question that is not answerable is whether or not this is sustainable."
Martyn Hopper, director of the National Federation of Independent Businesses, said workers' compensation rates for NFIB's 35,000 California members fell 15% to 20% over the last two years, and he expects an additional 10% to 15% reduction over the next six months. Hopper said, "The insurance industry moves slowly, and this is no different. But it's moving in the right direction."
However, critics of the changes approved by the Schwarzenegger administration in 2004 have said that many workers no longer have "adequate medical care" and are "unable to support themselves or their families," the Times reports.
Angie Wei, a lobbyist for the California Labor Federation, said, "The insurance commissioner's findings continue to provide evidence that the big winners from Schwarzenegger's reforms are the insurance companies" (Los Angeles Times, 8/9).
California politicians are well aware that workers' compensation is "a political minefield through which one treads very carefully," Dan Walters, a Bee columnist, writes in an opinion piece. Garamendi is "dancing carefully through it," Walters writes, adding that the "more Garamendi calls for reducing costs to employers, the more he potentially alienates those on the other side" or the workers' compensation debate.
However, Walters writes that if Garamendi pursued "the union-attorney demands to modify the 2004 reforms, he'd risk rancor from the business community" (Walters, Sacramento Bee, 8/9).