Workers’ Compensation Reform Negotiations Ongoing

Insurance Commissioner John Garamendi (D) on Tuesday gave a 47-minute presentation to Gov. Arnold Schwarzenegger (R) and state legislators on a new plan to regulate workers' compensation insurance rates, the Los Angeles Times reports (Lifsher, Los Angeles Times, 3/24). Under Garamendi's proposal, insurers would be prohibited from raising their expenses or profits from the levels reported to the state on July 1, 2003, for three years, the Sacramento Bee reports (Chan, Sacramento Bee, 3/24). Insurers could seek approval from the Insurance Department for adjustments in their actual costs of paying claims but not any other costs or profits during the three-year period (Lawrence, AP/Contra Costa Times, 3/24). Garamendi, who was previously against rate regulation, developed the proposal because Democratic lawmakers are "toughening their stand on regulating insurance rates in what could become a deal breaker" for reform of the state workers' compensation system, the Bee reports (Sacramento Bee, 3/24). "The reasoning is this is a transition period while the market recovers, while we bring more insurers into the market, while reforms take effect," Norman Williams, a spokesperson for the Department of Insurance, said (AP/Contra Costa Times, 3/24). Garamendi said that rate regulation "would help stabilize the market" and "assure that savings from this year's legislation are passed through" to employers (Abate/Hubbell, San Francisco Chronicle, 3/23). Sen. Richard Alarcon (D-Van Nuys) said, "We must reduce the rates. [Rate regulation] will be part of the [workers' compensation reform] package." However, Sen. Charles Poochigian (R-Fresno) said rate regulation would not work because it applies only to private insurers, although most companies obtain coverage through the quasi-public State Compensation Insurance Fund (Sacramento Bee, 3/24). Alarcon said that Schwarzenegger "would be willing to support" rate regulation "if it's part of a broader package" (Los Angeles Times, 3/24).

Earlier this week, Margita Thompson, press secretary for Schwarzenegger, said, "The governor wants a free-market approach. Rate regulation is not going to address the cost drivers in the system" (Sacramento Bee, 3/24). However, Schwarzenegger on Wednesday "signaled ... that he would be open to a compromise with Democratic lawmakers" on rate regulation, the Los Angeles Times reports. Schwarzenegger said that regulating rates is "all part of the negotiations and part of the whole mix" (Nicholas/Lifsher, Los Angeles Times, 3/25). The governor added that rate regulation "is definitely something to consider" (Chan, Sacramento Bee, 3/25). Schwarzenegger is proposing a plan that would require insurance companies to "pass on" any savings from workers' compensation reform legislation for one year, the San Diego Union-Tribune reports (Ainsworth, San Diego Union-Tribune, 3/25). According to the Bee, Schwarzenegger continued his "carrot-and-stick strategy" with lawmakers by indicating that he would consider rate regulation while continuing to campaign in favor of a possible ballot initiative to reform the state workers' compensation insurance system (Sacramento Bee, 3/25). Schwarzenegger's initiative, which must collect 598,105 valid signatures by April 16 to qualify for the November ballot, would cut $11.3 billion from the cost of the state's $29 billion workers' compensation program. It includes measures that would prohibit workers from receiving multiple disability payments for the same injury; require dispute resolution more frequently to reduce litigation costs; limit penalties paid by insurers and employers in medical bill disputes; and establish uniform standards for permanent disability (California Healthline, 3/18). Schwarzenegger has given lawmakers until the end of the week to develop a framework for workers' compensation reform because meeting that deadline would allow legislation to be passed by the time Legislature leaves for spring break on April 1 (Los Angeles Times, 3/24).

Summaries of other recent articles addressing the state workers' compensation system are provided below.

• The San Diego Union-Tribune on Tuesday examined the State Compensation Insurance Fund, which holds about 60% of the California workers' compensation market, compared with about 3% to 4% of the market for the nearest private-sector competitor. According to the Union-Tribune, the "financial strains" put on State Fund by its large market share have been passed on to clients, with State Fund's premiums having more than doubled to $7.6 billion in 2003 from $3.6 billion in 2001. The Union-Tribune reports that many private insurers contend that there is not a "level playing field" between State Fund and the private market and that State Fund should be more closely regulated by the state (Calbreath, San Diego Union-Tribune, 3/23).
  
  
• Schwarzenegger's fundraising adviser Marty Wilson last week said that the governor will temporarily stop accepting campaign donations from insurance companies with a stake in the state's workers' compensation system, the Sacramento Bee reports. Wilson said that as of March 2, all donations already received by Schwarzenegger's California Recovery Team from such insurers would be returned. Donations received before the March 2 primary election will be kept because "the committee's focus up until then was a multimillion dollar ad campaign" promoting Propositions 57 and 58, the Bee reports. "Because our focus has shifted now to the (workers' compensation) qualification effort and the governor is involved in negotiations with legislative leaders to forge a compromise, the decision was made that it would be best from an appearance point of view that the recovery team not accept contributions from carriers involved in the California comp market," Wilson said. Since December, the California Recovery Team has received $900,000 from insurers, the Bee reports (Talev, Sacramento Bee, 3/19).

KCRW's "Which Way, L.A.?" Tuesday discussed workers' compensation reform issues with Sen. Richard Alarcon (D-Van Nuys), California Business Roundtable President Bill Hauck and Sacramento Bee columnist Dan Weintraub (Olney, "Which Way, L.A.?" KCRW, 3/23). The complete segment is available online in RealPlayer. In addition, "California Connected" Thursday will focus on workers' compensation reform. The program will examine the Los Angeles County Metropolitan Transportation Authority's approach to the issue and the perspectives of Joe Heidelmaier, vice president of City Sea Food in Los Angeles, and James Franklin, a Palm Desert locksmith who was injured while working (KVIE release, 3/25). California Connected is a weekly, hour-long newsmagazine produced by PBS stations in Los Angeles, Sacramento, San Diego and San Francisco that covers state events and issues. Check local PBS listings for show times. Audio and video versions of the program will be available online in Quicktime or Windows Media formats after the broadcast.