Workers’ Compensation Reforms Not Translating Into Savings, Employers Say

Many employers say the state "has a long way to go" to reduce the cost of workers' compensation insurance, and most do not believe that several workers' compensation reform measures lawmakers passed last year and the workers' compensation law (SB 899) enacted earlier this year have saved businesses a significant amount of money, according to a survey released Friday by Pacific Staffing, the Sacramento Bee reports. Researchers surveyed executives at 100 companies in the Sacramento region and found that 72% of corporate human resource officials said that their companies have not saved money as a result of the reforms, while 9% said they have seen a difference. Additionally, 79% of executives said Gov. Arnold Schwarzenegger (R) "hasn't fixed the problem," while 5% said they think he has, the Bee reports. However, executives said that the reforms have made "positive steps" in reducing recent annual increases in workers' compensation costs, according to the Bee. Many business groups and insurers have said that premium rates in 2004 have decreased an average of 10% to 13%.

Pacific Staffing President Jay Jurschak said, "There's some optimism that (reforms) should translate into savings in years out." However, he noted that "the changes haven't translated into any significant savings as of yet." Nicole Mahrt, a spokesperson for the American Insurance Association, said that more reductions would be likely after new rules from the reforms are implemented next year. She added, "There really is a lot to be done. It is not going to happen overnight" (Chan, Sacramento Bee, 8/6).

In related news, Insurance Commissioner John Garamendi (D) at a meeting of the Hispanic Chamber of Commerce of Orange County said that workers' compensation reforms have produced double-digit reductions in workers' comp costs, but acknowledged that "there's a lot of work ahead ... to get costs to business down," the Orange County Register reports (Norman, Orange County Register, 8/6). In July, Garamendi announced that workers' compensation insurance premium rates have decreased by 10.38% since the enactment of SB 899 and other reform measures; Garamendi in May recommended a premium rate reduction of 20.9% (California Healthline, 7/28). Garamendi said that larger workers' compensation premium reductions depend on the passage of regulations needed to completely implement SB 899, such as defining permanent disability. Regulations are expected next year (Orange County Register, 8/6).

Both large and small business owners in the state "have every reason to be frustrated by the cost[s] of workers' compensation insurance," which are among the highest in the nation, a San Diego Union-Tribune editorial states. Reductions in premium rates this year have been "underwhelming -- well below the 20.9% that [Garamendi] recommended," the editorial continues. The "exorbitant premiums" for workers' compensation insurance policies have left employers in "a bind that shows no sign of easing anytime soon," the editorial states. Regulations that will "translate [the most recent reform] into action" must be enacted by next month, when insurance hearings begin, so that the Department of Insurance "can make concrete rate recommendations" and "employers can afford to insure their workers," the editorial concludes (San Diego Union-Tribune, 8/6).