Workers’ Compensation Reforms Reduce Employer Costs by $8.1B

Reforms to California's workers' compensation insurance system have reduced costs to employers by at least $8.1 billion over the last three years, according to a study released Friday, the Los Angeles Times reports.

The study, commissioned by the Department of Industrial Relations, found that workers' compensation insurance premiums declined by almost half since July 2003. In addition, rates in California have dropped to 1996 levels and are now lower than premium rates in other large states such as Texas and Florida, the report found.

The report found that private insurance companies, competing for business, are undercutting premium quotes from the State Compensation Insurance Fund by an average of 15.2% in 2005. As a result, State Fund in 2005 wrote workers' compensation insurance policies for about 36% of California businesses, down from 58% in 2003.

Workers' compensation insurers have reported record profits but shared 86% of the savings from the reforms with their customers, according to the study.

The Times reports that the savings "are expected to continue."

Steven Maviglio, a spokesperson for Assembly Speaker Fabian Nunez (D-Los Angeles), said the report "only looks at half of the equation," noting that another study being finalized by the Commission on Health, Safety and Workers' Compensation found that the reforms have reduced benefits to permanently injured workers by more than 50%.

Democratic lawmakers said they hope to revise some of the "shortfalls" of the new regulations, Maviglio said.

Daryl Ng, a spokesperson for Gov. Arnold Schwarzenegger (R), said the governor is open to adjusting some of the regulations that determine the extent of a worker's injuries but would not make major changes to the legislation (Lifsher, Los Angeles Times, 2/4).

The DIR report is available online.