Compromise on Workers’ Comp Hinted

Gov. Arnold Schwarzenegger signaled Wednesday that he would be open to a compromise with Democratic lawmakers on a plan to cut workers’ compensation costs, the most hopeful sign yet that a deal may be close.

Schwarzenegger said at a news conference outside a Costco store that regulating workers’ comp insurance rates -- a move he has opposed to date -- is “all part of the negotiations and part of the whole mix. Yes.”

Reaching a compromise on overhauling the state’s costly workers’ comp system is impossible without the governor’s OK. And Wednesday’s show of flexibility could open the way to crafting a reform plan that backers hope will save employers billions in insurance premiums and greatly improve California’s business climate.

After weeks of intense negotiations between the governor and lawmakers, rate controls have emerged as a sticking point that could either make or scuttle a deal.

Embracing a classic free-market position, Schwarzenegger until now has opposed any ceilings on premiums. The fear was that perceptions of government meddling might make the California insurance market less attractive to insurance companies. Schwarzenegger’s press office said as recently as this week that rate regulation was not the answer to escalating workers’ comp costs.

But many influential legislative Democrats disagree, and with time running out for a deal, Schwarzenegger may now be moving to the view that compromise is necessary if he is to get a bill approved before the Legislature leaves for its spring break next Thursday.

“We have to bring the costs down,” the governor said, “because otherwise more and more businesses will leave the state, and we’re losing jobs.”

If Schwarzenegger is unable to win legislative approval of a workers’ comp package, his backup plan is to put an initiative on November’s ballot, much as he did when he convinced voters to approve a $15-billion bond to plug the state budget gap on March 2.

The deadline for submitting the needed 598,105 valid signatures to the Secretary of State’s office is April 16.

Schwarzenegger appeared at Costco to urge shoppers to sign initiative petitions. Wearing a jacket with a logo reading, “Join Arnold/Fix Workers Comp/Terminate Fraud,” the governor spoke to people collecting signatures at a table set up near the entrance, then made his way to the food court to give an address.

“It’s too sad that our special interests are pushing our legislators right now,” the governor told the crowd, singling out labor unions, insurers and the attorneys that represent injured workers. “And as I said during my campaign, I made it very clear: If special interests push me around, I will push back.”

The message was indeed clear, and it was directed at lawmakers: If a deal falls through, the governor was poised to go around them and try to settle the issue at the polls.

Labor negotiators and Democratic lawmakers insist that some form of rate regulation be part of any deal with the governor. They want to ensure that cost savings from any reform plan are reflected in lower premiums, not pocketed by insurance companies, said Sen. Richard Alarcon (D-Sylmar), chairman of the Labor and Industrial Relations Committee.

Rate regulation moved front and center in the complex workers’ comp negotiations earlier this week when Schwarzenegger took up the matter in a meeting with Democratic Insurance Commissioner John Garamendi.

Garamendi has put together a proposal giving him the authority to set ceilings on future workers’ comp premiums and prohibit insurers from changing rate plans that went into effect last July. The proposal also would make companies subject to Department of Insurance enforcement actions if they failed to pass along cost savings to customers.

For his part, Schwarzenegger was questioned Wednesday about his acceptance of campaign money from insurers. Having vowed that he would not be influenced by special interests, he has thus far taken at least $1.3 million from companies and individuals involved in the insurance business.

At least some of those firms provide workers’ compensation insurance. One of them, Woodland Hills-based Zenith Insurance, donated $100,000 to one of the governor’s campaign accounts in January.

Earlier in the month, the governor’s fundraising team said that he would stop taking campaign money from insurers whose fortunes are tied to the workers’ comp debate.

Explaining the practice, Schwarzenegger said: “If I get a contribution from an insurance company that deals with workers’ comp I will send it back. Because I don’t want to be beholden to any insurance company that deals with workers’ comp because I know I need to negotiate with them.”

Times staff writers Robert Salladay and Dan Morain contributed to this report.