Workers’ Comp Savings Detailed

California’s overhaul of its troubled workers’ compensation insurance system has saved employers at least $8.1 billion over the last three years, and the benefits to the economy are expected to continue, according to a study sent to the governor and Legislature on Friday.

The report commissioned by the state Department of Industrial Relations found that workers’ comp premiums paid by businesses and nonprofit organizations, which soared as much as 200% in the early part of the decade, have been almost cut in half since July 2003.

What’s more, rates in California, the highest in the nation in 2004, have dropped to 1996 levels and now are lower than those in other big states such as Texas and Florida, the report said.

Democratic lawmakers, labor unions and advocates for injured workers complain that at least some of the savings created by passage of the 2003 and 2004 workers’ compensation laws has been at the expense of benefits and medical care for employees injured on the job.

“We’re pleased that the rates are dropping, but this [report] only looks at half of the equation,” said Steven Maviglio, a spokesman for Assembly Speaker Fabian Nunez (D-Los Angeles). “It doesn’t look at whether the savings are coming out of the hide of injured workers.”

Maviglio noted that another major study being finalized by the state Commission on Health, Safety and Workers’ Compensation concluded that rules imposed last year by Gov. Arnold Schwarzenegger’s administration had reduced benefits for permanently injured workers by more than 50%.

“Clearly, insurance companies have done very well by the reforms, and so have businesses,” Maviglio said. “But we think that everybody has to benefit.”

To that end, Democratic leaders in the Legislature said they hoped to work with the governor’s office on revising regulations to “address the shortfalls that we seem to be seeing,” Maviglio said.

A spokesman said the governor was open to fine-tuning some regulations that determine the extent of a worker’s injuries -- the key factor in calculating benefits. But Schwarzenegger is not interested in rolling back any of the accomplishments of his signature workers’ compensation legislation, spokesman Daryl Ng said.

For his part, state Insurance Commissioner John Garamendi, a strong supporter of the workers’ comp overhaul, urged both the governor and lawmakers to make sure that “employees are not being shortchanged by the very system designed to help them.”

Garamendi has complained that insurers have been profiting unduly from the workers’ comp overhaul at the expense of their policyholders.

The study circulated Friday, however, noted that although insurers had reported record profits, they had shared 86% of the savings from the new laws with their customers.

“Major employers are seeing significant reductions” in their insurance bills, said Jeanne Cain, senior vice president of the California Chamber of Commerce. “This allays concerns that the insurance industry would not pass their savings on to employers.”

Insurers also said they were open to doing research that would go beyond what they dismissed as “anecdotal evidence” presented by injured workers’ advocates of flaws in the workers’ comp overhaul. They said they hoped that the report would quiet calls by some Democratic legislators for a law capping workers’ comp insurance rates.

Workers have complained that since the system was overhauled they have had trouble getting insurance company approval for medical treatments, prescription drugs, surgeries and physical therapy.

The new report, compiled by insurance consulting firm Bickmore Risk Services for $768,000, underscores that the drop in claims and expenses has made workers’ compensation “a profitable line of coverage.” Private insurers now are competing strongly for business and are undercutting premiums quoted by the State Compensation Insurance Fund by an average of 15.2% in 2005, the report said.

As a result, the State Fund, a government-sponsored insurer of last resort for businesses that have trouble buying coverage, has lost some of its market dominance. Its share of the state’s workers’ compensation business has dropped from 58% in 2003 to 36% in 2005, the Bickmore report said.