Wilson Urged to Back Broad Insurance Reforms

After a hearing in which Gov. Pete Wilson was accused of helping insurers block $2.5 billion in Proposition 103 rebates, the new chairman of the state Senate Insurance Committee on Monday called on Wilson to help a new effort to pass broad reforms of the industry.

State Sen. Art Torres (D-Los Angeles) said he has been consulting with Insurance Commissioner John Garamendi on a legislative package that would reform the state’s health, auto and workers’ compensation insurance systems this year.

Torres added that he has high hopes the governor can be persuaded to sign the reform bill if it clears the Legislature.

But the call on Wilson for backing came shortly after Garamendi suggested at the hearing in Los Angeles City Hall that the governor might be part of a “fifth column undermining consumer interests within the state government.”

So it was not too surprising that Wilson’s insurance adviser promptly criticized the plan that Torres broached.

Garamendi told the hearing that, while he was pleased at Wilson’s recent decision to overrule an Administration official who sought to block the rebates, he was “troubled” that at the same time the governor said he would consider no appeals against future moves to block the regulations needed to force insurers to make rebates.

“At this point, I am hoping that the governor’s recent gesture, which could be interpreted as allegiance to the insurance companies’ cause, is just a spasm of confusion and not a manifesto of opposition to consumers,” Garamendi said.

Others at the hearing, including Proposition 103 author Harvey Rosenfield, Senate President Pro Tem David A. Roberti (D-Los Angeles) and Torres himself, were also critical of Wilson Administration moves with regard to Proposition 103 rebates. All the critics are Democrats, while Wilson is a Republican.

Nonetheless, Torres said after the hearing that now is the time to launch a major reform drive that could win bipartisan support, including Wilson’s.

Torres said one piece of legislation would attempt to shift the injury coverage provided by auto insurance and workers’ compensation into a broad health insurance plan that would provide reimbursement for medical treatments of all kinds.

Torres also said no-fault auto insurance would not be part of the bill he is working out with Garamendi. Instead, he said, a compromise system would be proposed that falls between the interests of insurers who want no-fault and the trial lawyers who oppose it. Wilson has supported no-fault.

The Torres-Garamendi proposal would be an elaboration of a health insurance reform plan that Garamendi unveiled Feb. 12. At that time, the commissioner suggested that placing all injury compensation in the health insurance system would reduce workers’ comp premiums by 25% and auto insurance premiums by 15%.

Reaction from the Wilson Administration Monday was very cool.

“We’d have to see the details,” said Wilson’s insurance adviser, Marjorie Berte. “I’ve read Garamendi’s health proposal and I don’t see enough detail to even begin to understand what he’s doing.

Berte questioned whether the plan would offer true savings or only shift the cost of injury coverage onto a consumer’s health insurance bill. “If that’s all it did, what would have been accomplished?”

Monday’s hearing was billed as an inquiry into what has held back the rebates to consumers mandated by Proposition 103.

In his testimony, Roberti disclosed that on Jan. 2 he wrote the chief executive officers of the 10 largest insurance carriers in the state asking that they follow the example set last fall by the Automobile Club of Southern California, which rebated $104 million to customers.

He received only three responses, Roberti said, and none of them were encouraging.

Later, officials from State Farm, the largest seller of insurance in the state, told the hearing that they could not give a rebate because claims the company paid in the 1989 Loma Prieta earthquake had given the company an operating loss in the state.

When Torres asked, however, how much State Farm paid in earthquake claims and specifically how much those payouts contributed to company losses, company officials said they did not have the figures with them.