Employers Get Extra Relief on Workers’ Comp

California employers will get an estimated $50 million to $60 million in extra relief under a workers’ compensation rate decision announced Thursday by Insurance Commissioner John Garamendi.

Garamendi’s decision extends the reach of a 7% workers’ compensation rate cut approved by the Legislature. He called for the cut to apply to policies already in force on July 16, when lawmakers acted. Previously, industry officials were unsure whether the reduction would apply to any policies other than those written after mid-July.

The 7% cut in the minimum premiums that insurance companies can charge, adopted as part of a broad legislative reform package, has been welcomed by business groups. But not all insured employers will necessarily benefit, because while the reduction gives insurers the freedom to cut their base workers’ compensation rates, it does not require them to do so.

Garamendi, appearing at a Sacramento news conference Thursday, predicted that enough insurers will act to save employers roughly $590 million, including the extra $50 million to $60 million from extending the rate cut to policies in force on July 16. He estimated that overall savings would average slightly more than $1,000 per insured business, although the amount would vary widely among firms.

Garamendi said the rate cut was warranted by a decline in workers’ compensation claims over the last year, which industry officials have attributed largely to a crackdown on fraud and the sluggish economy.

California’s biggest workers’ compensation insurer, State Compensation Insurance Fund, issued a statement saying it fully supported Garamendi’s decision and is “moving with all speed to implement the rate decrease for all of our affected policies.”

The rate cut on policies written before July 16 applies only to charges for the time covered after that date. For example, a policy that expired at the end of August would only have 1 1/2 months subject to the 7% rate cut.