Workers’ Comp Rate Cut Proposed at 2.2%
California employers renewing their workers’ compensation policies in the first half of 2005 would see their premiums fall by a meager 2.2% under the latest rate recommendation from Insurance Commissioner John Garamendi.
Insurers aren’t required to follow Garamendi’s counsel on workers’ comp rates, which pay for policies to cover medical treatment and disability benefits for victims of workplace injuries.
The fact that employers won’t see a bigger decline in premiums is evidence that the massive overhaul of the $19-billion system by Republican Gov. Arnold Schwarzenegger and the Democrat-controlled Legislature “has not achieved its promise,” Garamendi said Wednesday.
Leaders of business organizations, whose members have been pounded by workers’ comp premiums that doubled and tripled in the last few years, greeted the rate forecast with resignation but warned that their patience was beginning to wear out.
“We expect that by this time next year, rates will be 15% to 20% lower,” said Martyn Hopper, director of the California branch of the National Federation of Independent Businesses.
“If rate reductions don’t happen, small business is going to be very, very unhappy and will want to know specifically why and who is responsible.”
At least Garamendi’s recommendation was an improvement on the one made earlier by the influential Workers Compensation Insurance Ratings Bureau, which suggested employers pay 3.5% more next year.
Garamendi and the insurance industry said employers wouldn’t see significantly lower rates until state officials completed the regulations needed to implement last spring’s workers’ comp legislation. The regulations, released in draft form Wednesday, would create a new system for calculating permanent disability payments for injured workers -- the most controversial part of the workers’ comp overhaul.
The regulations could change substantially before the Jan. 1 deadline, but lawyers for injured workers already are squawking. The California Applicants’ Attorneys Assn., whose members represent injured workers, said the Schwarzenegger administration was proposing to slash benefits for permanently disabled employees to the lowest level since 1983, adjusted for inflation.
David Schwartz, the group’s president, is vowing to file a lawsuit to block the permanent disability rules, which would determine how much workers would be paid for varying degrees of disability. Under the proposed rules, he said, a warehouseman who had his leg amputated below the knee because of a workplace accident could see his total benefits reduced from $62,000 under the current rules to $36,000.
Rick Rice, assistant secretary of the California Labor and Workforce Development Agency, which administers the workers’ comp system, said Schwartz’s analysis “doesn’t make sense.”
Since July 2003, Garamendi said, he has recommended that insurance companies lower rates by a total 22.6% in response to cost-control measures contained in a series of changes in workers’ comp laws passed in the last two years.
Insurers -- following the lead of the government-backed State Compensation Insurance Fund -- have dropped average premiums by only 10.4%.
Garamendi called on lawmakers to move quickly next year to clear up what he said were ambiguities and errors in the law signed by the governor last April.
For their part, insurance companies stressed that the new laws halted what had been an upwardly spiraling trend. “The double-digit, autopilot increases have stopped,” said Nicole Mahrt of the American Insurance Assn. She suggested that new regulations being readied by the state should further cut costs and spur competition by luring new insurers to California over the next 18 months.
In Beverly Hills, hair salon owner Umberto Savone said he was already unhappy with the governor’s inability to bring down his workers’ compensation premiums. He said the rates for his three salons have jumped about 38% in the last year, even though he hasn’t filed any claims.
“None of us in Beverly Hills are seeing any savings,” he griped.