Drop in Comp Rates Urged

California’s workers’ compensation insurance rates could be poised for another big drop, according to a recommendation issued Friday by an industry statistical service.

The rates, which are the basis for most premiums paid by employers, should decline by 15.9% for policies that start or renew in the first half of 2006, the San Francisco-based Workers’ Compensation Rating Bureau said in a filing with Insurance Commissioner John Garamendi. Rates already have plunged by more than 25% in the last two years, in part because of sharp cuts in the benefits collected by injured workers.

The bureau’s latest recommendation is more than three times greater than a rate cut it proposed July 28. Spokesman Jack Hannan said actuaries were able to suggest deeper cuts after analyzing new data on claims losses and disability costs.

“It’s great news, obviously,” said Vince Sollitto, a spokesman for Gov. Arnold Schwarzenegger. “The bipartisan reforms have achieved a dramatic turnaround in what was an out-of-control system.”

The proposed reduction, if fully passed on to policyholders by insurance companies, would lower rates by a cumulative total of 42.4% since July 1, 2003. Those same rates rose by as much as 300% for companies and nonprofit organizations during the three previous years, driving some employers out of state or out of business because of crippling insurance bills.

The lower rates resulted from a series of overhauls of the complex legal system that were crafted by state lawmakers, former Gov. Gray Davis and Schwarzenegger, who made fixing workers’ compensation his top priority during his first six months in office. He signed a sweeping legislative package in April 2004 that put new controls on treatments for injured workers, reduced disability payments and created medical provider networks designed to cut expenses.

But the latest rate relief for employers doesn’t mean that the $24-billion-a-year workers’ compensation system is fixed, Democratic officeholders stressed.

“As I have said repeatedly, insurers should take heed and pass the savings along to employers more quickly,” Garamendi said.

Assembly Speaker Fabian Nunez (D-Los Angeles) vowed to transform some of the savings into improved benefits for on-the-job accident victims.

“As costs come under control, the speaker is confident that we can make further improvements to adequately ensure quality health coverage for all permanently injured workers,” spokesman Vince Duffy said.