Reduced insurance costs still too much

Alicia Robinson

Workers' compensation insurance savings haven't started coming for

local employers despite state legislative changes more than four

months ago that were touted as rate reducers.

California's workers' compensation insurance rates are among the

highest in the nation, and were a target of reforms that Gov. Arnold

Schwarzenegger vowed would make the state more business-friendly.

Local business operators said they haven't seen any significant

savings yet, and they're skeptical about what's to come.

"They keep touting that businesses out there are realizing real

improvements," Costa Mesa Chamber of Commerce President Ed Fawcett

said. "When I got my next bill, it was every bit as much as the

previous one."

There's a sense of frustration among business owners who have seen

only minor decreases, if any, in their rates. Most said they saw no

reduction, a few had heard from business owners whose rates had

decreased less than 10%, while others said they're paying more than

the last time they renewed their policies.

"I have seen nothing," said Louise Robinson, office manager at

Glenn's Alignment in Costa Mesa. "In fact, our rates went up, and we

did not have as much payroll as we did the year before."

In the eyes of business owners, the workers' compensation industry

still has problems with fraud and greedy attorneys. But one of its

biggest problems is that the state Workers' Compensation Insurance

Fund controls 60% of the market, 70th District Assemblyman John

Campbell said. Another 20% of companies can afford to self-insure, so

only about 20% of the insurance is provided by third-party insurance

companies in a competitive market. That has to change to bring rates

down, but it won't happen immediately, he said.

"We expect to see more reductions after Jan. 1, and I think

depending on how the elections go in November, you may see some more

reform proposals next year to try to drive down rates," he said.

But a recent analysis by Standard & Poor's insurance ratings

division predicts disaster for the state workers' compensation system

if rates are forced down too far, too fast. A state fund that backs

insolvent insurers has had to borrow heavily in recent years, and the

state-controlled portion of the insurance market is still unstable,

the report said.

A few businesspeople, like Newport Beach Chamber of Commerce

President Richard Luehrs, are optimistic rate reductions are coming

in 2005.

"I'm not sure there's been enough time to let all of this shake

out," he said. "I think [people are] expecting a reduction in their

next premium."

But most said they have little faith in the promises of

politicians supposedly fixing the system.

"I don't know what to expect," said Randy Garell of Costa Mesa

sport and outdoor store the Grant Boys. "I'd like to say I think

there's going to be a change, and we're going to see a little relief.

But until I see a change, I'm not actually going to believe it."

The continued pressure from workers' compensation, plus the threat

of an increased minimum wage and other expenses, is making it hard

for small businesses to survive, said Dan Marcheano, owner of the

Arches restaurant in Newport Beach for 23 years. If minimum wage and

social-security deductions go up, he might have to shut down his

lunch operations, he said.

The state Senate on Thursday voted to boost minimum wage to $7.75

over the next two years, but Schwarzenegger is expected to veto the

measure.

It might take more businesses leaving the state to spur

legislators to make effective reforms, Fawcett said.

"I'm a native Californian," he said. "This is the first time I'm

thinking of leaving the state and retiring elsewhere."

* ALICIA ROBINSON covers business, politics and the environment.

She may be reached at (949) 764-4330 or by e-mail at

alicia.robinson@latimes.com.

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