Workers' comp rates dropping an average of 3.6 percent in January

Star-Telegram ^ | Dec. 03, 2003 | Associated Pres

[yonif]

SACRAMENTO - California's workers' compensation insurance rates are trending downward for the first time since 1998, a sign the costly system has "turned the corner," state Insurance Commissioner John Garamendi said Wednesday.

But the average 3.6 percent decrease is far below the nearly 15 percent drop in so-called pure premium rates that he recommended in November.

Garamendi said 95 workers' comp insurers, representing about 75 percent of the California market, had announced rates that will take effect in January.

Of those 95 firms, 69 plan to reduce rates, 16 are standing pat and 10 are raising rates. The decreases range from about a half percent to nearly 29 percent. The State Compensation Insurance Fund, which has more than half the California workers' comp market, announced an average cut of 2.9 percent.

Increases range from a third of a percent to more than 25 percent.

Overall the changes averaged out to a 3.6 percent decrease, Garamendi said.

He characterized the drop as a dramatic change from recent years, when California employers were hit by annual increases of about 20 percent or more, and said it was a "clear sign" that cost-cutting legislation approved by lawmakers earlier this year was working.

Besides generating the cuts, the legislation also wiped out the need for a potential 12 percent rate increase in January, he added.

"We are no longer on the up escalator with California workers' comp rates," Garamendi said at a news conference. "We have stopped and we're now on the down escalator and we need to go down several floors before this process is completed."

He said he would push lawmakers to adopt additional cost-saving changes in the 90-year-old workers' comp system and would pressure insurers to cut their rates even more.

"We will certainly be looking at the filings in great detail and questioning the insurance companies as to their situation and why they didn't achieve more," he said. "And frankly we will put pressure on the insurance companies to get the job done."

But he said the small average drop in rates didn't demonstrate the need to give him the power to roll back excessive workers' comp insurance charges, saying that could reduce competition and boost costs by discouraging more workers' comp insurers from writing policies in California.

Asked why the rate cuts weren't bigger in light of Garamendi's recommended reduction, Nicole Mahrt, a spokeswoman for the American Insurance Association, said insurers first needed to close a $12 billion hole in their reserve funds.

"These reforms that came out of the 2003 session are helping us fix the reserving problem we had and helping us to slowly start reducing premiums," she said.

Allan Zaremberg, president of the California Chamber of Commerce, said the rate filings demonstrated that there were "some true cost savings in the reforms enacted earlier this year."

But he said lawmakers should adopt sweeping legislation backed by the chamber and Gov. Arnold Schwarzenegger to make additional cuts.

"Workers' compensation costs have risen 136 percent in the last four years on average, with some companies experiencing 200 percent and 300 percent increases, causing businesses to lay off employees, shut their doors or move to neighboring states," he said. "The status quo is simply unacceptable."

Opponents say Schwarzenegger's plan goes too far and would harm injured workers while actually boosting some employer costs.

Garamendi proposed in November that insurers slash their so-called pure premium rates by 14.9 percent, saying that the bills approved earlier this year, if properly implemented, would justify that reduction.

The pure premium rate is what it costs an insurer to process and pay claims, and doesn't take into consideration an insurance company's other expenses, profits and reserves. The rates announced Wednesday include those other factors, Garamendi said.

The State Compensation Insurance Fund, a quasi-state agency, said not all of its customers would see a rate reduction in January because a rate increase that took effect last July 1 had not yet been applied to policies that are renewed in the first half of the new year.

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On the Net: www.insurance.ca.gov

[Amerigomag]

The problem: Claims and treatment for soft tissue injuries. The fix: No recogniion soft tissue injuries.

No bad backs, sore necks, sore sholders, sprained ankles, torn muscles etc. Just gun shot wounds, broken bones and amputations.

Should reduce program cost by about 2/3s.