Posted on 04/26/2005 4:59:39 PM PDT by NormsRevenge
The pressure intensified Monday on workers' compensation insurance carriers to step up and deliver significantly lower rates to employers and improved benefit payments to workers.
The questions that loom over California's struggling workers' comp system came into sharp focus at a hearing Monday held by Insurance Commissioner John Garamendi.
The hearing was the start of a process to establish a benchmark for workers' comp rates during the second half of 2005.
Garamendi expressed dismay that the workers' comp reforms of recent years have primarily served to reduce medical and disability benefit payments to workers without a meaningful cut in premiums paid by employers to cover on-the-job injuries suffered by employees.
"This is a charge of dynamite that is sitting beneath the insurance industry," Garamendi said. "The cost of claims has fallen dramatically, but the gross premiums collected by the insurance industry has gone up."
Some critics of the reform efforts have suggested that the state government institute price controls on workers' comp premiums. But Gov. Arnold Schwarzenegger has championed a free-market approach for the reforms he has ushered through the Legislature.
An industry-backed entity, the Workers' Compensation Insurance Rating Bureau, recently estimated that California insurers in 2004 paid 45 cents for medical and disability claims for every $1 they collect from employers in premiums. That sparked an outcry because the numbers suggest insurers have gobbled up hefty profits as a result of reforms instituted under Govs. Arnold Schwarzenegger and Gray Davis.
The most recent reforms were designed to chop expenses out of the system by reducing medical costs incurred by insurers. Schwarzenegger and his allies hoped that the lower medical costs would spur lower premiums from insurance companies. Garamendi is skeptical that has happened.
"The only possible explanations are that truly injured workers are not getting medical or disability benefits, or the insurance industry is pocketing the savings, or both," Garamendi said.
Insurance representatives responded that the workers' comp system is finally showing signs of improvement after years of skyrocketing premiums that had crushed California businesses with a rising mountain of insurance expenses.
"Insurers have been passing along savings and will continue to do so," said Nicole Mahrt, a spokeswoman for the American Insurance Association's western region.
She pointed out that in July 2003, insurance companies were preparing to institute a nearly 18 percent increase in average premiums for workers' comp. Since then, the industry has begun to slow the pace of increases and even start to cut comp rates.
In late March, the workers' comp bureau recommended a 10.4 percent reduction in average premium fees starting July 1. That was the deepest cut proposed by the industry in several years.
"The purpose of the reforms was to rein in excessive medical costs, and as we see the impact of those reductions, that will flow into a reduction in rates," said Jack Hannan, a spokesman for the Workers' Compensation Insurance Rating Bureau.
Mahrt figures that the insurance industry will have reduced its rates by a cumulative 31 percent if the recently proposed cuts become reality, since mid-2003.
"To go from the 17.7 percent increase that was scheduled to an aggregate reduction of 31 percent is very significant," Mahrt said. "It shows the reforms are making a difference." She encouraged employers to shop around come July 1.
Some groups say the reforms have harmed workers and companies alike.
"This has turned into a cash cow for the insurance industry," said Mark Gearheart, a partner with Pleasant Hill-based Gearheart & Otis, a law firm that represents injured employees. "There should be a rate cut in insurance premiums and a benefit structure that is more fair for workers."
Commissioner Garamendi said he does not favor price controls for premiums at this point. Instead, he wants to pressure State Compensation Insurance Fund, the dominant workers' comp carrier in California, to reduce its rates significantly.
"There is a price leader in California, which is State Fund," Garamendi said. "State Fund can lower its prices. Their actions would influence the rest of the market."
Yeah and this loser named John Garamendi will run against Tom McClintock next year for Lt. Governor of California.
I do hope that the McClintock haters here in CA will reconsider and vote for conservative Tom McClintock rather than a liberal like Garamendi next year.
California workers comp premiums are twice the national average. The exodus of businesses to neighboring states like Nevada will continue unless something is done.
Didn't Arnold fix this?
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lol.. Are you baiting me? ;-)
Fixed is a 'relative' term.
All aRnold has fixed is the arses of Kennedys and their GReen ilk and policies in so many state gubamint positions, it's enough to choke a goat.. or a state economy.
Sorry, I should have closed my sarcasm tag.
LOL.. Oh, I got the sarcasm . ;-)
Trying to give this Gub a chance is like being asked to buy more chickens for the henhouse so his buddies can come over later for a snack.
There is still a lot of people drinking the Kool-Aid.
Yeah! He bedder do whut his relatives tell him, or Maria will have him "fixed!" (snart!)
Germ-mandi is just crankin up his press releases cause he wants ta beat out Angelides, who's already announced prematurely, that he's gonna run up against Ahnold, if Ahnold is even gonna ever run again. Jesse Ventura didn't and Ahnold has just been showin off for his old "Predator" co-star!!!
senator boxer's husband makes millions off of workers comp in california.
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