California employers are poised to see a third straight double-digit cut in workers' compensation insurance rates

Workers' comp optimism
Employers likely to see another sharp rate cut
By Gilbert Chan -- Bee Staff Writer
Published 2:15 am PDT Friday, April 28, 2006

California employers are poised to see a third straight double-digit cut in workers' compensation insurance rates this summer, but it could be the last resulting from a landmark legislative overhaul of the system.

The Workers' Compensation Insurance Rating Bureau of California, a key industry group, recommended Wednesday that Insurance Commissioner John Garamendi urge insurers to cut rates by 16.4 percent across the board.

At the same time, a bureau spokesman cautioned that insurers have already reaped the biggest savings from the state's cost-cutting measures.

"We have probably reached a point of the last of the double-digit decreases. This filing includes all the post-reform data," said Jack Hannan.

Critics, including labor leaders and the California Applicants' Attorneys Association, have accused carriers of reaping excessive profits and urged even larger rate cuts.

"There are huge reductions of benefits to injured workers. We don't want to get fooled into thinking that all the savings are being passed on to employers because the advisory rates went down," said Mark Gerlach, a consultant to the attorneys group, whose members represent injured workers.

After sweeping legislative changes in 2003 and 2004, workers' comp insurers cut rates five times in a row. If the commissioner adopts the latest proposal, the cumulative rate reduction would add up to an average 55 percent since July 2003.

While carriers are not bound by the commissioner's proposal, they use his number as an important benchmark.

A state-commissioned study by Bickmore Risk Services reported insurance rates have fallen nearly 40 percent and generated $8.1 billion in savings because of measures that included new medical-fee schedules, uniform guidelines on treatment and benefit payments, new HMO-style doctor's networks and a revamped formula to calculate permanent disability benefits.

Still, Gerlach said, a Union Bank survey of small businesses last month found 56 percent of employers reported their premiums remained the same in 2005 while another 29 percent saw increases.

However, a separate survey released this month by the business-backed Workers' Compensation Action Network reported 68 percent of employers experienced a drop in workers' compensation costs.

"Some businesses have not seen significant decreases in rates. The majority has seen significant savings, upward to 40 percent," said Michael Shaw, a lobbyist for the California chapter of the National Federation of Independent Business.

About the writer:
The Bee's Gilbert Chan can be reached at (916) 321-1045 or gchan@sacbee.com.