Workers’ Comp Rate Cut Urged

Hard-pressed employers could get a big break on workers’ compensation premiums later this year if insurers follow a rate recommendation issued by a key agency Wednesday.

The Workers’ Compensation Insurance Rating Bureau in San Francisco, an industry-backed private organization that provides statistical analysis, recommended that insurance companies drop their premiums by about 10% beginning in July. The bureau is expected to make the recommendation official Friday.

If, as is likely, such a cut is reflected in rates submitted by insurance companies to regulators, employers would see the first double-digit decline resulting from a two-year campaign to overhaul the state’s system for treating on-the-job injuries.

Counting smaller previous decreases since July 2003, the employers could see a cumulative saving of 31%, John Hannan of the rating bureau said.

The rate recommendation, based on the rating bureau’s analysis of the latest actuarial data, confirms that the cost and frequency of injury claims have dropped.

“This is great news for the California economy,” said Vince Sollitto, a spokesman for Gov. Arnold Schwarzenegger, who made passage of a bill last April revamping workers’ compensation the centerpiece of his first year in office.

The recommended reduction, which must be endorsed by California Insurance Commissioner John Garamendi, provides insurers with a voluntary benchmark for policies that start or renew in the second half of 2005.

Insurers generally follow the bureau’s recommendation. Nicole Mahrt of the American Insurance Assn.’s Sacramento office said it “means the reforms are really starting to work.”

Employers frustrated by the slow rate at which premiums dropped after last year’s legislation said they were heartened by the prospect of significant decreases.

Those same businesses, after being hit with cumulative rate hikes of as much as 300% from 2000 to 2003, allied themselves with Schwarzenegger in the campaign to overhaul the state workers’ compensation system.

“We’ve been saying all along that once we got the regulations in writing ... we’ll start seeing double-digit savings, and here they are,” said Willie Washington, a lobbyist for the California Manufacturers & Technology Assn.

Washington said he expected insurance bills to decline even more in 2006, after a series of regulations spelling out medical treatment protocols and permanent disability benefits were put into place.

The proposed rate cut is “a move in the right direction,” but it’s not deep enough, considering all that the new law has done to reduce insurance company costs, said Angie Wei, a lobbyist for the California Federation of Labor and a member of the insurance rating bureau’s board of governors.