Garamendi Urges Workers’ Compensation Rate Cut

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State Insurance Commissioner John Garamendi on Thursday recommended that the state’s workers’ compensation insurers lower their rates 15.3 percent, saying that state reforms enacted two years ago are working to reduce costs.


Garamendi’s recommended decrease is a guideline for insurers as they price workers’ compensation premiums for employers. Under state law, every employer must carry workers’ compensation insurance or self-insure against on-the-job injuries. Those premiums skyrocketed earlier this decade, doubling in just four years and becoming an issue in the debate over companies fleeing California.


This is the fourth consecutive recommended decrease in the last two years from Garamendi, who has chastised insurers for not lowering their rates quickly enough. Prior to Thursday’s recommendation, Garamendi had called on insurers three times to lower rates a cumulative 36 percent; in that period, insurers had lowered rates an average of 27 percent.


“This does not compute,” Garamendi said in a statement accompanying his recommendation. “It’s obvious that the savings are there insurers simply need to pass them on.”


Under the state’s workers’ compensation insurance deregulation law, Garamendi can recommend rate reductions, but cannot require insurers to lower their rates. Insurers were slow to reduce rates through 2004, saying they needed to wait longer to see if the reforms would be effective in reducing costs.


Insurers may have further reason to remain cautious as legislators are discussing proposed changes to the 2004 reforms that would roll back some of the benefit decreases.


In his statement, Garamendi said he was concerned about testimony he has received that the benefit reductions may have gone too far. “I urge the Legislature and the governor to quickly re-examine this issue and have corrective action taken, if necessary.”

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