State Insurance Commissioner John Garamendi Thursday recommended a 9.5 percent reduction in workers' compensation premiums for employer-held policies renewing on or after Jan. 1, 2007.

Garamendi's recommendation is more than the 6.3 percent reduction suggested last month by the Workers' Compensation Insurance Rating Bureau. Assuming insurers implement the recommendation, most California employers should be seeing additional rate reductions in their premiums as they renew their policies.

Since peaking in 2003, workers' compensation premiums have plunged about 50 percent, thanks to two rounds of reforms that brought down costs within the troubled system that pays claims to injured workers.

"There have been extraordinary improvements made to the workers' compensation system since we began our work in early 2003," said Garamendi, who was also in the final stages of his campaign for lieutenant governor. "The reforms have helped stop the uncontrolled escalation of premiums and reduced system costs by more than half."

Under the deregulated system that's been in place since 1995, the insurance commissioner cannot set rates; he can only issue guidelines that workers' compensation carriers can choose to follow or ignore. In recent years, insurers have generally tended to follow the recommendations.

However, pressure has been building to adjust the reforms. Severely injured workers and their attorneys have argued benefit levels have been slashed too far. Democrat lawmakers are expected to introduce a package of bills next session addressing this problem. Schwarzenegger has said he prefers to wait until after a major study of the reforms comes out next month before proposing any changes to the system.

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