State Insurance Commissioner Steve Poizner on Wednesday rejected an industry request to increase workers’ compensation insurance rates by nearly a quarter, saying insurers could do much more to contain soaring costs.
This past spring, the Workers’ Compensation Insurance Rating Bureau recommended a 23.7 percent increase in basic workers’ compensation insurance rates charged to employers. The insurance industry-backed research group cited rapidly rising medical costs and recent court rulings now under review that threatened to undo recent legislative reforms.
The WCIRB recommendation triggered an outcry from broader state business groups that said such substantial increases would prompt employers to further cut payrolls during a time of record unemployment.
Poizner agreed on Wednesday, saying he is recommending no change to the benchmark insurance rate. Under reforms enacted in the mid-1990s, the industry is free to set its own rates, but the rate recommended by the insurance commissioner’s office is usually taken as a guidepost.
“A spike in workers’ comp costs couldn’t come at a worse time, with a record unemployment rate of 11.5 percent,” Poizner said. “It would increase the costs to hire people in California.”
In a statement shortly after Poizner’s announcement, Gov. Arnold Schwarzenegger hailed the decision. “As I told the Insurance Commissioner in March, now is not the time to impose additional costs on employers especially given the current economic climate and I applaud him for making the right decision today.”
Poizner said that evidence from two hearings he convened on the issue indicated that workers’ compensation insurance carriers were not doing all they could to reduce workers’ comp costs. He noted that large employers that self-insure are seeing their costs go down.
“My message to the insurance companies: ‘You all need to make system much more cost-efficient,'” he said, adding most insurance carriers have filed for rate increases only in the “high single digits.”
Poizner denied that his candidacy for the Republican gubernatorial nomination next year played any role in his decision.
