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home / insurance / in the media

Los Angeles Times
May 29, 2004

by Marc Lifsher, Times Staff Writer

Garamendi Seeks 21% Cut in Comp Rates;

The commissioner's proposal is received cautiously by insurers, employers and Schwarzenegger.
SACRAMENTO -- Insurance Commissioner John Garamendi called on California insurers Friday to slash their rates on workers' compensation policies by almost 21% this year. But it's unclear when business owners may actually see those savings.

So far, Garamendi's recommendation for lowering premiums -- based on expected savings from recent revamps of the state's troubled workers' comp system -- isn't being embraced by insurers, employer organizations or even Gov. Arnold Schwarzenegger.

The governor personally orchestrated this spring's sweeping workers' comp overhaul, impatiently threatening to take the issue to the voters if lawmakers failed to act quickly enough to suit him.

But now, as business owners just as impatiently wait for cuts in workers' comp premiums that have doubled or tripled in recent years, Schwarzenegger has become elusive on the issue.

The governor's office pointedly shied away Friday from endorsing either Garamendi's call for a 20.9% reduction in premiums this year, or a more conservative 17.8% cost-savings estimate put out earlier this month by the Workers' Compensation Insurance Rating Bureau, an industry-supported research and statistical service.

Both of those figures would mean much more in savings than what insurers are indicating they will offer their customers when they reset their workers' comp rates July 1.

The governor "expects that there will be immediate relief" from the workers' compensation bill he signed into law April 19, Schwarzenegger spokesman Vince Sollitto said, but he is unwilling specify an amount.

In the past, Schwarzenegger has predicted that the new legislation, when fully implemented, would reduce employers' insurance bills by 30%.

For now, most insurers won't say whether the rates on policies written or renewed after July 1 will reflect savings along the lines spelled out by Garamendi.

"The bottom line is there will be savings, but how much is a little uncertain," said Nicole Mahrt of the American Insurance Assn. in Sacramento.

Woodland Hills-based Zenith National Insurance Corp., the state's fifth-largest workers' compensation carrier, this week filed rates with the Department of Insurance seeking only a 10% premium drop.

Garamendi insists that insurers have no reason not to cut rates substantially for hard-pressed employers, some of which have been hit with rate increases of up to 200% in the last few years.

"We must now do everything in our power to ensure that all of the savings go to premium relief for employers," he said, "and not to insurers' bottom lines."

Labor and employer groups note that the responsibility for implementing the Legislature's workers' comp overhaul now rests squarely with the Schwarzenegger administration, which must issue the hundreds of regulations needed to put the broadly written law into practice.

Given that obligation, they speculate, the governor may want to avoid making promises of immediate, significant savings.

"They don't want to champion too much," said Willie Washington, a lobbyist for the California Manufacturers and Technology Assn. in Sacramento.

The Schwarzenegger administration has "a lot on its shoulders in terms of making this work," said Tom Rankin, president of the California Labor Federation. "They may be worried that they can't produce the savings they promised."

The governor's reluctance to publicly pressure insurers to bring down ratesin the wake of the workers' comp overhaul has some consumer advocates questioning his commitment to follow through on his promise to slash workers' compensation costs.

"He cares more about the preview than he does about the movie," said Doug Heller, executive director of the Foundation for Taxpayer and Consumer Rights in Santa Monica.


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