CA Insurance Commissioner Recommends 16.4% Cut to Workers' Compensation Pure Premium Rate

Statement from Insurance Commissioner John Garamendi:

“Today, I am announcing my decision to recommend an additional 16.4% decrease in the workers’ compensation pure premium rate for policies incepting on or after July 1, 2006. This recommendation results in a cumulative decrease of -55.1% in the cost of claims within the system since the July 1, 2003 period.

“In the past three years, California has experienced a dramatic transformation of its workers’ compensation system. High premium rates, which choked businesses and threatened to drive them from this state, have decreased, although some insurers have been slow to pass on the full savings to all businesses. Costs within the system continue to decrease as well, as has the frequency with which workers’ compensation claims are filed. This is all very good news for business. But, there is another, troubling side to this story for injured workers.

“In recent months I have heard a growing chorus of complaints from seriously injured workers who have suffered as the amount of compensation and treatment they receive has been slashed. In the area of serious permanent disability, benefits have been cut by an average of 50% compared to the period prior to the reforms. Additionally, I have received many complaints from injured workers and medical providers regarding unnecessary delays in providing medical benefits.

"These problems have led me to the conclusion that the most seriously injured workers with objective findings of disability may not be receiving fair compensation, and that utilization review is now being overused to delay and deny medical care. While I strongly believe that medical treatment guidelines and utilization review are necessary and effective tools, they must be used responsibly and not as an obstacle to reasonable and prompt medical treatment.

“These are issues that I fully expect the Governor and the Legislature to address. In addition, there are also court challenges underway to some provisions of the reform. I have taken into account the possibility that these actions, if successful, may have a slight impact on costs.

"Accordingly, rather than the 18.5% decrease proposed by my actuaries, I am recommending the additional 16.4% decrease in the pure premium rate.”

From California Department of Insurance (www.insurance.ca.gov)