California Consumer Leaders Ask for Workers’ Comp Rate Freeze, Rollback, Regulation

March 30, 2004

Consumer leaders and a key state senator recently called for regulating California’s workers’ compensation insurance system.

The Foundation for Consumer and Taxpayer Rights called for applying the same remedies to workers’ comp insurance that have been successful in saving California consumers tens of billions of dollars in auto insurance.

“In auto insurance, Prop. 103’s system of premium regulation and price controls has saved California motorists over $23 billion,” said Doug Heller, the Foundation’s executive director. The consumer advocate called for an immediate one-year freeze on workers’ comp insurance rates, and rolling back rates at a Sacramento news conference. “California has a successful history of strong rate regulations under voter-approved Proposition 103. Prop. 103, which does not apply to workers’ compensation insurance, requires insurers to justify any rate increases and bars excessive profits, overhead and other factors that drive up the cost of insurance. If we want to be sure that rates come down, we must require a rollback and enforce strong regulation over all the companies selling workers’ compensation insurance in the state.”

The backers of Proposition 103, the measure that regulates other types of insurance, will call for similar controls to be placed on workers’ comp insurance. Proposals include freezing rates for one year, an immediate rate rollback to provide relief for California businesses, and regulation to prevent excessive rates.

Senator Richard Alarcon, chair of the key State Senate committee that is considering changes to the workers’ comp system, told the news conference that rate regulation must be part of any solution, “Any reforms that have my support will include regulatory powers to ensure insurers pass on savings from reforms to the employer community.”

“Workers’ compensation insurance is the only line of insurance NOT regulated in California,” added Ignacio Hernandez, legislative director of the Consumer Federation of California. “Consumers deserve lower workers’ compensation premiums, and injured workers deserve to have their on-the-job injuries cured and relieved. Until we stop excessive pricing by insurance companies, there will be no guarantee that any savings are passed on to consumers.”

“Last year was the most profitable year for insurance companies in decades, yet they are still crying poverty and trying to cut meager benefits to injured workers,” continued Hernandez. “The insurance companies continue to gouge California employers despite last year’s cut of $7 billion in injured workers’ benefits. We could cut injured workers’ benefits completely, and insurance companies could still RAISE rates on consumers. Regulation must be part of any solution.”

Scott Hayes, legislative advocate for VOICES, an injured workers’ organization, told the news conference, “The governor’s bill and initiative contain no provision that requires insurance carriers to reduce rates by one dime. Under the proposals, all injured workers’ benefits could be cut and premiums could still go up.”

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