California Commissioner Recommends 16.4 Percent Workers’ Comp Rate Cut

May 31, 2006

California Insurance Commissioner John Garamendi has recommended a 16.4 percent decrease in the workers’ compensation pure premium rate. The decrease would be applicable to new and renewal policies as of the first anniversary rating date of a risk on or after July 1, 2006. In addition, the experience rating eligibility threshold was reduced to $16,971 to reflect the decrease in pure premium rates for policies incepting on or after July 1, 2006. The recommendation results in a cumulative decrease of -55.1 percent in the cost of claims within the system since the July 1, 2003 period.

On March 24, 2006, the Workers’ Compensation Insurance Rating Bureau of California (WCIRB) proposed to the California Insurance Commission a decrease in advisory pure premium rates of 16.4 percent effective July 1, 2006. A public hearing concerning the WCIRB’s filing was held on April 27, 2006.

According to Garamendi, he has “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 percent 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,” he continued. “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 percent decrease proposed by my actuaries, I am recommending the additional 16.4 percent decrease in the pure premium rate,” he said.

The Insurance Commissioner’s decision, including electronic files containing the approved July 1, 2006 pure premium rates, may be downloaded from the Filings section of the WCIRB Web site at:

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