One Step Closer to Reform’

By | March 22, 2004

Ironically, there was no shortage of things to write about when it came to filling the pages of our Workers’ Compensation issue. All over the West, workers’ comp has been the hot topic in many states—not just in California.

A bill designed to privatize the Utah Workers’ Compensation Fund was defeated when Utah’s 2004 legislative session adjourned, and the Fund remained a quasi-governmental entity.

In Colorado, allegations of overspending caused the state’s largest workers’ comp insurer, Pinnacol Assurance, to look at overhauling their corporate structure, despite the fact that Colorado reportedly has some of the most stable workers’ comp rates in the nation, in part due to Pinnacol’s success.

And concerns of a possible crisis in Alaska’s workers’ comp system surfaced when Senator Con Bunde proposed that the Alaska Permanent Fund, the state’s public savings account, to cover a $20 million hole in the Alaska Insurance Guarantee Association, which was created to cover unpaid workers’ comp claims.

Not to be outdone, there was much hoopla in the Golden State when it was alleged that the Workers’ Compensation Insurance Rating Bureau (WCIRB) miscalculated numbers in their estimate of medical and indemnity benefit costs for injured workers in 2004. The revised estimate placed the cost at $17.9 billion, down from $24.9 billion.

California Senator Richard Alarcón demanded that insurers cut rates to reflect the $7 billion in savings the WCIRB discovered in an update of their estimate, which reflected the effect of AB 227 and SB 228 as well as changes in the size of the self-insured market.

Insurance Commissioner John Garamendi quickly pointed out the $7 billion savings as a result of legislative reforms, touting current reform bills sitting in the legislature as the best fix for the workers’ comp system. Garamendi has been battling an initiative backed by Governor Arnold Schwarzenegger, who said he will move forward with plans to endorse the November ballot initiative if an agreement between the governor and the legislature can’t be reached.

After news of the WCIRB’s revised estimate hit the streets, Gov. Schwarzenegger said he is open to negotiation with lawmakers, and would consider making a deal on reform packages that would cut between 25 and 30 percent of workers’ comp costs.

It will be interesting to see the outcome of these potential solutions to the workers’ comp system. Hopefully by the time our next Workers’ Comp issue goes to print, we will have seen some real change in the system.

But I’m not going to hold my breath.

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Insurance Journal West March 22, 2004
March 22, 2004
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