California Commissioner Recommends 20.9 Percent Decrease in Workers’ Comp Rates

May 28, 2004

California Insurance Commissioner John Garamendi has recommended that California workers’ compensation insurers lower their rates by 20.9 percent for policies issued or renewed on or after July 1, 2004. Garamendi’s advisory pure premium rate recommendation does not bind insurers to the reduction, but is used as a benchmark for the industry.

According to the commissioner, the recommendation represents the impact of the estimated $5.5 billion in savings from last year’s reform, AB 227 and SB 228, as well as the impact of this year’s reform, SB 899, estimated to save $2.25 billion. A substantial portion of the SB 899 savings can be attributed to cleanup of AB 227 and SB 228.

“The tremendous savings from these reforms will rejuvenate California’s economy by reducing employer premiums, and providing better and more appropriate medical care to our injured workers,” said Commissioner Garamendi. “But our work is not finished. We must now do everything in our power to ensure that all of the savings go to premium relief for employers, and not to insurers’ bottom lines.”

The American Insurance Association’s Ken Gibson, Vice President for Western Region said in a statement, “Commissioner Garamendi’s pure premium rate recommendation is based on projections and estimates of cost savings. The challenge now is to see these projections become reality. We must make sure that the promises to end the abuse and over-utilization of the system are kept during the rule-making process.”

According to Gibson, “If the reforms are properly and responsibly implemented – and not eroded by litigation or regulatory mishaps – the three bills enacted in 2003 and 2004 will translate into a much healthier, more competitive insurance market in California.”

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