Calif. State Sen. Poochigian Sees Workers’ Comp Reforms as Good Start

The Workers’ Compensation Insurance Rating Bureau (rating bureau) earlier this week recommended a 15 percent rate reduction resulting from an expected $3 billion in cost savings generated from Senate Bill 899 (Poochigian, R-Fresno), signed by Governor Arnold Schwarzenegger on April 19.

The recommendation was presented at a California Department of Insurance public hearing in San Francisco, and will be weighed by the Insurance Commissioner in determining pure premium advisory rates for the July 1, 2004 filing.

“The rating bureau’s recommendations today are the strongest indication yet that employers will see significant savings materialize over time from this year’s reform, though it will take time for regulations to be implemented,” said Senator Chuck Poochigian.

“The fact that savings of this magnitude are being suggested just 24 days after the bill became law offers hope to employers who have been pummeled by skyrocketing costs over the last several years. However, if $3 billion in savings and a 15 percent reduction was the final savings generated from the reforms, I would be less than enthusiastic.”

Many of the reforms will reportedly not be fully incorporated into rate recommendations until regulations are adopted by the Administrative Director of the Department of Workers’ Compensation, including an overhaul of the permanent disability benefit system, and the creation of doctor networks, both of which are key cost-saving components of this year’s reforms.

“The rating bureau’s numbers represent a snapshot in time. No projection can include a full assessment of how behavior will change in the future, but it would be in all stakeholders’ best interest to do everything possible to make sure that SB 899 results in substantial savings to employers,” said Poochigian. “These savings should help to bring California’s workers’ compensation costs closer in line with the rest of the country, but we must be vigilant in monitoring the full effect of these reforms. Even with these reforms, it is inevitable that more will be needed, for example to reduce fraud and abuse plaguing the system.”