Governor’s Plan Putting Calif. Workers’ Comp Market on Right Track, Says ACIC

Governor Arnold Schwarzenegger’s plan for reform of the troubled California workers’ compensation system is already putting the state’s system on more stable footing, according to the state’s largest insurer group.

Sam Sorich, president of the Association of California Insurance Companies (ACIC) countered charges of company price gouging made in a press conference Jan. 5 at the California State Capitol by Sen. Richard Alarcon (D., Los Angeles) and the California Applicants’ Attorneys Association.

“Workers’ compensation rates today are falling and the future looks even brighter as more insurers enter the California market and the reform package is fully implemented,” Sorich said. “The reforms not only stabilized a once-turbulent system, they reversed a devastating trend of rate hikes that were suffocating California’s business community.”

Two key elements of this year’s reform law — medical provider networks and the new permanent disability schedule — are just now being put into effect, as specified by the legislation. Once fully operational, they are expected to help drive down costs even more, Sorich said.

A recent indication came in November from the State Compensation Insurance Fund (SCIF), California’s largest workers’ compensation insurer, which announced its rates will drop another 5 percent in January. This is in addition to separate decreases of 2.9 percent and 7 percent already instituted by SCIF. Similar activities are occurring among many private insurers as well.

Additionally, the California Workers’ Compensation Institute (CWCI) has reported that during the first half of 2004 rates averaged $5.76 per $100 of payroll, down from $6.40 per $100 of payroll at the end of 2003.

And more insurers are entering California’s workers’ compensation market because of the reforms. More insurers will mean more competition, which in turn will help drive down rates even more.

“It is quite apparent that the reforms are working,” Sorich said. “It’s also apparent that any changes to the reforms, such as strict rate regulation or inhibiting litigation, will harm if not reverse the major strides already made in fixing what was a badly broken workers’ compensation system.”