California's nonprofit State Compensation Insurance Fundannounced a 10 percent rate decrease yesterday–far short ofInsurance Commissioner John Garamendi's recommendation.

The SCIP action, for policies taking effect on or after July 1,comes a day after Mr. Garamendi called on workers' comp insurers todrop their rates by 16.4 percent.

State Fund acting President James C. Tudor said 10 percent“ensures State Fund's continued financial strength to fulfill ourmission to California employers and their injured employees.”

He also said the rate filing “validates our commitment to passon the savings from the 2004 reform legislation, bringing furtherrate relief to California employers.”

Additionally, the State Fund said it will continue offering a 10percent workplace safety credit for small employers (those payingbetween $1,000 and $75,000 annually for coverage) with a superiorsafety record.

Mr. Garamendi said his larger recommended rate reduction in purepremium reflected the cost savings achieved by insurers under aseries of reforms enacted over the past few years.

Department actuaries had actually recommended an 18.5 percentincrease, but Mr. Garamendi said he moderated the recommendation inanticipation of measures being implemented to prevent insurers fromusing treatment guidelines and utilization reviews to denycare.

As costs to insurers have come down, Mr. Garamendi hascriticized insurers, including the State Fund, for failing to fullypass along the savings to policyholders.

Norman Williams, a spokesman for the California Department ofInsurance, said that Mr. Garamendi feels “more can be done” by theState Fund, noting that of the cumulative 55 percent decrease Mr.Garamendi has recommended since the first wave of reforms in 2003,the State Fund has only reduced its rates by 48 percent.

“The commissioner is still very concerned about the fact thatthey are lagging,” Mr. Williams added.

An issue of more concern, however, Mr. Williams said, is how therate decreases are being distributed, and whether the decreases arebeing fairly offered to small businesses, agricultural businessesand other policyholders more in need of the savings.

“The bottom line is that the commissioner has examined the costsavings resulting from the reforms, and they are clearly above 48percent,” Mr. Williams said.

The State Fund, he added, “is not doing business any good, andis not doing the economy any good by withholding the cuts thatemployers need.”

Originally founded in 1914 to guarantee that Californiabusinesses could find workers' compensation coverage, the StateFund as the insurer of last resort is the state's largest compinsurer over the past decade.