California's nonprofit State Compensation Insurance Fund announced a 10 percent rate decrease yesterday–far short of Insurance 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 to drop 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 our mission to California employers and their injured employees.”

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

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

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

Department actuaries had actually recommended an 18.5 percent increase, but Mr. Garamendi said he moderated the recommendation in anticipation of measures being implemented to prevent insurers from using treatment guidelines and utilization reviews to deny care.

As costs to insurers have come down, Mr. Garamendi has criticized insurers, including the State Fund, for failing to fully pass along the savings to policyholders.

Norman Williams, a spokesman for the California Department of Insurance, said that Mr. Garamendi feels “more can be done” by the State 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 that they are lagging,” Mr. Williams added.

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

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

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

Originally founded in 1914 to guarantee that California businesses could find workers' compensation coverage, the State Fund as the insurer of last resort is the state's largest comp insurer over the past decade.

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