Garamendi Lowers Pure Prem. Rate
NU Online News Service, Nov. 7, 3:05 p.m. EST?Responding to the workers' compensation crisis in California, Insurance Commissioner John Garamendi announced he has significantly lowered the advisory pure premium rate by 14.9 percent, returning it to the July 2002 level.
Mr. Garamendi's ruling, based on recommendations from experts, as well as the evidence of savings that can result from the reform legislation signed in September, said the move was to give California employers relief from rising rates.
"Our businesses cannot continue to operate under the crushing weight of this dysfunctional system," he said in a statement. "There are substantial savings to be realized from the reform legislation, and I intend to do everything in my power to ensure that those savings are passed on to employers."
After taking office in January, Mr. Garamendi signed an advisory pure premium increase of 7.2 percent that became effective on July 1. This followed a previous 10.5 percent increase in pure premium rates that had gone into effect six months earlier.
Mr. Garamendi's decision yesterday, the department said, eliminates those increases, as well as a proposed 12 percent increase that if approved would have gone into effect Jan. 1, 2004.
Although insurers use his advisory rate as a benchmark, the commissioner does not have the power to set the rates charged to employers. However, the reform legislation includes a provision that requires insurers to file rates that reflect the savings that the commissioner determines are due to the reforms.
Mr. Garamendi said that although his ruling is a significant step toward addressing the workers' comp crisis, more must be done. He already has begun working to address problems with the permanent disability rating system, which he said is too subjective and too inconsistent; to eliminate fraud, which costs the system an estimated $1-to-$3 billion annually; extending the Medicare fee schedule to the entire medical portion of the system; and eliminating administrative inefficiencies.
"We have reined in much of the explosive growth in costs from the medical portion of workers' compensation, but our job is not over," Mr. Garamendi said.
At his news conference, Mr. Garamendi emphasized that savings from the reforms reflected in his pure premium order will only be realized if the law is enacted fully and immediately. He outlined several things that must occur:
? The insurance industry must enforce all provisions of the new law, including utilization controls on medical treatment. Beginning in January, they must adequately train adjusters to use the new treatment guidelines, and in April, begin paying medical providers based only on those new guidelines.
? Medical providers must learn and adhere to the new treatment guidelines consistent with the law's intent.
? The Legislature, in the special session that Gov.-elect Schwarzenegger has indicated he will call, must enact cleanup legislation that deals with ambiguities and technical errors in the new law. This is essential for the new legislation to be carried out effectively and to eliminate potential litigation.
? The Division of Workers' Comp must be adequately funded so that workers' comp appeals judges can address claims issues expeditiously.
"As I said, there are very significant savings within this legislation that can be passed on to businesses," Mr. Garamendi said. "It is now up to all who are involved to fully enact this new law so that our employers will see some relief."
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