Insurers Say Calif. Comp Reform In Danger

The charge that workers would be penalized was made by David Schwartz, president of the California Applicants' Attorneys Association, and State Sen. Richard Alarcon, D-San Fernando Valley, at a press conference they held. Mr. Alarcon introduced legislation to regulate workers' comp insurance rates.

"The state of California's injured workers is desperate, worse than at any time in the past thirty years," said Mr. Schwartz, adding that the reforms advocated by Gov. Arnold Schwarzenegger have cut workers' benefits by 70 percent, something no other governor has done.

Mr. Schwartz said that the governor's pledge to provide health care and doctors to injured workers is "a cruel and cynical joke on people who got hurt serving California."

"If you're a fireman, a policeman or a laborer, don't get hurt at work, because this governor has taken away the health care and compensation you'd need just to survive day to day," he said.

The insurance industry, however, has argued that the reforms have begun to have a good effect, removing the ambiguities and lowering the costs of the system. Applicant attorneys are fighting the reforms, the industry claims, because they have profited from the old system.

"The reforms enacted last year in SB 899 must be starting to work because the applicant attorneys are increasingly desperate," said Ken Gibson, vice president for the Western region of the American Insurance Association.

Mr. Gibson said, "The attorneys are doing everything they can to stop the reforms and restore a corrupt system that is profitable for them but harmful to California's workers and employers." Nearly a dozen companies have entered or enlarged their presence in California's workers' compensation market since the reform bill, SB 899, was signed into law, Mr. Gibson said.

He added, "Just as the reforms are finally beginning to take hold and progress is being made, Sen. Richard Alarcon and the California Applicant Attorneys' Association want to turn back the clock to 1992."

Sen. Alarcon has introduced Senate Bill 46 legislation establishing a commission to set workers' compensation rates. Under Sen. Alarcon's bill, the governor, attorney general and insurance commissioner, or their designees, would set rates for workers' compensation.

Sen. Alarcon, who chairs the Senate Labor and Industrial Relations Committee, has argued that rate regulation is needed to ensure that insurance companies pass the cost savings of the reforms to their customers.

The industry has continuously opposed any form of rate regulation, and Mr. Gibson maintained the argument that such legislation would reverse the positive trends that have been ongoing since the reforms became law.

"Rate regulation will suffocate a market that is just beginning to breathe again. Carriers cannot afford to sell insurance in a state that exerts extreme control over rates and does not allow insurers to charge rates that cover their costs," said Mr. Gibson.

He said California workers' comp insurers have "been in the red for a decade. Two quarters of improved results does not equal excessive profits; it means the reforms are beginning to work and the legislature and governor did their jobs by enacting genuine systemic improvements and cost-saving reforms."