California Insurance Commissioner John Garamendi called last week for a 16.4 percent decrease in workers' compensation insurance rates, but also issued a warning to insurers against using new guidelines to improperly delay or deny medical care, citing rising worker complaints.
Mr. Garamendi, in a nonbinding recommendation, called for the cut in pure premium for policies taking effect on or after July 1. Although only advisory, insurers typically stay in line with the commissioner's recommendations. The most recent decrease, he noted, would bring the total decrease in costs for businesses to 55.1 percent since the first of a series of reforms were enacted in 2003.
"High premium rates, which choked businesses and threatened to drive them from this state, have decreased, although some insurers have been slow to pass on the full savings to all businesses," said Mr. Garamendi. "Costs within the system continue to decrease as well, as has [claims] frequency."
Nicole Mahrt, a representative for the American Insurance Association in Sacramento, said Mr. Garamendi's recommendation "shows that the reforms, as properly implemented, have really taken hold and solved the problem of escalating costs in the system. We've gone from ongoing double-digit cost increases to consecutive double-digit decreases."
However, in his recommendation Mr. Garamendi spoke of another, "troubling side of the story" affecting injured workers.
"In recent months I have heard a growing chorus of complaints from seriously injured workers who have suffered as the amount of compensation and treatment they receive has been slashed," he said. "In the area of serious permanent disability, benefits have been cut by an average of 50 percent compared to the period prior to the reforms."
He added that he had received "many complaints from injured workers and medical providers regarding unnecessary delays in providing medical benefits."
These complaints, he said, led to the conclusion that "the most seriously injured workers with objective findings of disability may not be receiving fair compensation, and that utilization review is now being overused to delay and deny medical care."
Although Mr. Garamendi said he continues to believe treatment guidelines and utilization review are "necessary and effective tools," he also cautioned that "they must be used responsibly and not as an obstacle to reasonable and prompt medical treatment."
Mr. Garamendi said he expects the legislature and Gov. Arnold Schwarzenegger to address the problem, and that the potential impact of such moves led him to propose the 16.4 percent decrease rather than an 18.5 cut suggested by state insurance department actuaries.
Ms. Mahrt said insurers are "doing everything they can to follow the law as written" when it comes to utilization review and treatment guidelines. For those insurers that may not be acting in good faith, she added, "the commissioner, along with the Division of Workers' Compensation, has the authority to clamp down on bad actors."
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