Insurance Commissioner Steve Poizner today rejected, for the second time this year, an insurance industry request for a hefty increase in workers' compensation premiums, saying it would exacerbate the state's economic recession.
The Workers Compensation Insurance Bureau, citing rising medical costs and the projected effects of two recent Workers Compensation Appeals Board decisions, proposed a 22.8 percent increase in benchmark premiums.
But Poizner, a Republican candidate for governor, rejected the request, saying, "One in eight Californians is unemployed. Countless others are also suffering and have either given up looking because they cannot find work or have taken part-time jobs while they seek full-time work. Any increase in costs for employers will only make our already dire economic situation worse."
Poizner said the request lacked "clear evidence" that a big increase was warranted and said employers who self-insure for job-related illnesses and injuries had demonstrated that under terms of a 2004 overhaul of the system, big cost savings could be realized.
"These increases requested by the WCIRB give insurers an excuse to raise rates in concert without fully utilizing all of their cost containment tools or increasing efficiency." Poizner said in a statement. "I will not consider an increase in the claims cost benchmark until I see substantial efforts being made by insurers to use all available tools to constrain costs and improve efficiency."
The 2004 overhaul, pushed by Gov. Arnold Schwarzenegger, tightened up eligibility for both cash compensation and medical treatment, leading to howls of protest from labor unions and attorneys who specialize in work comp cases.
Earlier this year, the Workers Compensation Appeals Board declared that the new rules governing compensation were not as absolute as employers had assumed and could be breached if individual case circumstances warranted. That sparked fears among insurers that their costs would start to rise after years of decline and led to the proposal that Poizner rejected.
"I do not entirely reject the possibility that these WCAB decisions will increase permanent disability costs and it appears that the decisions may change further," said Poizner. "Given the lack of actual data and differing assessments, along with the economic challenges faced by California's employers, I believe the proper course of action is to further monitor the data on permanent disability costs, properly analyze the effect of these decisions, and await the resolution of further legal appeals."
In theory, insurers could ignore Poizner's rejection, since he doesn't exercise total control over premiums, but insurers that ignore his decision run the risk of becoming uncompetitive with other insurers.The premium benchmark has fallen 63.4 percent since its high in 2003.
In July, Poizner rejected a 23.7 percent increase proposal that also cited the new work comp appellate decisions. But last year, while rejecting a 16 percent proposal, he granted a 5 percent increase, one year after calling for premium decreases. His actions have pleased employers as much as they have created a gulf between him and insurers.
Torey Van Oot and the Bee Capitol Bureau report on the people and politics of California government. Get 
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