California Insider

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Sacramento Bee Columnist Daniel Weintraub

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April 15, 2004

State of confusion

When Democratic Assemblyman Juan Vargas stepped to the lectern in a Capitol conference room this morning, he admitted that he wasn't sure if it was day or night. A few minutes later, the groggy lawmaker almost forgot the name of his host, Assembly Speaker Fabian Nunez. Vargas’ confusion was understandable, given that he had been up all night putting the finishing touches on the bipartisan workers comp deal that was approved by a two-house conference committee at about 3:30 am Thursday. But Vargas and several colleagues, including Nunez, also seemed disoriented about the California workers comp insurance market as they pushed for state regulation of comp rates, a feature not part of the package agreed to late Wednesday. The Democrats tried to argue that without state regulation of the private insurance industry, the cost-savings achieved in this package won’t ever reach employers. But 80 percent of employers are either self-insured or covered by the state workers compensation fund, which doesn’t earn a profit. So those employers should see immediate savings from any reforms that actually cut costs from the system. The Democrats’ proposal, which is almost certain to be vetoed by Gov. Arnold Schwarzenegger, would affect only a relative handful of policies, and it’s not clear it would help them all that much either. And it would probably kill any chance that more firms would start selling policies in California, where a lack of competition is the market's biggest problem. One especially odd feature of their regulatory plan: it expires automatically after two years. Why would a company not now selling workers comp insurance in California do so under those conditions, when they know they can simply wait two years and avoid the whole mess? The rate regulation proposal is best seen as an attempt by the Democrats to satisfy their constituents in organized labor and the legal community, who hold this concept dear, and to embarrass the governor by forcing him to veto a bill the Democrats claim is good for the business community.