"Workers' comp was not going to become free...This is still an expensive program for insurance providers and the employers"

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Following a sweeping set of reforms designed to fix the workers' comp system in the Golden State, insurance carriers were able to offer deep discounts on premiums they charge employers to cover the cost of paying and treating people injured on the job.

Every six months, employers saw steep decreases in their workers' comp rates, a trend that reversed a series of huge increases -- sometimes 20 percent to 30 percent a year -- in premiums. Prior to reforms championed by Gov. Arnold Schwarzenegger in 2004, many California employers griped that skyrocketing workers' comp rates steadily chewed up their revenue.

In the most recent round of filings in May and so far in June, the average rate cut is running about 11 percent. In the previous filing period of November and December 2005, workers' comp carriers filed for an average 15 percent reduction.

The shift in workers' comp rates comes at a time when attorneys complain that insurance companies have amassed huge profits, even with the discounts they have offered, at the expense of injured workers.

"It's hard to say when the effect of the reforms would run their course," said Insurance Commissioner John Garamendi. "We should anticipate lower rate reductions in the year ahead."

At some point, the pace had to diminish, said Nicole Mahrt, a spokeswoman for the American Insurance Association in the state.

"Workers' comp was not going to become free," Mahrt said. "This is still an expensive program for insurance providers and the employers."

Some of the largest workers' comp carriers are among those insurers that have greatly slowed the pace of their rate cuts.

State Compensation Insurance Fund, the largest workers' comp provider in California, filed for a 10 percent rate reduction a few weeks ago. That followed reductions of 16 percent in early 2006 and 14 percent in mid-2005 from State Fund.

Zenith National Insurance Co. filed for a 5 percent reduction recently, a sharp contrast to its prior rate cuts of 13 percent, 12 percent and 10 percent.

"We set our rates so they are fair and actuarially sound," said James Zelinski, a spokesman for State Fund. "We need to cover the cost of doing business and to cover our payments to injured workers."

The reforms of 2004 were crafted primarily to banish a variety of medical costs from the workers' comp system, partly by controlling fraud and abuse. Medical costs did plunge, which allowed insurance carriers to reduce rates. The reforms also coaxed once-reluctant insurance companies to venture back into California and intensify competition, further reducing rates.

"We have a healthy, competitive workers' comp market, we have more companies entering the market," Mahrt said. "Rates are decreasing. Injured workers are benefiting as well."

Attorneys who represent injured employees disagreed. They believe insurance companies pocketed handsome profits, thanks to the lower costs. Officials with the California Applicants' Attorneys Association say too many injured workers are being ignored by insurers and employers.

"I guess you could say injured employees have benefited if you call denial of care a benefit," said David Schwartz, an official with the attorneys' group.

Schwartz believes rate reductions should be even deeper than they have been in the last year or so.

"Insurance companies are virtually printing money," Schwartz said. "But we see the frustration mounting every day for employees who are being denied the most basic treatment."

Commissioner Garamendi also has criticized insurers for not cutting rates deeply enough. He recently proposed a nonbinding 16.4 percent average reduction in workers' comp rates.

"We think the insurance industry is making excessive profits in California," Garamendi said. "And there is evidence that injured workers are falling through the cracks."

(Article from Contra Costa Times)