Governor willing to consider rate regulation to ensure savings

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Associated Press

ROSEVILLE, Calif. — Gov. Arnold Schwarzenegger is willing to consider state regulation of workers’ compensation insurance rates as part of legislation to control the skyrocketing cost of dealing with workplace injuries.

“It’s definitely something to consider,” the Republican governor said Wednesday. “We have to do everything we can to bring the costs down. We have to bring the costs down or otherwise more and more businesses will leave the state.”

Democrats have been pushing for rate regulation, saying that without it there’s no way to guarantee that any savings generated by changes in the workers’ comp system will be passed on to employers in the form of lower insurance prices.

Until Wednesday, however, the administration had said there was no need to regulate rates because increased insurance industry competition brought on by workers’ comp cost cutting would result in lower premiums for employers. 

“I am willing to listen to anyone and any idea,” Schwarzenegger said when asked about rate regulation during an appearance at a shopping center in the Sacramento suburb of Roseville. “That has been my philosophy from the beginning. We want to listen to all the different ideas … and then we will make up our minds.”

The Republican governor and the Legislature’s Democratic leaders have been trying for weeks to put together compromise legislation that would reduce workers’ comp costs.

Schwarzenegger has said he wants a deal by Friday or he’ll push ahead with a business-backed initiative that would impose a series of cost-cutting changes on the state’s 91-year-old system of caring for job-related injuries.

“That doesn’t mean that if (an agreement is reached) after midnight or Saturday morning I will not sign it,” he said. “It just means here is the deadline and let’s now all work the next two days full time, back and forth, to get it done. And I know we can get it done.”

His appearance at the shopping center was designed to encourage people to sign petitions to put the initiative on the November ballot. He spent about 20 minutes gathering signatures, talking to shoppers and fielding questions from reporters.

Republicans and their business group allies contend the initiative and similar legislation backed by Schwarzenegger would bring uniformity, objectivity and lower costs to workers’ comp cases.

Democrats, labor leaders and workers’ attorneys contend the initiative and Schwarzenegger’s bill would hurt injured workers without guaranteeing savings for employers, who pay workers’ comp costs.

Several consumer groups and Sen. Richard Alarcon, D-Van Nuys, also held a news conference Wednesday and stressed that rate regulation should be comprehensive to make sure that it works.

“There are a lot of pitfalls that can make regulation a sham,” said Doug Heller, executive director of the Foundation for Taxpayer and Consumer Rights. “We do not want insurance companies to be able to pull wool over our eyes … and end up with no savings.”

His group is backing a five-point plan modeled after Proposition 103, the 1988 ballot measure that imposed rate controls on auto insurance and a number of other types of coverage. The plan would include a rate rollback, then a one-year rate freeze and a requirement that future workers’ comp rate increases get state approval.

Alarcon said lawmakers made a mistake last year when they didn’t include rate regulation in legislation that Insurance Commissioner John Garamendi said should have cut workers’ comp rates about 15 percent. Insurers responded with an overall cut of 2.9 percent.

Stressing the need for flexibility to react to market changes, Nicole Mahrt, a spokeswoman for the American Insurance Association, said a stringent rate regulation system could drive workers’ comp companies out of the California market.

While insurers don’t want a “draconian rate regulation structure,” Mahrt said, they are willing to look at alternatives.
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