Dear Mr. Commissioner,

The Workers’ Compensation Insurance Rating Bureau’s (WCIRB) Governing Board meets on August 11 and appears ready to recommend an approximately 30 percent increase in the workers’ compensation claims cost benchmark. This possibility raises grave concerns about the impact an increase in premiums will have on businesses in California.

We must protect the 2004 workers’ compensation reforms, which reduced rates by 65 percent and have saved employers more than $50 billion. These reforms provided insurance companies with powerful tools to control costs, and they must use these tools effectively before we consider raising employer rates. My administration is implementing a comprehensive plan that will bring additional stability to the system and help control medical costs by bringing more employees into high-quality network care, simplifying administrative processes and eliminating overcharging for certain medical services.

In its report, the WCIRB said insurers spent 74 percent of their premium dollars on medical costs and direct payments to injured workers, 11 percent more than they spent in 2008. While medical costs escalated quickly in 2007, medical expenses in 2009 were up only 2 percent over 2008. Initial findings for medical costs in 2010 are that they are no longer escalating at the rate they did in 2007. Insurers also say their costs for administering, adjudicating and settling claims went down between 2008 and 2009: $3.9 billion in expenses in 2009 compared to $4.1 billion in 2008.

Medical costs have increased only slightly, while loss expenses have declined. Where is the money being spent? This question must be answered before employers are asked to pay more.

Over the past two years, you have consistently demonstrated your understanding of the overwhelming impact such an increase in rates would have on the workers’ compensation system and on our state’s economy. I am confident you will not allow such a tremendous financial burden on California businesses at this time.

Sincerely,
Arnold Schwarzenegger

From California Newswire