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| | Garamendi’s Legislative Math Lesson
By Robert Warne - September 3, 2003 Following a week filled with testimonies of workers’ compensation woe, Insurance Commissioner John Garamendi on Aug 29 gave Sen. Richard Alarcon a take-home test for the three-day weekend.
The challenge, or as Garamendi put it, the conundrum, is to figure out how to trim $6 billion of gristle from the workers’ compensation system so pure premium costs can be returned to July 2002 levels.
To keep pace and just cover the costs of claims the pure premium rate since December 2002 has steadily risen and is on track to hit the 32.7 percent mark by the end of this year.
So in order to reverse the recent trend the commissioner explained the basic principal of how $250 million in reduced system costs converts into a 1 percent reduction in pure premium costs.
He warned that there could be no reduction in premiums below the actual costs of paying claims, legal costs, administrative costs and a reasonable profit.
Garamendi also explained any attempt by the Legislature to force carriers to reduce their rates below the actual cost of paying claims would create a scenario similar to the state’s energy crisis.
Garamendi has given Sen. Alarcon and the members of the workers’ compensation conference committee the answers to the test, in the form of his legislative proposals. But there are many groups with a stake in the work comp system, so what may seem like a simple test to many, the lawmakers still need till Sept. 12 to deal with the multiple choice aspects of the test.
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