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Insurance Commissioner John Garamendi announced a pure premium rate reduction of 14.9 percent Nov. 7 after Workers' Compensation Insurance Rating Bureau actuaries were able to successfully glean a healthier savings estimate from the new medical guidelines established by SB 228. 

Earlier in the week the WCIRB actuaries were only able to recommend to Garamendi a 2.9 to 5.3 percent rate reduction due to a lack of data to base an estimate on.

But Garamendi wasn’t pleased with their conservative approach and sent them back to their spreadsheets and cost models to re-crunch the numbers and reassess the impact of medical utilization provisions outlined in AB 227 and SB 228.

"If we assume no impact, there will be no impact. That is an assumption, we cannot…we will not allow to happen," Garamendi said, according to the Workers’ Comp Executive.

So at a news conference at the Renaissance Hollywood Hotel on Thursday, Garamendi reported the revised rate reduction recommendation that will take carriers back in time to the July 2002 pure premium level.

"Our businesses cannot continue to operate under the crushing weight of this dysfunctional system," he said. "There are substantial savings to be realized from the reform legislation, and I intend to do everything in my power to ensure that those savings are passed on to employers."

Garamendi admitted that the advisory rate is used as a benchmark and that he doesn’t have the power to set carriers’ rates. However, he explained that the reform legislation includes a provision that requires insurers to file rates that reflect the savings that the commissioner determines are due to the reforms.

The commissioner emphasized that the savings from the reforms that are reflected in his pure premium order will only be realized if the law is enacted fully and immediately and he outlined several things that must occur:

• First, the insurance industry must enforce all provisions of the new law, including utilization controls on medical treatment. Beginning in January, they must adequately train their adjusters to use the new treatment guidelines and in April, begin paying medical providers based only on those new guidelines.
• Next, medical providers must learn and adhere to the new treatment guidelines consistent with the law's intent.
• The Legislature, in the special session that Gov.-elect Schwarzenegger has indicated he will call, must enact cleanup legislation that deals with ambiguities and technical errors in the new law. This is essential for the new legislation to be carried out effectively, and to eliminate potential litigation.
• And finally, the Division of Workers' Compensation must be adequately funded so that workers' compensation appeals judges can address claims issues expeditiously.

"As I said, there are very significant savings within this legislation that can be passed on to businesses," Garamendi said. "It is now up to all who are involved to fully enact this new law so that our employers will see some relief."