Labor unions plan to ask the Legislature to cap workers' compensation insurance rates next year if insurers fail to substantially cut the premiums they charge businesses.
"Organized labor is going to be watching very closely the insurance company filings, and what they file will determine their fate in the Legislature," said Angie Wei, legislative director of the California Labor Federation, during a Department of Insurance rate hearing in San Francisco.
Unions, allied with attorneys for injured workers and Democratic lawyers, fought unsuccessfully for such price controls during contentious negotiations with Gov. Arnold Schwarzenegger last spring that overhauled the state's troubled workers' comp system.
Wei said unions were outraged at a recommendation by the Workers' Compensation Insurance Rating Bureau to raise workers' comp premiums by 3.5% starting in January.
Five months ago, Schwarzenegger and the Legislature approved a landmark overhaul of California's troubled system for helping injured workers.
The governor boasted that the new law would cut rates by up to 30%. Since then, they've come down by only about 10%.
During the negotiations with Schwarzenegger, unions agreed to give up some workers' comp benefits in hopes of helping beleaguered employers and thus protecting jobs.
Wei and attorneys for injured workers said they couldn't understand why the industry-backed rating bureau is suggesting a rate increase when two years' worth of legislative action has helped push down claims frequency, medical costs and benefit payments. What's even more troubling is that some insurance companies' profits rose sharply in 2004, Wei said.
Capping insurance rates would be a "huge mistake" and would scare out-of-state companies away from the California market, said Nicole Mahrt of the American Insurance Assn. in Sacramento. "The goal of the entire process is to make a competitive system so that employers have more choices."
The rating bureau in its report to California Insurance Commissioner John Garamendi said it had already accounted for much of the savings from the workers' comp overhaul.
And future savings can't be determined until the Schwarzenegger administration completes work on regulations that recalculate permanent disability benefits.
The bulk of the regulations won't be ready until January at the earliest, said Andrea Hoch, director of the state Division of Workers' Compensation.
The rating bureau recommendation gives Garamendi detailed information to issue an advisory on how insurers should adjust their prices for policies that start or renew in the first half of 2005. The advisory isn't binding.