SACRAMENTO — California employers should see their workers' compensation insurance bills drop by an additional 15% early next year, bringing average total savings to 38% from two years of overhauls to the state's system for treating injured workers, Insurance Commissioner John Garamendi said Thursday.
But the reduction, although hailed by Garamendi as the sharpest in almost a century, was not deep enough, the commissioner said.
He accused insurers of pocketing about 60% of the savings created by cost-cutting laws signed by Govs. Arnold Schwarzenegger and Gray Davis in 2004 and 2003.
"I have been hammering on the insurance industry since this reform effort began to immediately pass through to businesses in the state of California any savings that materialized," Garamendi said.
Insurance company profits are the highest they've been in at least 30 years, according to the Workers' Compensation Insurance Rating Bureau, an industry statistical and research service. Last year insurers paid 39 cents in claims out of every $1 in premiums paid by employers. The bureau noted, however, that the industry lost money from 1995 to 2002.
Insurers and employers hailed Garamendi's 2006 rate recommendation -- which is not binding on insurance companies -- as proof that the complex overhaul of the $23-billion-a-year workers' compensation system was improving California's business climate.
"Our members are continuing to report that their rates are going down," said Michael Shaw, assistant state director of the National Federation of Independent Businesses.
Shaw said he expected premiums to keep dropping as insurers rebuilt reserves and compensated for losses suffered through most of the last decade.
Labor groups, which helped craft the workers' compensation changes, also said they were pleased that employers could spend more money on hiring and less on workers' comp bills. But unions are growing increasingly angry that insurance companies allegedly are socking away profits while cutting back benefits for injured workers.
"Money is being taken out of benefits and going straight to the bottom line of insurance companies," said Angie Wei, legislative director for the California Labor Federation.
She said unions and the Democrats who control the Legislature -- fresh from defeating four Schwarzenegger-backed ballot initiatives Tuesday -- were prepared to push bills next year to boost benefits for permanently disabled workers.
The governor remains open to fine-tuning workers' comp but will not support "any effort to undo the reforms that have been so successful," said Vince Sollitto, a Schwarzenegger spokesman.