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Proposed workers’ comp hike would ‘devastate’ small firms
October 7th, 2009, 11:00 am · 11 Comments · posted by Jan Norman, small-business columnist
A proposed hike in California workers compensation insurance rates would have “a devastating effect on small businesses,” said state Insurance Commissioner Steve Poizner following his hearing Tuesday Oct. 6 on a requested 22.8% increase in the pricing benchmark.
In August, the Workers’ Compensation Insurance Rating Bureau of California recommmended the increase starting Jan. 1, 2010.
The Department of Insurance will accept written testimony through Friday and then Poizner will have 30 days to issue his ruling, said spokesman Darrel Ng.
Poizner noted that over the past two years he has pushed to reduce inefficiencies in the workers’ comp system and rejected previous requests to increase the workers compensation cost claims benchmark.
The benchmark is advisory. Poizner can approve, reject or amend the bureau’s recommendation, but the Department of Insurance does not set workers comp insurance rates.
In 2003 legislative reforms reduced workers comp insurance rates, but recent trends foretell significant hikes in the cost of workers comp insurance throughout California, according to Irvine employers’ consultant Don Dressler. Among those trends:
- Insurance Commissioner Steve Poizner ignored his own staff’s preliminary rate hike of 13.5%, insisting that “pure premium rates” shouldn’t change. (His recommendation isadvisory.)
- The Workers Compensation Insurance Rating Bureau, an industry advisory group, already recommended a 23.5% rate hike beginning July 1, 2009.
- Insurers that handle the vast majority of the state’s workers comp insurance have announced rate hikes of 4% to 33%.
- The underwriting ratio for all of California’s workers comp insurers is growing unfavorable.
Click here to read Poizner’s press release.
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This will be a 100% political decision on Poizner’s part since he is running for governor. Approving it would be political suicide. Therefore it doesn’t have a snowball’s chance. The workers comp system in Cali is totally out of control and needs drastic reform. More money thrown at the problem will simply drive more businesses out of state, reduce tax revenue and drive another nail in the state’s coffin. I can’t see how anyone could be so stupid to even propose it. That is, unless, their own selfish, greedy pockets are being filled on account of it.
A 22.8% Increase?????
This is not good.
Our State will get worse.
Insurance is a huge racket. Small companies can barely make it as it is. This better not pass. This will open up another can of worms, there will be companies that normally obey all the laws will be forced to not claim workers in order to get around paying the premiums. I have seen this happen.
22%? unbelievable… how about we just knock out the fraud, I don’t know what else could be driving up such “costs”
There are not enough auditors and investigators to combat the fraud. Also, in many cases they lack the teeth to act decisively.
Would have been nice to hear that the recommended increase is ADVISORY only (as is the Insurance Commissioner’s recommendation) — insurance carriers don’t have to follow it but can set their own rates (and they do).
To OCRepublican, see 5th paragraph
Jan Norman
Workers comp insurance is already ridiculously priced! If it is raised any higher, I’ll start the process of relocating my business to Nevada or Texas.
Clamp down on fraud and waste, not my wallet.
Bill,
You’d better start packing now. I know rates are high, but these things only go up not down.
California wants all businesses to leave. What a bunch of idiots we have running this state. Nevada is looking better every day.
We need to banish anyone that would support this from the state!
Actually I was paying 17 % on payroll eight years ago and now I am down @ 8 % . What needs to be done is having the state look into the practice of hiring subcontractors as 1099’s when they should be classified as employees .