Pure Premium Rate Hearing: Savings Estimates from SB 899 Not Yet Available

By Loretta Macktal, Executive Assistant to the Vice President, Government Relations

Capitol Update, April 30, 2004 Share this on FacebookTweet thisEmail this to a friend

At the Pure Premium Rate Hearing on April 29th, the Workers’ Compensation Insurance Rating Bureau (WCIRB) outlined their methodology and explained to the Department of Insurance's Rate Hearing Committee (headed by Commissioner John Garamendi) how they would analyze SB 899 (Chuck Poochigian, R-Fresno) and quantify any cost savings attributable to the bill. The most important point made to the Commissioner at the hearing was that it is too soon to develop any real numbers.

The Bureau provided some preliminary numbers, qualifying them by expressing concerns about the legislation and the need for more time to complete an in-depth analysis. Of primary concern to the Bureau was when and how effectively many provisions of the bill would be implemented by the Division of Workers’ Compensation. Also of concern was the high probability of litigation on many of the legislative changes and legal challenges to impementing regulations that are not yet even written.

Preliminary estimates by the Bureau are:
• a 15 percent reduction in temporary disability due to the 2 year cap on TD payments
• a 10 percent reduction in permanent disability due to changes in number of weeks
• a 7 percent reduction in permanent disability due to the two-tiered disability award system.

It should be noted that the percentages don't translate directly into premium decreases and in the final analysis may have little bearing on the final pure premium rate approved by the commissioner to take effect on July 1, 2004.

Commissioner Garamendi acknowledged that many of the reforms may not occur this year and that some of the reforms may be subject to litigation. He also indicated that "some of the major cost savers contained in the legislation must be triggered by administrative action before costs in the system can be reduced." The Commissioner asked the WCIRB to complete its analysis prior to the resumption of the hearing on May 13th "so that we may continue to work to expedite the passing on of savings to employers."
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