Bill to Implement Federal Financial Services Reform

THIS WEEK IN SACRAMENTO

Prepared by Norwood & Associates

October 31, 2025

Senate Leader Proposes Starting Over on Workers' Compensation Reform

Senate President Pro Tem John Burton is offended that Governor-Elect Arnold Schwarzenegger and the California Chamber of Commerce think this year's workers' compensation insurance reform effort, AB 227 and SB 228, don't do enough. During the debates, the Governor-elect called the reforms "bogus." The Chamber, as well as most other business groups and Republican legislators, view even the most optimistic projection of a seven percent rate roll back as a result of the legislation as woefully inadequate.

Last Friday the Democratic Senate leader, who is now probably the most influential and one of the most liberal Democrat legislators in the State, fired off a letter to the Governor-Elect and the Chamber saying that since they didn't think the bills do much, he would just go ahead and author a bill to repeal the reforms and start over. While the Governor-Elect has not taken an official position on Burton's tiff, his spokesman suggested that replacing AB 227 and SB 228 with real reform might not be such a bad idea.

The Chamber upped the ante by suggesting that while Senator Burton is repealing workers' compensation insurance reform bills, he might as well also repeal AB 749, enacted in 2002 to increase workers' compensation benefits by $3.5 billion. It just so happens that Senator Burton authored the benefit increase bill, ignoring the Chamber and other business groups who said it would only deepen the worker's compensation insurance crisis.

Senator Burton's threat is not a serious one, but it does make for good entertainment. Even if the Legislature did move to repeal AB 227 and SB 228, Governor Schwarzenegger could veto the repeal bill and hold out for even more substantive reforms.

WCIRB to Present Revised Estimates for Savings

The authors and supporters of the workers' compensation insurance reform package claim it will produce savings of about $6 to 7 billion annually. Insurers, however, remain skeptical. Last month they concluded there are verifiable savings of only $2-3 billion. The difference between the two camps is the difference between rolling premium rates backwards, or simply slowing the rate of premium increases.

Last month the Department of Insurance held a hearing regarding pure premium advisory rates. The Commissioner preliminarily concluded that rates could be rolled back at least four percent, but ordered the Workers' Compensation Insurance Rating Bureau ("WCIRB") to go back and take another crack at the numbers to see if they could squeeze out some more savings.

The WCIRB will present its revised findings on Monday in San Francisco. The Department of Insurance's own actuaries will then make their determination, and the Commissioner is expected to quickly issue an advisory pure premium rate.

The advisory pure premium rate is, as the name implies, not mandatory. It also only covers claims, not administration. Insurers use the advisory pure premium rate as a guideline, and then add in their own administrative costs. However, the Commissioner has indicated he will post on his website the names of any insurers the Department believes have not included sufficient savings from the reform bills in their 2004 rates.

Schwarzenegger's Workers' Compensation Insurance Reform Agenda

The political battle that occurred this year to achieve the reform package is not the end of the story. Even if the Commissioner adopts a pure premium rate reflecting the high end of the reform packages cost savings, it will only reduce premiums to last summer's levels.

Insurance Commissioner John Garamendi has met with Governor-Elect Schwarzenegger to discuss further reforms that are necessary. The Commissioner said he and the Govenror-Elect are in agreement on many of the issues. The Governor-Elect has not provided any further details on his workers' compensation insurance reform agenda. However, his website contains the following statement:

"Fix the Runaway Workers' Compensation System. California's Workers' Compensation system is producing skyrocketing costs for employers and job losses for employees. This year alone Californians are expected to incur $29 billion in cost for workers' compensation, up from just $9.5 billion in 1995. In many cases insurance premiums are 200-250% higher than they were in 1999, and 2-3 times greater than the current national average. And the legislature has done little to address this need. Their solution addresses less than half of the state's $11 billion Workers' Compensation crisis. A comprehensive Workers' Compensation reform package will rein in costly premiums and unnecessary costs, so that more dollars can go toward expediting benefits to injured works, while retaining and creating new jobs in California.

"As Governor, I will:

· Work with the legislature to:

a. Implement objective and enforceable utilization guidelines and establish well defined networks of providers.

b. Eliminate excessive permanent disability payouts by adopting American Medical Association guidelines for impairment ratings.

c. Reduce unnecessary litigation and judicial involvement by adopting an effective Independent Medical Review process.

· Initiate a comprehensive review of the State Compensation Insurance Fund to assess its current financial condition and take action as necessary.

· Appoint a new team to the Division of Workers' Compensation and make cost containment job one. "

Election Certification Timeline

County elections officials are now conducting their official canvass of the vote, which must be completed by November 4, 2003. The results of the official canvass must be reported to the Secretary of State no later than November 11, 2025. By November 15, 2003, the Secretary of State must determine the votes cast on the recall question and ballot measurers for the replacement candidates, certify those results, and, if the recall was successful, issue a certificate of election to the candidate who was elected.

The Schwarzenegger transition team says that the Governor-Elect will most likely be sworn in on Monday, November 17, 2025. Incidentally, voter turnout was 61 percent.

* * *

[email protected]