THIS WEEK IN SACRAMENTO

Prepared by Norwood & Associates

March 12, 2026

WORKERS’ COMPENSATION UPDATE

Meetings Continue Between “Five & Five” & “Big 5”

The movement for workers’ compensation reform continued to gain momentum this week. Meetings between the five labor representatives and the five employer representatives (“five and five”) have been taking place on almost a daily basis. In some instances, they have been both morning and afternoon sessions.

Reported topics of discussion have been the key issues of the workers’ compensation system, including permanent disability, apportionment, eligibility, penalties and medical control. Although these issues have been heavily debated, it is not certain that any compromises have been reached between the parties at this time. As we reported last week, it is likely that the “five and five’s” role may only be as “guides” providing input on certain aspects and that the real negotiations will be between the “Big 5” (the Governor and legislative leadership) who will try to craft a legislative compromise measure based on the ongoing discussions.

It has been reported that the “Big 5” have also been meeting regularly; however, very little information has been provided on what issues are being discussed or if any compromises have been reached thus far.

Workers’ Compensation Initiative Title & Summary Unfavorable

The Small Business Action Committee, Grimmway Farms and the Independent Business Coalition began distributing petitions and gathering signatures this week.

Although slated to begin last week, delays in obtaining the title and summary from the Attorney General’s office precluded an earlier kick-off.

The sponsors of the initiative were unhappy with the title and summary given to the measure, stating they believed both were unfavorable. The title of the workers’ compensation initiative is “Compensation for Injured Workers. Eligibility and Benefit Limits. Initiative Statute .” The summary, which can be found on the Secretary of State website (www.ss.ca.gov), is written with a very negative tone, using terms such as deducts, prohibits and limits. Essentially, the summary leads with what might be considered take-aways.

The proponents do have legal options to appeal the title and summary; however, they will likely not take any action until May. On the other hand, the poll conducted by the Chamber of Commerce and the Workers’ Compensation Action Network tested several different titles and summaries on voters and even the worse case summary tested well.

Signature Gathering Campaign Off to Good Start

Despite the problems, the signature gathering campaign is off to a good start. Reportedly, the campaign has received 17,000 requests for petitions from California business trade associations. In addition, they have raised over $2 million towards the signature gathering drive on a budget of $5 million.

The campaign will have to rely heavily on mail for the gathering of signatures. To date, the campaign estimates that approximately 25% of their signatures will have to come through the mail. In an effort to obtain a list of mailing addresses to target with petitions at a later time, the coalition sent out 2 million mailers which included petitions for the recipient to petition the Legislature to enact real workers’ compensation reform. Although they are causing a bit of confusion, 100,000 responses have been received in just three days. The campaign hopes to receive at least 200,000 petitions and estimates that there is enough time to make two additional contacts to individuals who return them for purposes of obtaining a signature for the initiative. This whole system is necessitated by the fact that the initiative petition is 36 pages and it would be prohibitively expensive to mail them out in mass.

Republicans Back Initiative, Sign Petitions

On Wednesday of this week, the Republicans held a press conference on the steps of the Capitol to sign petitions in support of the workers’ compensation ballot proposal and put more pressure on Democratic lawmakers to come up with a legislative solution. At the press conference, prominent Republican legislators, such as the Senate Republican Leader Jim Brulte and Assembly Republican Leader Kevin McCarthy, pledged that they would contribute money from their personal campaigns to send petitions to constituents in order to help gather signatures. Supporters of the ballot measure have until April 16 to collect signatures from 598,105 registered voters to qualify the initiative. It is anticipated that Governor Schwarzenegger will endorse the initiative as soon as Friday and the proponents have planned a major weekend push to obtain signatures.

WCIRB Annual Adjustment Causes Confusion, Alarcón Stages Press Conference

Meanwhile, Senator Richard Alarcón held a press conference of his own at which he released new findings from the WCIRB that, he believed, indicated that payouts from the workers’ compensation system will be $7 billion lower this year. Armed with these new findings, he quickly called on insurance companies to reduce their rates and even provide refunds to policyholders. Senator Alarcón claimed that the savings stemmed from last year’s reform measures (AB 227/SB 228) and were simply not passed on to the customers.

The information released at Senator Alarcón’s press conference was from the WCIRB’s annual adjustment, a recalculation of the size of the market and the impact of current trends on the market. In this forecast, the WCIRB estimated that insurers will save approximately $4 billion from last year’s reform legislation, which limited doctor’s fees, drug costs, inpatient care and other treatments for injured workers. The bureau also recalculated the number of self-insured companies in the state, which resulted in a $2 million decrease in projected losses.

The new findings by the WCIRB created a lot of confusion among policymakers and there was a buzz around the Capitol that the Governor may lose some leverage in the negotiations due to the new developments. However, the buzz has died down as the Insurance Commissioner and the Bureau made statements clarifying that the new numbers had nothing to do with pure premium rates or newly discovered savings.

Senator Charles Poochigian, the author carrying one of the Governor’s two workers’ compensation reform bills, has issued several press releases refuting Senator Alarcón’s claims and correcting the false information that is being spread around the Capitol. The press releases assert that the stated reason for the WCIRB’s adjustment is that the Bureau had overstated the market share for the self-insured market. Previously, the WCIRB had assumed that self-insure employers accounted for 30% of the coverage. The new findings of the Bureau are based on the self-insurance market accounting for 20% of the market. This adjustment affected both the projected costs without AB 227/SB 228, as well as with the savings from those proposals. Moreover, Senator Poochigian stressed that the revisions still show that costs are going up dramatically in the coming years and that new reforms still must be enacted.

Late Thursday, Jack Hannan, a spokesperson for the WCIRB, commented on the hoopla surrounding the release of the information, stating “..there is no real new information here. The $24.0 billion estimate published in 2003 did not reflect any savings from AB 227/SB 228. In addition, the recently published updated preliminary 2004 estimate of the $17.9 billion reflects savings in benefit costs from AB 227/SB 228 of almost $4 billion and an updated evaluation of AB 749 that was reflected in the WCIRB’s January 1, 2026 pure premium rate filing, which reduced costs by approximately $0.5 billion. All of this information was reflected in the WCIRB’s proposed January 1, 2026 pure premium rates.” In addition, Hannan stated that the reduction in the percentage of self-insureds has no impact on the cost of benefits with respect to insured employers or pure premium rates.

WCIRB Evaluation of AFL-CIO Proposal Detrimental to Agents/Brokers

The Workers’ Compensation Insurance Rating Bureau (WCIRB) also released their preliminary evaluation of the AFL-CIO’s legislative proposal for workers’ compensation this week. For the most part, labors proposal has no real savings. In fact, the permanent disability proposal actually costs money. Unfortunately, the only real savings in labor’s proposal is their attack on agent commissions.

The WCIRB estimated that the 6% cap on commissions paid to agents by private insurers and the elimination of commissions paid by the State Compensation Insurance Fund (State Fund) would result in $600 million in savings for the workers’ compensation system. However, the WCIRB analysis notes that the costs for agent’s commissions are not calculated in the pure premium rate. In addition, there is no discussion relative to a reduction in commission costs being offset by increases in brokers charging fees for services provided.

Commissioner Garamendi Continues To Push His Proposal

Insurance Commissioner John Garamendi and Assembly Insurance Committee Chairman Juan Vargas met with about a dozen union leaders in an effort to forge a compromise between labor and business groups. The meeting took place on Monday and lasted approximately two hours. Assemblyman Vargas is carrying Garamendi’s proposal as a compromise package which seeks to address the concerns of employers who want to reduce premiums ,and labor who wants to regulate insurance rates.

In addition, Commissioner Garamendi is traveling to New York this weekend to meet with the executives of some of the nation’s largest insurance companies to try to bring more of them back to California. He will also be attending the National Association of Insurance Commissioners meeting. Garamendi has indicated that he hopes the new findings of the WCIRB will help convince insurers that our market is becoming more stable and that insurers can operate profitably in California.

Senate Holds Joint Hearing on Outsourcing of Jobs

The Senate Business and Professions Committee and the Senate International Trade Policy and State Legislation Committee held a joint hearing this week to discuss the outsourcing of jobs in California.

Senator Liz Figueroa, Chairwoman of the Senate Business and Professions Committee, began the hearing by expressing her concerns with the current trend of outsourcing for services such as call centers, service centers, medical transcription, and tax returns. She also voiced concerns regarding the security of individual’s medical and financial information overseas.

The committees heard from several panels—an economic panel, a medical privacy panel, a financial privacy panel, an employer panel, a policy options panel, and a panel of CEOs of companies who outsource jobs to other countries.

The panel of economists told the committee that, although more companies are beginning to send jobs overseas, the idea of outsourcing is not new at all. They pointed out that the new wave, however, was different because it not just manufacturing jobs, it is white collar jobs across industries that are being outsourced. The panel also discussed the benefits and drawbacks to sending jobs overseas.

Dominic DiMare from the California Chamber of Commerce testified on the employer panel. He pointed out to the committee that California is losing jobs because the business climate is hostile and very costly. DiMare also referred to a study performed by the California Business Roundtable that showed California is losing more jobs to Texas than overseas. Specifically, the study found that two-thirds of California jobs are going to Texas.

The AFL-CIO also testified on the employer panel and presented the committees with 6 ideas for slowing the trend of outsourcing. The ideas included tracking and collecting data in California and other states on outsourcing, having the Franchise Tax Board review existing tax code, audit all existing and pending state contracts, prohibit state taxpayer money from be used to give jobs to other states or countries, work to guarantee privacy implications for consumers, and ask for extended unemployment benefits.

On the medical and financial privacy panel, consumer and privacy groups testified to the committee that customer’s personal information was being made available to person’s overseas where, if an individual’s information was misused or stolen, United States strict laws would not apply and customers would have no recourse. Many of the Senator’s were very concerned with this idea.

The policy options panel included Justin Marks, a representative from the National Conference of State Legislators, who provided the committee with various legislative options for dealing with outsourcing. He stated that this issue is very big across the nation and 29 states are currently debating various proposals. Proposals range from all-out bans of outsourcing, restricting companies from outsourcing state contracts, or requiring the disclosure of the location where a call center or service center is located.

The CEO panel included, among others, Chris Larsen of E-Loan, who has been highly involved in the privacy battles of the last couple years. He testified to the committees that we must find a balance between consumer demand and consumer privacy. He stated that outsourcing allows companies to work essentially 24 hours a day, thereby providing customers with faster service. Larsen also told the committees that his company discloses to customers that they will be outsourcing their data and provides the customer with the ability to opt-out.

The information provided at this hearing will likely be incorporated to the approximately 10 bills proposed in the California Legislature relating to outsourcing.