THIS WEEK IN
Prepared by Norwood & Associates
Workers'
Compensation Insurance Reform Put Off to Next Year
Republican
legislators, adamant about pushing the Governor's aggressive workers'
compensation insurance reform packaged, refused to consider clean-up legislation
necessary to fully implement this year's early reform effort. Democrats, as well as Insurance Commissioner
John Garamendi, have been arguing for a two step process: (1) implement
clean-up legislation immediately that will allow the full benefits of AB 227/SB
228 to be effective as of
Republicans, however, want to move faster. They view moving clean-up legislation as giving up leverage to move the Governor's entire package by Christmas. Frustrated Democrats said privately they would hold no further hearings for the remainder of the year on workers' compensation insurance reform until they can get this stalemate resolved.
An awkward personnel issue at the Senate Industrial Relations Committee may have played a role in closing down committees for the year. A consultant to the Committee responsible for workers' compensation insurance issues had earlier announced her decision to accept a job as a lobbyist with the California Teamsters. However, when Governor Schwarzenegger called the special session on workers' compensation insurance reform, the committee chair and the President Pro Tem of the Senate asked the consultant to stay on temporarily. After a few hearings, the obvious conflict became too obvious, and the responsibility for workers' compensation issues was handed over to another consultant who openly admits he doesn't know comp and needs to bone up on the issues before he can properly staff more hearings.
Its unfortunate the bi-partisan consensus on clean-up legislation has fallen apart. Insurers have submitted rate filings to the Department of Insurance based on the assumption the clean-up bill would pass and become effective January 1, 2004. It remains to be seen how many insurers amend their rate filings to increase rates because some of the cost savings expected from AB 227/SB 228 will be illusory.
This glitch also creates foreboding for getting the Governor's reform package through the legislature, even if legislators take the whole year instead of their self-imposed March 31 deadline. Recognizing this, the Governor's staff is starting to prepare for an initiative to place the Governor's reform package on the November 2004 General Election ballot. At the very least, the specter of an initiative will keep pressure on the Legislature.
Timeline for a
Worker's Compensation Insurance Initiative
The first step in the initiative process is to submit the draft language to the Attorney General so he can draft the official "title and summary" to be used in the signature gathering process and in the election pamphlet. The Governor's staff has privately told us they expect to do this in the next couple of weeks. The Attorney General has 15 days to provide the title and summary to the Secretary of State, or 25 days if a fiscal analysis is also required.
After the title and summary are complete, proponents have a maximum of 150 days to circulate signatures. The measure must qualify 131 days before the election. The number of signatures must be equal to at least five percent of the total votes cast for Governor at the last gubernatorial election, or 373,816 signatures. If the initiative amends the State Constitution, the threshold increases to eight percent, or 598,105 signatures.
Signatures may be verified by doing a full count or using a sampling technique. There probably isn't enough time to qualify the initiative using the full count method. As a result, proponents must collect 110 percent of the valid signatures required. County elections officials will them randomly sample three percent of the signatures submitted. As a rule of thumb, consultants recommend at least a 50 percent cushion to be successful with the random sampling signature verification technique.
The last day to file signatures with county election officials is April 16, 2004. The last day for county election officials to verify and certify results of the random sampling of signatures to the Secretary of State is June 21, 2004. June 24 is the last day for the Secretary of State to determine whether the initiative qualifies for the ballot or 100 percent of signature verification is necessary.
Controller to
Develop Workers' Compensation Reform Plan
State Controller Steve Westly
announced this week he would put together a team of local government and school
leaders to develop a workers' compensation insurance reform plan that would
gain bi-partisan support. He said he
hoped to have the plan put together within a month.
Westly is California's chief financial officer, and as such pays workers' compensation claims for the State. He said he survey government and school districts and discovered excessive costs that are preventing schools from hiring teachers and cities and counties having to cut vital services. He noted the workers' compensation insurance crisis is not simply a private sector problem, but effects government entities as well.
The Controller said that workers' compensation costs to government have increased the following amounts over the last three years:
State: 29%
County: 39-45%
City: 19-55%
School: 18-46%
The increased compensation costs have cost the State of California $112 million. Westly pointed out that reforming the workers' compensation insurance system is one of the easier ways to help get the state budget in balance.
With the Controller jumping on the workers' compensation reform bandwagon, the applicant's attorneys and labor will have a harder time arguing greedy and incompetent insurers caused the current crisis. Many school districts, cities and counties are self-insured. Thus, the Controllers involvement is essential for highlighting the systemic problems with the workers' compensation insurance system and the high cost of failing to reform the system.
Commissioner
Investigate Auto Insurance Rate Redlining
Sounding a familiar theme, Insurance Commissioner John Garamendi held a series of town hall meetings on possible auto insurance rate redlining by Zip Code. The town hall meetings were prompted by a petition from a cadre of consumer groups and the cities of Los Angeles, Oakland and San Francisco that asks the Commissioner to change regulations they believe place too much weight on the use of Zip Codes in rating auto insurance.
Proposition 103 requires insurance companies to base auto insurance rates on three mandatory factors: driving records, annual miles driven, and years of driving experience. Other optional factors such as location and marital status are allowed. Current regulations allow the use of Zip Codes, but the emphasis placed on the data has long been the source of controversy. The complaining consumer groups and cities are complaining about the weight given to Zip Codes, arguing it allows de facto redlining.
Insurers argue that Zip Codes should play a role in auto insurance rating, noting urban areas have higher accident rates and claims costs. They say granting the petition would increase rates for 61 percent of drivers, and require rural and suburban areas to subsidize urban areas. In addition, they say that 63 percent of good drivers would see a rate hike, while 56 of drivers who don't get the good driver discount would get a rate reduction
The Commissioner has not yet disclosed what his response to the petition will be. Given that he held town hall meetings on the issue, it is safe to assume he intends to revisit the matter.
Happy Holidays
The Legislature is adopting a compromise with the Governor on the state budget and spending cap as we write. The Assembly Insurance Committee and the Senate Industrial Relations Committees do not intend to hold further hearings on workers' compensation insurance reform this year. It appears most everyone's thoughts will now turn to family and the Holiday Season, as they well should. Accordingly, this will most likely be the last issue of This Week in Sacramento until next year. Of course, we will keep our ears to the ground, and if there are any important developments, you will be among the first to know. We wish you a safe and happy holiday season.
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© Copyright 2003 by Norwood & Associates