THIS WEEK IN SACRAMENTO

Prepared by Norwood & Associates

March 26, 2026

Workers’ Comp Update

Governor Schwarzenegger’s deadline for workers’ compensation reform is today and no one can predict what will happen. This week has seen numerous key developments in the negotiations towards meaningful workers’ compensation reform. Meetings have been occurring on several fronts—labor and employers, the “Big 5”, the Governor and Senate President Pro Tem John Burton, and the Governor and Insurance Commissioner Garamendi. However, the results of these meetings are still unclear.

The Governor has said that if a negotiation is not reached today he will push ahead with the initiative. If an agreement is reached today, language would be drafted over the weekend and passed by the Legislature next week before the spring recess.

The “Big 5” met last night and are meeting again some time today. An announcement could be made as soon as this afternoon; however, there are still several balls in the air.

Reportedly, Democrats want to cut a deal but want the reform package to include rate regulation. Governor Schwarzenegger, up until the middle of this week, has been opposed to any kind of rate regulation; however, on Wednesday he stated that rate regulation is “something to consider.”

On the other hand, it has also been reported that the Democrats may stall the negotiations until after the spring recess, thereby forcing the Republicans to spend more money on the initiative. Republicans, as of today, are still somewhat undecided on whether it is a better idea to go with the initiative or try to cut a deal legislatively.

If Democrats do indeed stall the negotiations, the Republicans may simply decide to commit to the initiative.

A big factor in the negotiations is the Workers’ Compensation Rating Bureau’s release of its analysis on 2002 loss data earlier this week. Citing rising loss costs, the Bureau recommended a rate increase of between 8-12%. Commissioner Garamendi’s actuaries agreed that a rate increase was in order, but the Department of Insurance estimated that only a 3% jump would be required. Whatever the percentage, the reality of higher costs complicates the political negotiations toward a deal. The Governor and Republican legislators have promised business meaningful premium reductions. Assume for argument’s sake that the Governor’s initiative would save $5 billion in system costs, a generous assumption to be sure. The new rating bureau numbers eliminate approximately $2 billion of those savings, leaving Republicans little room to negotiate if they still intend to deliver a drop in premiums.

While all of the meetings and negotiations have been occurring this week, Norwood & Associates has been busy reviewing numerous rate regulation proposals and fighting labor’s continued attacks on broker agent commissions.

Commissioner Garamendi flip-flopped on his position against rate regulation this week, proposing a short-term period of regulation in which he would set a mandatory base rate each year until 2007. Reportedly, Garamendi introduced this proposal to take attention away from the rate regulation sticking point and turn attention to the overall reform of the workers’ compensation system. Unfortunately, it appears his move didn’t work out as planned.

Senator Richard Alarcón (D-Sun Valley) joined with the Foundation for Consumer and Taxpayer Rights to propose a freeze on workers’ compensation rates and regulation similar to the Proposition 103 model. Alarcón claimed Wednesday that “The Prop 103 model is very much on the table and very much under consideration.”

Other regulation proposals have been circulated by Liberty Mutual, AIG and various insurer trade associations. The Governor’s office will have to consider some level of regulation to promote a political compromise with Democrats, but Administration officials continue to insist that they will do nothing that will discourage insurers from committing new capital to the market.

Norwood & Associates continued to distribute information on broker agent fees and commissions to the Legislature and California employers to fend off the attacks of labor. Reportedly, the grassroots efforts of IBA West caused several lawmakers to make it clear to the Governor at a caucus dinner this week that they do not want to cut agent commissions. As of this writing, it appears the majority of the “Big 5” do not support imposing a cap on or eliminating commissions. However, the issue is still in the mix and anything could happen in the end.

With all that said, we wait for some kind of announcement. Legislative staff and industry representatives are “on-call” all weekend. Stay tuned.

Governor’s Initiative Garners More Endorsements

Several business groups endorsed the Governor’s workers’ compensation initiative this week. The Workers’ Compensation Action Network (WCAN), a group of over 750 employers and business organizations including IBA West and Liberty Mutual, publicly backed the initiative. The California Chamber of Commerce, also a member of WCAN, has endorsed the initiative as well. In addition, the Western Growers Association, which represents approximately 3,000 employers, announced their support for the initiative. All of the organizations stressed that they would rather have a legislative solution; however, they must be prepared if the Legislature fails to enact meaningful reforms.

SB 2 Repeal OK’d for Ballot

The Secretary of State certified the referendum to repeal last year’s mandatory health insurance measure, SB 2, for the November ballot this week. The proponents of the initiative, Californians Against Government Run Healthcare, gathered the 624,000 signatures needed to place the referendum on the ballot.

SB 2, backed by labor, consumer and doctor groups, would require companies with 200 or more employees to buy health insurance for workers and their families by 2006. Companies with 50 to 199 employees would be required to purchase coverage by 2007.

Business groups, including the California Chamber of Commerce, the California Restaurant Association and the National Association of Independent Business, have estimated that the measure would cost firms as much as $11.5 billion.

Legislative Update

The Assembly Insurance Committee met this week and passed the following bills:

AB 1953 (Vargas): Increases penalties for unlicensed public adjusters, specifies language for disclosure terms in contracts and requires the prior approval of contracts by the Insurance Commissioner.

AB 1985 (Wolk): Allows insurers to retain an electronic version of an original claim form regarding the theft of an insured vehicle for a minimum of three years, in lieu of retaining the actual original claim form.

AB 1962 (Cox): Allows an underwritten title company to be either a corporation or a limited liability company (LLC) in California.

AB 2639 (Cox): Authorizes the Department of Insurance to impose a restriction on the license of an underwritten title company in lieu of suspension or revocation.

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