Insurer Carriers in California are demonstrating a blatant disregard to the California Insurance Commissioner call to comply with reform laws to lower premiums and pass on the savings to the employers. As to why they are doing it certainly begs an answer, but they’ve been skirting around the issue successfully over the last few years.
Commissioner Dave Jones is urging insurance carriers in the state to cut the workers compensation premiums they charge employers by 14 percent. In 2016, Jones lowered his recommendation for the average premium rate to $2.19 per $100 of employer payroll. On average, this means a 14 percent drop from premium rates insurance companies have filed, and a 5.5 percent drop from Jones’ 2016 mid-year rate recommendation. Unfortunately, carriers have not been passing on to employer’s savings in the workers’ compensation system that were enacted through legislative reforms in 2012 and 2013.
According to the commissioner, there is no legal requirement that they pass these cost saving onto employers. Moreover, workers’ compensation insurers continue to file premium rates that are higher than the premium rate warranted by their costs.
California’s workers’ compensation system, which was partially deregulated in the 1990s, allows insurers to set their own premium rates. Although insurers must file their rates with the insurance commissioner’s office, the insurance commissioner has no have veto power over premium rates. His role is to only recommend rate levels.
In the past, insurers were inclined to follow the insurance commissioner’s recommendations. However, insurers’ evaluations of overall market conditions and concerns about rising health care costs generally have them doing an about face and choosing to disregard the commissioner’s calls to reduce premium rates.