Wednesday, February 18, 2004

Workers Comp Insurers Show Record Profits

You can barely pick up the paper these days without reading about insurance companies and Republicans complaining about outragious lawsuits and the need for tort "reform" and medical malpractice "reform." Insurers are raising their rates through the roof and blaming it on lawsuits, although evidence shows that it was really their bad investments -- and not huge lawsuits -- that are causing the "crisis" and "forcing" them to raise their rates.

Also high on many states' legislative agenda this year is workers compensation "reform" (a.k.a. cuts in benefits) designed to fight rising premiums, yet workers comp insurers are showing record profits.
Insurance companies are reporting that 2003 was the fattest year on record, while they push to cut meager benefits to injured workers. Many of the insurers writing worker’s compensation policies in California reported “record net income and underwriting income in 2003,” figures in line with other companies’ banner profits.

“The very companies enjoying huge profits from the huge rate increases imposed on businesses are calling for more cuts in medical benefits to injured workers,” said Art Azevedo, president of the California Applicants’ Attorneys Association (CAAA). “Insurance company earnings soared in 2003 – even before the major new reforms took effect this year – as insurers profited from huge rate increases.
Because of rapidly rising premiums, California Governor Arnold Schwarzenegger has made workers comp reform one of his top goals, but most of the "reforms" will serve only to make it harder for workers to get benefits after they've been injured.

California injured workers groups are calling on Insurance Commissioner John Garamendi to put caps on insurance rates.
The Commissioner would reduce benefits to injured workers but allow unlimited profits for insurance companies. Garamendi’s plan includes a floor on rates, but no ceiling, so insurance companies can continue to gouge California employers. That’s not right,” said David Schwartz, President-Elect of the California Applicants’ Attorneys Association (CAAA). “Garamendi’s plan takes away benefits from injured workers, benefits that are already too low. You can cut injured workers’ benefits down to zero, and without regulation insurance companies may not reduce premiums by a single dollar.”
The groups do credit Garemendi's plan with a few good points, however, such as his proposal to accelerate payments to injured workers and to increase penalties for employers who fail to carry workers comp insurance.