Is Garamendi the Problem’

Our coverage of the California Commissioner’s recommendations to solve the workers’ comp market meltdown appears on page 24. My comments here only have context if you’ve read that article first. So, is Commissioner Garamendi the problem? Well, no he’s not the problem, but he’s part of the problem.

If California’s WC market is going to survive, it needs the private sector back in the market. That won’t happen as long as WC cost drivers continue to spiral upwards with no end in sight. The primary cost driver is medical costs. And, it’s not just a workers’ comp problem in California. National health insurance costs are projected to increase 24 percent this year prompting business leaders to question whether health insurance for their employees is an affordable perk anymore.

I believe a free market provides the best combination of price and product for consumers. A free market needs regulators that provide a level playing field and make sure no one cheats. Then, they need to get out of the way and let the market do its work. The private sector needs to be able to project its costs and have a reasonably good idea what the regulators think and will do before the private carriers can deliver the goods. They can’t do either right now. One would think that many carriers would enter the California WC market right now. The rates are skyrocketing and they would have a clean balance sheet with no prior losses. This is not happening. There are no carriers willing to enter the market; there have been no startups, with one small exception and nothing on the horizon. They are staying on the sidelines because they fear two things.

The first thing they fear is John Garamendi and that’s why I say he is part of the problem. The private sector doesn’t know what he will do. Garamendi has accepted campaign contributions from all of the ëinsurance stakeholders’ except the insurance industry. Garamendi has accepted contributions from lawyers, labor, medical providers and large insurance buyers, but not agents and no carriers. The insurance industry feels that Commissioner Garamendi sees them as the ‘bad guys’. The second thing the carriers fear is that if the State Fund collapses, any WC carrier doing business in California will be assessed to make up the losses.

And let’s give the State Fund credit. Thank God for the SCIF. They have almost single handedly keep the California WC market alive. They have managed to provide coverage for California’s employers under the most difficult of circumstances. They are understaffed and overwhelmed with business and are working their way through their problems.