The drop in workers' compensation insurance rates paid by California employers will not hurt efforts to continue luring businesses to Northern Nevada, officials said Monday.
California Insurance Commissioner John Garamendi said claims insurers have paid for work-related injuries dropped 36.5 percent since mid-2003, but insurance companies have reported overall base-rate reductions of about 26.8 percent.
Actual price cuts by the 25 largest workers' comp insurers in California have averaged only 25.7 percent, according to projections made by Department of Insurance actuaries. Those reductions range from 41.22 percent by the Swiss RE Group to 10.77 percent by State Farm Fire and Casualty Co., the department said.
But Northern Nevada officials said California's costs remain high and will continue to be a major reason businesses relocate to the Silver State. In fact, in fiscal 2004-2005, 15 of 40 businesses that relocated or expanded to Northern Nevada came from California.
An even earlier example is PC-Doctor, which began its move from Emeryville, Calif., to Reno in 2003, citing a 300 percent increase in worker's compensation costs as a big factor.
But economic development officials in Northern Nevada said reports such as the one released Monday are good news, because the stronger California's economy is, the more money those people have to travel and spend in Northern Nevada.
"Certainly the reform (Gov. Arnold) Schwarzenegger has enacted is a step in the right direction for California," said Julie Ardito, spokeswoman for the Economic Development Authority of Western Nevada. "When California is doing well, automatically we do well."
"We couldn't do what we do with economic diversification without a strong tourism base."
Ardito added that even if the reforms have cut costs by 26 percent or 30 percent, workers' compensation still is expensive in California.
"It really comes down to when are the companies seeing a savings in their bottom line," she said. "The new companies we have moving here don't feel they have seen that savings."
"Workers' compensation is one of many variables companies take into consideration. They look at the overall cost of doing business."
Lawmakers in California passed a series of changes in workers' compensation in 2003 and 2004 to respond to skyrocketing claims that boosted the cost of workers' compensation insurance as much as 200 percent to 300 percent in some instances.
The changes included limits on the amounts doctors, pharmacies and clinics can charge to treat workers' comp patients, development of new treatment guidelines and regulations that critics say will result in sharp cutbacks in benefits for many disabled workers.
A California Senate bill to regulate rates is bottled up in an Assembly committee.
Garamendi said it was appropriate for lawmakers to wait for more analysis before deciding if rate regulation is needed.
Garamendi said the industry's price cuts seem to be lagging about six months behind his advisory rates.
"The bottom line is there is more relief possible for employers...," he said. "We should in the months ahead see better and lower prices for businesses in the state of California."
Sam Sorich, president of the Association of California Insurance Companies, said insurers are still uncertain about how some regulations putting the new cost-cutting laws into practice will work and whether courts will overturn key provisions of the legislation.
"But despite these uncertainties, the reforms are progressing and results for California businesses are expected to improve with time as the final pieces of the reforms are implemented," Sorich said.