Employers face an extended wait for relief on workers' comp bills.

Like many employers, Sierra Group Chief Financial Officer Scott Martin was expecting his workers' compensation insurance premium to drop sharply this year.

The Glendale-based designer and builder of bank facilities had done a good job of avoiding claims. And Martin was counting on workers' comp reforms signed into law last year to bring his $250,000 a year premium down at least 20 percent.

But when Martin opened his premium renewal statement last month, it showed an increase. "The politicians claimed that the rates were going to go down 20 percent, 30 percent or more. But it's all smoke and mirrors," he said.

Frustrated, Martin took his policy renewal to his insurance broker and asked him to try to find a better quote. The broker came back a few days later with a reduction of $1,000 a month, or about 5 percent.

That's about typical for businesses throughout Los Angeles and the state. According to several local insurance brokers, the average rate reduction for their clients this year is between 5 percent and 10 percent. Figures from the state Department of Insurance show an average 7 percent decrease, according to department spokesman Norman Williams.

Only a few employers are seeing premium reductions near the 20 percent that politicians were predicting when Gov. Arnold Schwarzenegger signed a workers' compensation reform package last April--following a four-year run when average rates more than doubled.

As of September 2004, California employers still paid workers' comp premiums that averaged $5.34 per $100 in payroll, about twice as high as the next most expensive state.

Delays in implementing the reforms, caution among insurers and the possibility of some reforms being rolled back means that premiums paid by employers are slowly drifting down, not plunging.

"My clients are naturally frustrated," said Fritz Mutter, president and chief executive of Golden Pacific Insurance Services. "They expected steeper cuts."

Some employers in higher risk industries have not seen their premiums come down at all.

"I'm not going down a penny," said Jan Rutkin, president of Todd Rutkin Inc., a garment-cutting contractor in Huntington Park that employs 80 people. "We're just not seeing it yet. I have no confidence that my rates will come down next year either."

Rutkin said her company's claims history is better than the industry average, citing premiums of around $8 per $100 payroll--considerably below her industry's average of $11 per $100 payroll.

Insurance industry representatives say that the reforms are working, but that it will take time for employers to see the full effect.

"We're asking employers for a bit more patience," said Nicole Mahrt, spokeswoman for the California chapter of the American Insurance Association. "We had a very expensive system that was a total mess. Now, rates are coming down and they will continue to come down; we just need to hang tough and stay on the path we're on."

Reforms slow

One of the key elements of the reforms was allowing insurers to form medical provider networks to keep costs down. The networks were supposed to be up and running by now, but the process of forming and getting approvals for most of them has only begun.

The networks will eventually allow employees to choose from a roster of doctors, similar to HMOs. Previously, injured workers were allowed to get their own doctor, and if the employer or insurer objected to the treatment plan, they could bring in their doctor--setting up a frequent "dueling doctor" scenario that drove up costs.

A handful of medical provider networks were launched on Jan. 1. It will take several months before most others are up and running, and considerably more time after that to determine how much they will save employers. Until those savings are realized, insurers have been reluctant to factor them into rate calculations.

Another factor is the massive State Compensation Insurance Fund, which has half the workers' compensation insurance market. State Fund dropped its rates 5 percent on Jan. 1, on top of two previous decreases last year totaling 10 percent.

Frustrated with the pace of rate reductions at State Fund, Schwarzenegger last month put three new directors on the board. The board then hired a consultant to study ways that the organization can become more efficient.

What's more, some of the regulations implementing last year's reforms are still being written and could face further delays if Andrea Hoch, head of the state Division of Workers' Compensation, is not confirmed by the state Senate. The division is writing the reforms.

Democrats, labor unions and applicants' attorneys are opposing Hoch's confirmation, saying the rules her agency wrote to determine disability payments are too harsh on injured workers.

"We will work to block Hoch because she has gone out of her way to take permanent disability compensation and other rights from injured workers," said Mark Hayes, president of VotersInjuredatWork.org, a statewide group advocating for injured workers and funded in large part by applicants' attorneys.

Last week, the Senate Rules Committee indefinitely postponed consideration of the Hoch nomination. "Employers are very anxious to see workers' compensation reform translate into more savings. They need to realize that's now under assault," said Vince Sollitto, spokesman for Schwarzenegger.

VotersInjuredatWork.org is also considering placing one or more initiatives on a possible special election ballot this November to roll back the reforms enacted last year.