California Official Campaigns for Insurance Overhaul
July 5, 2003
By JOSEPH B. TREASTER
New York Times
SACRAMENTO, Calif. - Twice, John Garamendi has run for
governor of California. Twice, he has lost.
Now, nine months after winning election as the California
insurance commissioner - a job he also held in the early
1990's - Mr. Garamendi is back on the campaign trail, this
time, he says, for the cause of reform.
His stated objective, as he shakes hands around the state,
chats with grocers and fishmongers and labor leaders and
delivers peppy speeches, is to win support for a plan to
drive a stake into what many California business people say
is their biggest, single problem: the soaring cost of
workers' compensation insurance.
But political friends and foes say Mr. Garamendi, a
Democrat, may also be positioning himself for another run
for the governor's office.
"It is widely assumed that Garamendi wants to run for
governor again," said Kevin Spillane, a Republican
political consultant who advised Mr. Garamendi's opponent,
Gary Mendoza, a Republican lawyer, in the election for
insurance commissioner last fall.
The field of potential candidates for governor in 2006 is
already crowded and, to many Californians, that election
seems far away. But the workers' compensation problem is a
real payday issue across the political spectrum, and Mr.
Garamendi is being widely, sometimes grudgingly, applauded
for helping focus attention on it.
"I'm in the process of building the best consumer
protection agency in the country," Mr. Garamendi said as he
rode through Los Angeles recently in a chauffeured sedan,
part of his barnstorming efforts to popularize his
proposals. Here in the state capital, he has been pressing
the legislature to take steps to reduce medical, legal and
administrative costs, which he says are the main factors
pushing insurance prices for California employers. He wants
standardized medical procedures and fees and the use of
generic drugs, and he wants a medical review panel and an
ombudsman to resolve disputes and reduce litigation.
But the proposed changes threaten some of the state's most
powerful political forces and, although Mr. Garamendi says
he is increasingly optimistic, meaningful compromise is
proving difficult.
"A lot of bills have been introduced and the bulk of them
have been bottled up in the legislature by special interest
groups," said Senator Chuck Poochigian, the chairman of the
Republican caucus.
In many ways, workers' compensation is a perfect issue for
Mr. Garamendi. It provides an opportunity to raise his
already high profile among voters with little political
risk: the price of workers' compensation insurance has
risen higher in California than anywhere else in the
country, costing jobs and forcing some businesses to close
or leave the state. But the problem is so big and so
bewilderingly complex that even if he fails to achieve
major change, he stands a good chance of winning praise for
having fought the good fight.
Mr. Garamendi, a former football player at the University
of California at Berkeley, former Peace Corps worker in
Africa and veteran of the state legislature, with a
reputation for intelligence and a willingness to take on
complex issues, is not denying he dreams of higher office.
But, for now, he says, he is concentrating on insurance.
"If I look too far into the future," he said, I'm going to
miss the opportunity to do what needs to be done today and
tomorrow."
Mr. Garamendi, who grew up on a ranch in the foothills of
the Sierras, served as Bill Clinton's campaign manager in
California in 1992. After he was defeated in the
gubernatorial primary in 1994, the Clinton administration
found a job for him as a deputy secretary in the Department
of the Interior. In 1998, Mr. Garamendi opened a Washington
office for a Los Angeles investment firm, then went on to
run for insurance commissioner. His wife, Patricia
Wilkinson Garamendi, also served in the Clinton
administration and is now an assistant secretary in charge
of international economic development for California. They
have six children.
Mr. Garamendi, 58, is well known in California. On the
streets and in airports, people call out to him. He chats
easily with them and tells them to urge their legislators
to focus on workers' compensation. He recently spent a full
day talking workers' compensation with business owners in
Los Angeles and was up at dawn the next day in Sacramento
to speak at a labor breakfast. Then he went on to address
the Associated General Contractors of California.
"He's trying to position himself as the moderate,
pro-business Democrat in the 2006 primary for governor,"
Mr. Spillane said.
Senator Jackie Speier, the chairman of the Senate insurance
committee, a Democrat and political ally, said Mr.
Garamendi was "first and foremost a candidate," adding: "I
don't think you can rule him out for 2006."
(Like many other prominent Democrats in California, Mr.
Garamendi said he would not be a candidate this fall should
the state's Republicans force a recall election of Gov.
Gray Davis.)
In his zeal for the spotlight, Mr. Garamendi is an anomaly
among the 51 insurance regulators in each of the states and
the District of Columbia.
A few insurance regulators have risen to higher office. Ben
Nelson, the Democratic senator from Nebraska and Bill
Nelson, the Democratic senator from Florida, are two
examples. But most are gray, faceless bureaucrats - all but
invisible, appointed by governors rather than elected. They
worry about getting out in front of their benefactors on
the issues and they run from controversy. None of them,
including Mr. Garamendi, is empowered to make big changes
on their own. But the bully pulpit is theirs for the
mounting.
But few insurance regulators choose advocacy. Instead, they
affect a neutral stance, professing to deal evenhandedly
with insurance companies and their customers. But the
insurance companies have the advantage. They pour millions
into lobbying and they and the regulators are experts in
insurance.
Mr. Garamendi is not neutral. In his first campaign for
insurance commissioner in 1990, he ran on a promise to
carry out a new law that established a price range for auto
and home insurance and forced the insurance companies to
refund hundreds of millions in premiums. He also took the
side of customers who complained that the insurers were
trying to cheat them on their damage claims after the
devastating brush fires in the hills of Oakland in 1991 and
the North Ridge earthquake that stunned Los Angeles in
1994. Mr. Garamendi, who has an M.B.A. from Harvard, was
criticized however, for selling the assets of a failed life
insurance company in behalf of policyholders for far less
than he could have gotten once the bond market revived.
This time with Mr. Garamendi as insurance commissioner,
there is less tension over auto and home insurance and the
insurers are delighted that he is pledging to cut workers'
compensation costs. "I'm trying to work with them and
they're trying to work with me," Mr. Garamendi said.
In workers' compensation, however, one person's solution is
another's problem. To the lawyers who specialize in
representing injured workers, the talk of cutting legal
costs sounds like Mr. Garamendi wants to put them out of
business. Political experts say the strong medical lobby is
also likely to oppose efforts to make cuts in their field.
Yet others, like Senator Poochigian say Mr. Garamendi's
cost cutting does not go far enough. "They've cherry-picked
some of the more popular ideas and been cautious about
embracing other reforms, some of which might be offensive
to their core constituencies," Mr. Poochigian said.
Tom Rankin, the president of the California Labor
Federation, A.F.L.-C.I.O., the state's largest labor group,
favors set fees for medical services. But he said some of
the ideas backed by Mr. Garamendi and Governor Davis "we
think are totally unworkable." One example, is the medical
review board, that Mr. Rankin says will add another layer
of bureaucracy "to the detriment of the injured worker."
Mr. Rankin also wants controls imposed on what insurance
companies can charge. But Mr. Garamendi says that if the
expenses within the system, like those for medical
services, are reduced, the insurers' prices will follow.
Part of his job, he says now, is making sure that insurance
companies can operate profitably.
"But," he said, "it's also making sure the insurance
companies obey the law and treat their customers properly.
If not, they are going to have some serious conversations
with me."
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