Gov. Arnold Schwarzenegger and California’s insurance commissioner have a dilemma on their hands: A workers compensation rating advisory panel has suggested that worker comp rates in the state be increased by nearly 25%, but as one of the Top 10 economies of the world, California is already in economic crisis mode.

The premium rate increase was reported by the Los Angeles Times.

It is an especially dicey situation, as the governor — who has no authority over such increases — has already stepped into the fray. And Commissioner Steve Poizner is poised to run for governor next year, making any action on his part appear to be politically motivated.

A study has shown that health care costs for injured workers rose by 27% this year, so the facts are on the insurers’ side.

However, a rate increase of such magnitude in today’s economy could be a hardship that has a severe impact on already struggling employers, not to mention a quandary for agents and brokers who have to relay news of a massive premium increase to their commercial clients.