BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2887


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          Date of Hearing:  April 20, 2016


                           ASSEMBLY COMMITTEE ON INSURANCE


                                   Tom Daly, Chair


          AB 2887  
          (Committee on Insurance) - As Introduced February 25, 2016


          SUBJECT:  State Compensation Insurance Fund:  out-of-state-risks


          SUMMARY:  Repeals the sunset date on the statute that authorizes  
          the State Compensation Insurance Fund (SCIF or State Fund) to  
          provide limited coverage for out-of-state employees of  
          California employers.  


          EXISTING LAW:  


          1)Requires every employer to provide workers' compensation  
            benefits for its employees, either by purchasing a policy of  
            workers' compensation insurance or by obtaining a certificate  
            of self-insurance, in the event of injuries to employees that  
            arise out of or in the course of employment.


          2)Establishes SCIF as a quasi-state entity to provide workers'  
            compensation insurance to California employers, both in  
            competition with private insurers and as the insurer of last  
            resort for employers that are unable to obtain workers'  
            compensation insurance from private insurers.










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          3)Authorizes SCIF to provide workers' compensation insurance  
            covering California employees who are temporarily working  
            outside of California (and are therefore subject to the  
            workers' compensation laws of those other states).


          4)Authorizes SCIF to provide workers' compensation insurance  
            covering employees who work permanently outside of California  
            (and are therefore subject to the workers' compensation laws  
            of those other states) if:


             a)   The employer's principal place of business is in  
               California, and


             b)   The majority of the employer's operations and employees  
               are in California; and


             c)   SCIF provides the workers' compensation insurance for  
               those California operations and employees; and


             d)   SCIF has a reinsurance agreement with a qualified  
               insurer that is authorized to transact insurance in  
               California and the state where the employees are employed.


          FISCAL EFFECT:  None.


          COMMENTS:  


           1)Purpose  .  The Committee introduced this bill to make permanent  
            a moderate expansion of SCIF's authority to provide coverage  
            for non-California employees that was enacted in 2011, with a  
            sunset clause.  AB 228 (Fuentes) - Statutes 2011, Chapter 670  








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            -- the legislation that authorized this expansion, required  
            the Insurance Commissioner to report on the effects of SCIF  
            covering more out-of-state employees.  That report was  
            completed, and concluded that the program was operating as  
            hoped, without any unintended consequences.  Accordingly, to  
            ensure the continued benefits for some California employers,  
            the Committee determined that the sunset date ought to be  
            repealed.


           2)Background  .  In general, SCIF provides workers' compensation  
            insurance only for California employers employing California  
            employees.  However, many businesses have incidental  
            out-of-state business, even though they are primarily  
            California companies.  If these employers are unable to obtain  
            coverage from private insurers, which have more flexibility to  
            provide multi-state coverage, they must turn to SCIF as the  
            insurer of last resort.  Prior to 2012, these employers, in  
            the event they were covered by a SCIF policy in California,  
            had to obtain a separate insurance policy from a different  
            insurer to cover the non-California employees.  That necessity  
            came with a price in both dollars and administrative  
            inconvenience.  The limited authorization for SCIF to cover  
            non-California employees was intended to provide relief for  
            this class of California employer, without allowing SCIF to  
            routinely compete for non-California business.  The consensus  
            reached in 2011 on AB 228 remains, and there are no concerns  
            expressed by any stakeholder by allowing SCIF to continue with  
            this practice.


          REGISTERED SUPPORT / OPPOSITION:




          Support










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          State Compensation Insurance Fund




          Opposition


          None received




          Analysis Prepared by:Mark Rakich / INS. / (916) 319-2086