BILL ANALYSIS Ó AB 2887 Page 1 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. AB 2887 Page 2 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 AB 2887 Page 3 -- 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 AB 2887 Page 4 State Compensation Insurance Fund Opposition None received Analysis Prepared by:Mark Rakich / INS. / (916) 319-2086