BILL ANALYSIS
SENATE COMMITTEE ON BANKING, FINANCE,
AND INSURANCE
Senator Ronald Calderon, Chair
SB 683 (Calderon) Hearing Date: April 1, 2009
As IntroducedFebruary 27, 2009
Fiscal: Yes
Urgency: No
SUMMARY
SB 683 requires each group self-insurer to annually file with
the director of the Office of Self Insured Plans (OSIP) an
annual audit of the financial accounts and records of the group
self-insurer by an independent, certified public accountant. The
annual audit shall be made available to the Director. No
individual group self insured members' audited financial or
claim information will be included in this disclosure to the
guarantee fund or be made available to the public.
DIGEST
Existing law
1. Establishes a workers' compensation system, administered by the
Administrative Director of the Division of Workers'
Compensation, to compensate an employee for injuries sustained
in the course of his or her employment.
2. Requires the administrative director to conduct audits of
insurers, self-insured employers, and 3rd-party administrators
to ensure that injured workers are promptly and accurately
receiving the full measure of compensation they are entitled to
receive.
This bill
1. Would require a group self-insurer to annually file with
the director an annual audit by an independent, certified
public accountant of the financial accounts and records of
the group self-insurer.
2. Would prohibit audited financial or claim information of
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individual members of the group self-insurer from being made
public.
COMMENTS
1. Purpose of the bill: This bill is intended to provide
appropriate disclosure regarding group self-insurer audited
financials. This bill appreciates though that disclosing
audited financials to the public would provide critical
information to competitors who would then obtain an
advantage without public benefit. Consequently, this bill
provides for the disclosure to the director and not the
public.
This information will be used by the OSIP director to better
determine the financial means of the SIG.
2. Background A group self-insurer or self insured group
(SIG) is a California Non-Profit Mutual Benefit Corporation
formed exclusively for the purpose of providing workers'
compensation under Chapter 8, Section 2 of the California
Code of Regulations. Group members are joint and severally
liable. Group members make contributions to the SIG, and the
SIG pays all expenses, provides safety & loss control
services, and pays claims for injured workers.
The funds left over are called "Surplus," the equivalent to
an insurance company's profit. In a SIG the members own the
surplus and it can be used for dividends, rate reductions,
or even payment holidays. Members of the SIG and the SIG
itself are audited annually. In addition to the audits, an
actuarial study is performed to ensure that members are
contributing correctly. SIGS believe that because the entire
SIG is at financial exposure if members are not carefully
reviewed and screened, SIGs are thorough in assuring their
groups are at minimum risk.
In 2008 an effort was commenced by some insurers to mandate
that SIGs must disclose their financials to the public. This
effort was directed at the SIG regulator, the OSIP which
rejected this request based upon their lack of regulatory
authority.
At the direction of the Assembly Insurance Committee, the
Commission on Health and Safety and Workers' Compensation
(CHSWC) is currently evaluating the regulatory oversight in
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California of SIGs. The CHSWC report has not yet been
released.
3. Support . Associated California Self Insured Businesses
(ACSIB), which manages the self insured workers'
compensation in California for five groups: contractors,
growers, farm labor contractors, food processors, and
livestock producers is the sponsor of SB 683. ACSIB
supports providing the financial information to the
director, but would oppose legislation that would make the
information public. Financial information from publicly
traded entities is already public. However, similar
financial information on privately held entities is, and
should remain, private. Providing such information to a
regulator for purposes of administration of the program is
appropriate. Going beyond and making it public would have
negative effects on various industries by providing
proprietary information to competitors.
4. Opposition None received.
5. Related Legislation AB 879 (Hernandez) is very similar to
this bill, except that AB 879 requires the additional
disclosure of claims information and that all information
disclosed would be made public. AB 879 is pending in
Assembly Insurance Committee.
POSITIONS
Support
Associated California Self Insured Businesses (sponsor)
Acclamation Insurance Management Services (AIMS)
Engineering Contractors' Association
California Chapter of the American Fence Contractors'
Association
Oppose
None Received
Consultant: Michael Miiller (916) 651-4102
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