BILL ANALYSIS �
AB 1394
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Date of Hearing: April 10, 2013
ASSEMBLY COMMITTEE ON INSURANCE
Henry T. Perea, Chair
AB 1394 (Committee on Insurance) - As Introduced March 4, 2013
SUBJECT : State Compensation Insurance Fund
SUMMARY : Authorizes the State Compensation Insurance Fund
(SCIF) to have four additional "exempt" positions.
Specifically, this bill :
1)Authorizes the Board of Directors of SCIF to appoint four
additional exempt employees:
a) Chief Medical Officer;
b) Chief Actuarial Officer;
c) Chief Claims Operations Officer; and
d) Chief of Internal Affairs.
EXISTING LAW :
1)Establishes SCIF as a quasi-state agency for the purpose of
transacting workers' compensation insurance both competitively
in the market and as the insurer of last resort for California
businesses that require coverage but cannot obtain that
coverage from private insurers.
2)Provides that SCIF is governed by an 11-member Board of
Directors, nine of whom are appointed by the Governor and two
by the Legislature.
3)Provides generally that SCIF employees are subject to the
state civil service system.
4)Authorizes the SCIF Board to appoint 7 exempt employees:
a) President;
b) Chief Financial Officer;
c) Chief Operating Officer;
d) Chief Information Technology Officer;
e) Chief Investment Officer;
f) Chief Risk Officer; and
g) General Counsel.
AB 1394
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5)Authorizes the SCIF Board to set the salary of these exempt
employees.
FISCAL EFFECT : None. SCIF is 100% funded by premiums and
investment income, and receives no state funds.
COMMENTS :
1)Purpose . According to SCIF, AB 1394 is designed to continue
improvements in its operational efficiency by providing its
Board the discretion to appoint highly skilled, specialized
experts and executives needed in order for SCIF to be
competitive with other insurers and provide lower costs and
better service to California's employers. SCIF further notes
that it must be able to attract and retain industry experts to
fulfill its mandated role as a viable, competitive option for
California employers. It contends that it has not been able
to find the talent it needs, such as medical directors,
actuaries and other industry experts, within the civil service
system.
2)Background . In the early 2000's, SCIF became embroiled in
controversies relating its governance and the actions of
certain of its officers. Audits and investigations were
undertaken, although no criminal charges were brought against
any SCIF employees. However, the administrative audits did
result in a substantial reformation of the governance of SCIF.
The reforms included expansion of the Board of Directors from
5 to 11 members, compensation for Board members, and exempt
positions were created so that SCIF could more effectively
operate as a $20 billion insurance company. AB 1874 (Coto),
(Statutes 2008, Chapter 322) and SB 1145 (Machado), (Statutes
2008, chapter 344) enacted these reforms.
The consensus in 2008 was that SCIF had been unreasonably
restricted in its management and governance structure, and
that organizing SCIF less like a state agency, and more like
an insurance company, made sense for California. In general,
these reforms have been well-implemented and well-received in
the market and by SCIF's regulator, the Insurance
Commissioner.
3)Prior Legislation . Last Session, the Senate considered SB
1406 (Emmerson). As introduced, that bill would have
authorized the SCIF Board to create an unlimited number of
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unidentified exempt positions, in addition to the positions
specifically named in statute. The bill was later amended to
limit the number of additional exempt positions to 20.
Finally, the bill was amended to authorize 3 of the 4
additional exempt positions proposed by AB 1394, plus 3
undefined exempt positions that could be created by the SCIF
Board. SB 1406 was held on the Senate Appropriations
Committee suspense file.
REGISTERED SUPPORT / OPPOSITION :
Support
State Compensation Insurance Fund
Opposition
None received.
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086