California: Insurance commissioner to file lawsuit to stop sale of state fund assets

California's insurance commissioner is filing a lawsuit to halt the Legislature's proposed plan to sell a portion of the State Compensation Insurance Fund's assets to shore up a $24 billion budget shortfall.

Insurance Commissioner Steve Poizner recently announced that he will take legal action to have the $1 billion sale of SCIF assets declared unconstitutional, arguing that such a transaction could lead to high workers' compensation costs for California's construction firms, agricultural industry, and other small businesses.

"The pilfering of funds used to pay the claims of injured workers to instead help fill the state budget gap is both unconscionable and unconstitutional," he said. "This $1 billion sale of SCIF assets could not only endanger the solvency of SCIF but is a direct affront to the state's jobs and business climate. In these tough economic times, the state should be doing everything possible to create jobs, not use budget gimmickry to hurt the economy. The Schwarzenegger administration simply got it wrong with their proposal, and the Legislature failed to adequately scrutinize the consequences."

Washington: DLI looks to establish medical provider network (09/10/12)
New York: Temporary insurance rule in effect (11/07/11)
Washington: Safety and health grants program rules allow for funding (03/05/12)
Oregon: Division sets claims processing administrative cost factor (01/30/12)
Alaska: Amendments would tweak medical benefits rules (09/29/11)

The measure, which was passed as part of the state's budget revisions in July, authorizes the California Department of Finance to sell or otherwise dispose of part of SCIF's assets and liabilities to a private insurer but allows the fund to become a workers' comp insurer of last resort. Officials estimate that the sale could generate as much as $1 billion. The fund's board of directors recently issued a statement saying it was opposed to the plan and that it doesn't believe that the idea gels with the SCIF's fiduciary responsibility to California policyholders.

Poizner said the lawsuit will ask a judge to rule that measure -- ABX4 12 -- violates Article XIV, Section 4 of the California Constitution. That constitutional provision requires the Legislature to enact "appropriate legislation" to establish a "complete system of workers' compensation." The system specifically includes the SCIF as a self-supporting entity whose assets must be devoted solely to providing compensation to injured employees and their dependents. Selling the SCIF's assets for the purpose of benefiting the state's budget, Poizner said, does not fall within the realm of "appropriate legislation."

The commissioner also noted that experts at the Department of Insurance predict that the sale of the SCIF's assets will incur the risk of not having enough funds left to pay the remaining liabilities, and as a result, cost each of its 200,000 policyholders thousands of dollars in additional premiums.

Read more at the WORKERSCOMP Forum^TM homepage.

September 16, 2009

Newsletter Sign-up