Statement by Janet Frank State Compensation Insurance Fund President regarding recently introduced legislation to restructure State Fund operations

"We are grateful to Senator Machado and Assemblymember Coto for introducing SB 1145 and AB 1874, respectively. Both are important pieces of legislation that will enable us to continue our progress toward becoming a more responsibly transparent, accountable and effective organization.

"We look forward to continuing to work with the authors and their staffs to ensure the bills achieve these important goals while also ensuring California's workers' comp market -- and the employers and injured workers it serves -- can continue to rely on the moderating and stabilizing influence and critical safety net State Fund provides.

"Although State Fund is a public entity, we must be able to compete fairly in the private market to remain competitive and effectively balance our mix of profitable business and market-of-last-resort book if we are to remain a stabilizing force on the market.

"The importance of State Fund's dual role is particularly highlighted when market conditions worsen and private insurance companies scale back their product offerings. In these markets State Fund must expand its operations to meet the needs of California employers and serve as a safety net for employers who cannot find coverage in the private market. In short State Fund must take 'all comers' -- in good times and bad -- to serve its role as the bedrock of the market.

"Since our Board took unprecedented action last year to set State Fund on a new course the organization has made significant strides toward transformative change and sound corporate governance. The pace and magnitude of this change has been remarkable and has already resulted in a more open, more accountable and more collaborative operation.

"There is still much work to be done. Organizational change does not occur over night -- it is a marathon and not a sprint -- but State Fund is prepared to go the distance."

Background

Frank and Board Chair Jeanne Cain will be on hand to testify when both bills will receive their first hearing on Wednesday, April 2. SB 1145 will be heard by the Senate Banking, Finance and Insurance Committee and AB 1874 in the Assembly Insurance Committee.

The bills are very similar and make several changes to State Fund operations including increasing the size and scope of its board, adding several new exempt management positions and instituting new disclosure and open meeting requirements.

State Fund has asked that the bills be amended to include these important changes:

    -- Increase the board size to at least 11 members so they may serve on
        much needed board committees such as Audit, Governance/Ethics,
        Investment, Compensation and Finance and establish greater
        accountability and oversight within State Fund.

    -- Create an additional exempt position of Chief Risk Officer. As an
        insurer, it is imperative State Fund have a member of the executive
        team who is responsible for developing and implementing a
        comprehensive and integrated approach to risk management across State
        Fund's operations.

    -- Modify the Bagley-Keene and Public Records Act language as it pertains
        to State Fund to enable closed sessions for underwriting/marketing and
        rate making discussions and the non-application of requests for such
        information as well as injured worker/policyholder information to the
        Public Records Act.

        State Fund's ability to compete fairly in the private market enables
        the insurer to remain solvent and to continue to serve as California's
        workers compensation safety net. There must be some provision to
        preserve the organization's competitiveness and role as the market
        safety net, and ultimately protect its policyholders and the
        businesses and workers of California

        Currently Bagley-Keene specifically permits closed meetings for thediscussion of personnel actions, real estate transactions, security
        matters and litigation. Case law suggests that trade secrets are
        exempt from disclosure under the Public Records Act.

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Statement by Janet Frank State Compensation Insurance Fund President regarding recently introduced legislation to restructure State Fund operations