Lawmakers Seek Greater Transparency From State Workers’ Comp Insurer

On Wednesday, the Senate Banking, Finance and Insurance Committee called for an overhaul of California's quasi-public workers' compensation insurer, including changes to its board of directors and greater transparency, the Los Angeles Times reports.

The committee hearing focused on a recent audit of State Compensation Insurance Fund that uncovered significant mismanagement, including questionable vendor payments, secretive slush funds and possibly fraudulent contracts (Lifsher, Los Angeles Times, 2/7).

The Department of Insurance audit stems from State Fund's agreements with associations to market workers' compensation insurance policies that prompted some to allege conflicts of interest because leaders of two groups sat on the insurer's five-member board.

Since November 2006, those two board members have resigned, and the insurer's president and vice president for group sales were fired.

State Fund writes about a quarter of workers' compensation insurance policies in California (California Healthline, 12/12/07).

Committee Chair Michael Machado (D-Linden) is sponsoring a measure (SB 1145) to make the first significant reforms to State Fund in almost 100 years.

The bill seeks to expand State Fund's board of five political appointees to nine members and put professional financial, information technology and investment officers in charge.

Machado's legislation also calls for more transparency from State Fund by requiring its board to meet in open sessions and make most records available to the public.

Jeanne Cain, chair of State Fund's board, told lawmakers she was willing to consider more public disclosure but maintained that the insurer must balance its obligations as a state agency with its need to protect sensitive information about setting rates, claims handling and marketing (Los Angeles Times, 2/7).