SCIF Blows Up Group Insurance Programs
State Compensation Insurance Fund (SCIF) is moving to radically reshape its group insurance program by dropping stand-alone safety groups and weeding out trade associations that don’t meet new standards drawn up by the carrier. State Fund’s group programs were at the epicenter of scandals broken by Workers’ Comp Executive. They rocked the quasi-governmental carrier nearly four years ago and prompted an ongoing investigation. State Fund says these changes are part of the evolution of that program. And indeed it appears to be removing questionable practices that allowed the abuses and that nearly everyone criticized.
These are more of the substantial Buy Viagra management changes new State Fund CEO Tom Rowe and his team are making.
Over the holidays, State Fund sent a letter to all trade associations and safety groups participating in its group insurance program, warning that new standards will be rolled out beginning January 1, 2012. The decision puts tens of thousands of workers’ comp policies in play as other carriers begin to figure out whether and how to pick up the groups, and if so, which ones.
“State Fund has decided to phase out its Safety Group program…This decision was not based on the performance of the Safety Groups as a whole or individually and simply reflects a change in our group insurance business model.”
—State Fund letter
While the groups say they were caught off-guard by the letter and the scope of the planned changes, some already have decided that it will not make economic sense for them to reshape their operations to stay in the program. Others won’t even have that option under the rules State Fund is adopting. Trade associations will have the year to come into compliance to remain in the program, but safety groups are out unless they transform themselves into bona fide trade associations as defined by State Fund.
The letter states: “State Fund has decided to phase out its Safety Group program…This decision was not based on the performance of the Safety Groups as a whole or individually and simply reflects a change in our group insurance business model.” State Fund officials confirmed to Workers’ Comp Executive that after the effective date, State Fund will go forward with only trade associations in its group program.
Nearly One-Third Reduction
Overall, 84 safety groups are in State Fund’s group insurance program. The number of policies has declined to approximately 25,000. Trade association groups number nearly 200 and represent an equal number of policies, says State Fund spokeswoman Jennifer Vargen. How all of these individual policies will be affected is still to be seen.
“Approximately 25,000 policies are currently insured in a safety association. For most of these policies, we do have current trade associations they may choose to participate in. If they don’t wish to participate, or we don’t have a trade association covering a classification, policyholders can be converted into individual policies,” she tells Workers’ Comp Executive. “Our new pricing structure gives us a better ability to offer accounts appropriate pricing, making this a good time to implement this refinement in our group business strategy.”
But employers that do fall out of the groups will lose one of the key benefits of the program — the 6% discount they receive on their workers’ comp coverage. Observers note that a 6% increase on top of State Fund’s regular premium hike will cause serious consideration of the alternatives.
As for the trade associations themselves, Vargen says State Fund expects little change: “We expect the vast majority of the trade associations insured with State Fund now will be eligible under the new requirements.”
Groups Cry Foul
But that’s a far more optimistic viewpoint than that of some of the groups themselves, that things will remain status quo. Some even concede that under the standards elucidated by State Fund, they will be eliminated for noncompliance when their 2012 policies go to renew.
“The way this has been rolled out is pretty harsh. They’re going to lose a lot of associations, aside from safety groups,” says attorney Mark Alcorn, who represents some of the groups. “We think it’s an overreaction. We’re hoping we’ll be able to work with them to come up with something so that everybody comes out better, including State Fund. Some of the groups would very much like to make whatever adjustments they have to make to continue to run the programs — the loss minimization programs and to continue to do this business.”
“This will really impact some of these nonprofits. It’s a hard time for them. They’re voluntary membership organizations by and large, and times being as tight as they are, a lot of employers have dropped their memberships in anything that is voluntary.”
—attorney Mark Alcorn
Whether that will come to pass is still to be seen, as many are still reviewing how the guidelines will affect their participation in the group program. According to the letter that State Fund sent to the groups, trade associations will have to verify in writing that, among other things, they have a physical office and staff, and conduct regular membership meetings. And they will have to prove they are financially viable without participating in State Fund’s group insurance program and have a membership base that extends beyond those members who participate in the group insurance program.
State Fund says that at least 25% of an association’s annual membership dues have to come from non-participants in the group insurance program. Additionally, no more than 75% of the association’s annual revenues can come from the group insurance program.
“This will really impact some of these nonprofits. It’s a hard time for them. They’re voluntary membership organizations by and large, and times being as tight as they are, a lot of employers have dropped their memberships in anything that is voluntary. So financially they’re pressed right now,” says Alcorn. “Some are going to go down; they’re going to collapse. You take $40,000 to $50,000 away, for example, and that will mean they will be officially unable to operate.”
Others who are less vested in the group insurance program say the benefits of participating won’t offset the economic impact of complying with the rules put out by State Fund.
Stanley “Rob” Gustafson, CEO of the Woodwork Institute of California, says that after 30 years in the State Fund group program, his association is likely to drop out next year as a result of the changes. He notes that most of the 56-year-old association’s revenues are tied to other services for their members, and that making the necessary changes for the 45 to 50 firms that take part in the group insurance program would not be economically feasible.
“We weren’t expecting this. There have been a lot of changes over the years, but for the last three years it’s been stable,” he tells Workers’ Comp Executive. “We’re probably going to have to discontinue the program because we don’t meet their requirements. There are three or four items in there that we don’t comply with, and it wouldn’t be worth it economically to do so, like holding an annual meeting. We could do what they’re asking us to do, but it’s not economically sound. It’s not worth it.”
Click here for a copy of the letter that State Fund sent to its group program members.
State Fund
2011 Rate Filing and Changes to Broker of Record Policy
With our 2011 rate filing, State Fund has begun the process of repositioning itself to better serve California employers in California’s workers’ compensation insurance market. To that end, we filed for a 5.2 percent overall rate increase for 2011, and revised our broker of record policy.
We recognize these are difficult economic times for California business owners. This rate increase reflects only the inflation to claims costs. While focused on maintaining rate adequacy, we will also take another step in spreading underwriting credit to more appropriately price all business and provide new opportunities for savings and better pricing for the best risks.
Merit Rating Expanded
Specifically, this rate filing expands the merit rating range for accounts $25,000 and above in premium to +/- 40% to improve our ability to price businesses and to compete for those with excellent performance.
Tighter Group Screens
We have also revised our group eligibility criteria with a goal to improve the performance of that book. These new underwriting screens will have an increased focus on loss ratios, loss control, and profitability. Group screens will no longer consider ex-mods.
While some of your accounts currently in a group may not meet the new eligibility criteria to be in a group, they can improve performance in order to regain admission back into the group.
New Opportunities for Commission
We are also expanding and standardizing our commission plan for 2011, and brokers will be able to receive commission for PEO accounts, accounts that have filed for bankruptcy, as well as accounts that have experienced a lapse in coverage. State Fund is increasing commission for NPIs and also narrowing the list of non-standard classifications.
Broker of Record Policy Changes
State Fund policyholders will also have more flexibility to choose how their workers’ compensation policy will be serviced. We will recognize broker of record letters for our direct accounts and pay commission for those accounts in accordance with our 2011 Broker Agreement.
Policyholders who pay more than minimum premiums, who do not have or cannot get broker representation and insure with State Fund directly, will receive a 3 percent credit on their policy.
In our limited role as a direct writer, State Fund provides many services to our policyholders, but such services will never include periodic market search and remarketing activities on behalf of our in-force direct policyholders. However, the credit noted above reflects the absence of these services, and makes our distribution model more equitable.
We worked with industry groups and brokerages, including IBA West and the Alliance of Insurance Agents and Brokers, as we revised these distribution strategies.
We believe the independent agent and broker communities provide clients with outstanding service and are confident this channel is where we will grow our premium in the future.
The new rates apply to new and renewal workers’ compensation policies with an effective date on or after January 1, 2011.
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Experience Modification Changes – Loss-Free Rating
Your clients either love or hate them, but experience modifications (ex-mods) are the single element of workers’ compensation insurance pricing that all carriers are legally required to endorse on the policy. In 2010, the Workers Compensation Insurance Rating Bureau (WCIRB) made changes that affected approximately 120,000 employers in California. Although 2011 will not have major changes to experience rating like those of 2010, there are a few changes you should be aware of:
The 2011 ex-mod rate sheet will show a loss-free rating - what the ex-mod would have been if there had been no losses (claims) during the experience period used in the ex-mod calculation. The loss-free rating is intended to serve as a safety incentive by showing employers how much money they would save by improving workplace safety.
Effective 1/1/2011, employers may request one free copy of their ex-mod rate sheet from the WCIRB.
Along with the ex-mod rate sheet, the WCIRB has developed a one-page summary explanation sheet to include with the ex-mod rate sheet to employers. This insert will have terms and definitions to help employers understand the ex-mod calculation.
State Fund is dedicated to assisting you and your staff with explaining the updates and changes to your clients. To learn more, please contact your Regional Marketing Representative who will soon have a new pamphlet about ex-mods to share with you. You can also log into the WCIRB website at www.wcirbonline.org.
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Reminder: New DWC Requirements are Now In Effect
State Fund reminds our broker partners that the California Division of Workers’ Compensation (DWC) recently revised employer notification requirements, and your clients should be in compliance.
The new requirements, which took effect on October 8, 2010, modified several mandated forms employers are required to post and/or provide in the work place, as well as how and when employers must distribute them to workers. Those changes include:
Updates to the mandated Employee Posting Notice [form 13708 English & form 13709 Spanish]
A new required form - MPN Implementation Notice [form 3841] to notify employees of the Medical Provider Network.
Employers must post the Employee’s Guide to the State Fund Medical Provider Network [form 13176] in close proximity to the currently required Employee Posting Notice. Employers need only provide this brochure at the time of injury or when an existing injured employee begins treatment within buy drugs online the MPN.
Revisions to the instructions on the DWC-1 [form 3301] claim form.
Please remind your clients they should be in compliance with the new requirements by now, because failure to post and/or provide employees the required forms may result in possible state fines as well as the loss of medical control of workplace claims.
For more information and downloadable versions of the new forms for your State Fund clients, check both links below:
Important Changes in Employee Notification Requirements
Detailed instructions for each form
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Safety Professionals Help Your Clients Reduce Claims
A safe workplace can increase worker productivity and reduce the cost of doing business by preventing injuries and illnesses. We can work with you to help your clients improve their safety practices to reduce the frequency and severity of workplace injuries and illnesses.
By allowing us to be a partner, we can provide injury analysis and identify hazards and issues of compliance that could save your clients costly Cal/OSHA fines. We can also provide your clients assistance with the creation of an effective Injury & Illness Prevention Program (IIPP), still the number one source of Cal/OSHA fines. Our experts in Ergonomics & Industrial Hygiene can perform on-site surveys to evaluate occupational health risks for noise and chemical exposures. We can also assess ergonomic risks from material handling, repetitive motion, and overexertion.
The experience of State Fund’s professional loss control staff can make it easier for you and your client to analyze hazards and provide employee training through ongoing programs that fit the needs of each company.
Contact your local State Fund office for more information.
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Farm Bureau Group Program
What is the Farm Bureau? The California Farm Bureau Federation is a non-governmental, non-profit, voluntary membership organization that works to protect and promote agricultural interests and solve farm and rural problems throughout the state. Comprised of 53 county Farm Bureaus representing a membership in the tens of thousands, it is California’s largest agriculture-related organization.
Why should my client join the Farm Bureau? Membership gives your clients a voice – an outlet for feedback, representation of their interests in the legislative process, and a valuable network of contacts and resources. The Farm Bureau also offers many membership services, including various discounts on supplies, vehicles, travel, and insurance. Visit the California Farm Bureau website for more benefit information.
Why State Fund and the Farm Bureau Group Program? Since 1943, State Fund and the Farm Bureau have collaborated to offer group workers’ compensation insurance to qualifying California growers and ranchers. We offer a competitive commission structure to our brokers, and qualifying growers will find the group program consistently offers the best value. State Fund’s Farm Bureau Group Program promotes and rewards safe and healthy work practices. Together we can help assure that California agriculture can continue to grow and prosper.
What are the Farm Bureau Group Program qualifying policyholder benefits?
A 6 percent discount on their State Fund policy
Lowest minimum premiums in the industry
Agriculture-specific safety training and consultation
Free seminars on farm machinery safety, heat stress, and material handling
Free DVDs on safety including orchard, tractor, dairy, ATV, and vineyard safety
Tailgate training
Injury Illness and Prevention Plans
To find out more, visit our Group Insurance page.
