Tuesday, May 24, 2011

What Does the 800 Pound Gorilla Really Want?

It was just yesterday that I opined on the national influence of state work comp systems.

Then this morning WorkCompCentral News reports that California's State Compensation Insurance Fund ("The State Fund") is seeking a legislative remedy to a little issue that has followed The State Fund since inception - what to do with California employers who have employees permanently out of state.

The private carriers are skeptical - The State Fund doesn't pay income taxes and therefore theoretically has an unfair advantage in the free market.

According to The State Fund, though, they have no intention of actually writing out of state business but instead seek to partner with carriers that are licensed in other states to provide coverage for California businesses that have permanent out-of-state workers. The purpose, according the The State Fund, is to make it easier for agents to single source their comp placement for employers.

I should note that WorkCompCentral fits this model - we are a California business, but we have journalists permanently out of state. We thus have different work comp policies through different work comp carriers to cover these workers. Truth be told, it's a pain to manage these policies, but not so onerous that it is excessively time consuming. But confusion does occur when underwriting audits payroll and fails to note the details of where that payroll is located...

I'm on the fence on this one. I don't know the details on how The State Fund intends to market out of state, nor how it would actually partner up with out-of-state carriers: underwriting, marketing, claims - there are many details that could either make or break this deal.

I'm not sure that legislation is actually necessary for this to happen, if in fact The State Fund's true intentions are to partner with out-of-state carriers to make single source agent shopping possible. Why can't they do that now? Isn't this just a marketing effort?

Nevertheless, in this very mobile employment market, just the fact that The State Fund, the largest  single line workers' compensation insurance company in the nation, recognizes that jobs cross state lines is significant.

Workers' compensation is slow to evolve. Usually we deal with "reform" that changes compensability, medical or indemnity issues, but major moves like the one The State Fund is contemplating can either be a game changer, or a non-sequitur. We'll just have to see how this all plays out. The State Fund is the 800 pound gorilla in this industry and has considerable size advantages and its unclear what the carrier really wants.

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