The Service Employees International Union (SEIU) might be coming to a meeting of the minds—at least partially—regarding legislation that would set training requirements for State Compensation Insurance Fund employees who transact insurance, and require Senate confirmation for State Fund board member appointees. After a canceled vote at an earlier hearing, AB 1897, authored by Dave Jones (D-Sacramento), will come before the Assembly Insurance Committee today, likely for a vote only.

State Fund is still expected to oppose the bill, but at least there is a commitment to work with the union to achieve some of the goals. The biggest hang-up, at least for committee members, were licensure requirements for State Fund employees who transact insurance. Proposed amendments scaling back the requirements are likely to lessen the burden and the anticipated cost.

State Fund opposes a provision that would require State Fund to do an analysis of adjuster caseloads and report the findings to the Legislature. It also would have to include a plan on how State Fund would come in line with industry standards. But SEIU says it’s the confirmation provision that State Fund really dislikes.

“They don’t like the fact that they would have to get confirmation,” says Randall Cheek, legislative advocate for SEIU. “I spoke to [Jeanne Cain] who said she hates confirmation. It makes it too political.” Jeanne Cain is the chairwoman of State Fund’s board and executive vice president of policy for the California Chamber of Commerce.

“They don’t like the fact that they would have to get confirmation. I spoke to
[Jeanne Cain] who said she hates confirmation. It makes it too political.”
—Randall Cheek, SEIU

SEIU isn’t counting its chickens yet, but it was working very hard to build additional union support and assuage balking members. Cheek says prior to the first hearing, SEIU had commitments from members who then backed out. Even if AB 1897 gets through the Assembly Insurance Committee this time, State Fund is banking on getting it killed in the Senate.

“We’re not trying to skewer [State Fund]. We’re trying to make you better,” Cheek says.

Confirmation for State Fund board members is not considered unreasonable by those in the industry. They receive a salary and are charged with hiring management and overseeing billions in investments. Cheek considers confirmation an oversight from the previous State Fund reform bill that expanded the board (AB 1874).

State Fund charges that confirmation would “politicize” appointments, but conflicts of interest with its own board members resulted in resignations and toppling of its management a few years ago.

“There are very few boards that don’t get confirmed and a lot of those boards don’t oversee $30 billion in investments,” Cheek says. “Board members have no incentive to be that transparent. Confirmation makes it a much more credible board.”

Mark Rakich, chief consultant for the Assembly Insurance Committee, says that he doesn’t recall that confirmation ever came up in regard to the Coto bill. State Fund’s lobbyist claims that there are no examples of boards composed of legislative and gubernatorial appointees where confirmation is required.

“The Legislature takes one of two approaches — we get some appointments, or we confirm some people, but not both. I can’t think of a violation of that rule off the top of my head,” Rakich says.

Cost of Licensure

But the most controversial component of the bill is licensure. The original language of the bill said that any employee who “solicits, negotiates, or effects contracts of workers’ compensation insurance” would require a professional license. According to Jones staffers, proposed amendments would bless State Fund’s current education program and have State Fund work through the Department of Insurance to develop a certification program rather than requiring professional licensure.

Cheek says the parties also reached an agreement on which employees would require training. Staffers say the goal was to limit it to employees who interact with purchasers or front-end people. The broad nature of the description gave some members pause. “It was never our intention that everyone get training,” Cheek says.

George Miller of Lang, Hansen, O’Malley and Miller, State Fund’s hired lobbyist, opined that the bill was too expensive and completely unnecessary, with “no redeeming value.” He noted in committee that State Fund rarely testifies on bills but that this was egregious enough to merit a response.

“What the proponents of the bill want to do is increase our employee’s marketability in the private sector. There is no reason for State Fund’s [brokers] to be trained in fire, product liability… If they want to go work in the private market, the private market will pay to do that.”
—George Miller, State Fund lobbyist

Despite not testifying very often, Lang, Hansen is raking in the dough from State Fund. In five years, it’s taken in almost $620,000 to watch a smattering of bills and “act as resource for the Legislature.”

“What the proponents of the bill want to do is increase our employee’s marketability in the private sector. There is no reason for State Fund’s [brokers] to be trained in fire, product liability… If they want to go work in the private market, the private market will pay to do that,” Miller says, adding that the initial cost would be $1.6 million per year, with an ongoing cost of $1.3 million.

Producers whom Workers’ Comp Executive spoke with say that as long as State Fund is held to reasonable standards, it shouldn’t be a problem.

“Selling insurance, maybe they should have licenses, but for underwriters and auditors, I don’t see the logic,” says Jerry Dunn, a broker with Owen Dunn, adding that what the union originally envisioned seemed like overkill.

Andrew Valdivia, president of White Sutton & Co. Insurance Services, says that if it’s a more onerous regulation, then it doesn’t make sense.

“You should have a level playing field. If you have a direct sales force conducting business, that’s one thing. I’m not aware of any licensing standards like that for underwriters or marketing people,” Valdivia says.

Some members still might need some convincing. Assemblyman Roger Niello (R-Sacramento) wonders what the fuss is about.

“What is the demonstrable problem that exists within the organization that this would fix? We’re telling the management of the State Compensation Insurance Fund how to manage their business. If we have to do that, we need to fire them all and get new managers.” Niello says.