Heeding the demands of SB 863, the Department of Industrial Relations Office of Self Insurance Plans revoked the certificates to self-insure from two staffing companies effective Jan. 1 –Barrett Business Services and Kimco Staffing. Both companies are now operating under large deductible workers’ comp insurance policies.
A provision in SB 863 created a ban under Labor Code section 3701.9 prohibiting the Office of Self Insurance Plans from issuing any new certificates to self-insure to PEOs, leasing employers and temporary staffing firms. It also required that any certificates already issued be revoked effective January 1, 2015.
OSIP chief Jon Wroten confirms that the certificates for Kimco and Barrett were revoked as scheduled even though KimCo’s constitutional challenge to the ban is still pending in the courts. Kimco Staffing is asserting that the requirement violated the equal protections clause of the constitution. The case has been fully briefed and oral arguments will be held early next month.
In the mean time, Kimco officials say that it is business as usual after operating for more than a decade as a self-insured employer.
“We just went back to a high-loss retained program like we used to have before we were self-insured,” Kimco CEO Kim Megonigal tells Workers’ Comp Executive. He says that they partnered with Zurich for a high-deductible product with a $1 million retention that was effective Jan. 1, 2015. “The only thing that has changed is we’ve got Zurich – an A+ carrier – and we’re operating underneath their umbrella. Nothing else has changed,” Megonigal adds.
Kimco operates as two separate companies – Kimco Staffing and KimStaffHR, which is changing its name to KTimeHR. The former is the staffing company and the latter is Kimco’s PEO. Both operations were formerly covered by its self-insured program and are now covered by the Zurich policy.
Megonigal says he’s unsure what the company will do if it ends up winning its constitutional challenge. He notes that all of the heavy lifting of switching programs has already been done.
“We probably would have ended up going this way anyway just because as our business grows more and more outside of California we would have had to get under a [national] carrier,” he says noting that in the past it had to get individual policies for clients with out-of-state operations.
Barrett never fought the revocation and entered a fronting arrangement with Ace Insurance Group nearly a year ago. It began transitioning its California business to the Ace program over the course of the year.
Barrett signed its deal with Ace months before its disclosures of an $80 million reserve charge for its workers’ comp accounts and its unclear what if any impact this revelation will have on the Ace policy. Barrett just renewed the deal for an additional year with the potential for future annual renewals. As originally announced, Barrett retains the first $5 million per claim.