California Commissioner Says Workers’ Comp State Fund Needs More Improvements

The California Department of Insurance has released its 2008 operational review of the State Compensation Insurance Fund.

In response to the report’s findings, Insurance Commissioner Steve Poizner said more issues must be resolved, and that SCIF needs to “move expeditiously” to address the findings.

“Eighteen months ago, the Department of Insurance completed a thorough review of State Fund’s operations,” Poizner said. “Our review identified 110 specific issues that we directed State Fund to address. Among these findings were a number of serious structural and operational issues including needed enhancements to State Fund’s corporate governance and board oversight. A follow-up review conducted by the Department determined that as of now, State Fund has fully remediated 53 of these findings and made progress on remediating 40 additional concerns. The follow-up review also identified further specific issues that must be resolved. While I commend State Fund and (CEO) Jan Frank for the work they have done, it is imperative that they move expeditiously to address the remainder of the findings.

“A healthy and efficient State Fund is essential to a functioning and efficient worker’s compensation insurance market,” the Commissioner explained. “Additionally, every government entity must streamline operations and achieve greater efficiencies. This includes State Fund. I will continue to monitor the progress of State Fund to ensure they operate effectively and transparently.”

Meanwhile, Frank sent a letter to the Commissioner in response to the report’s findings.

“We appreciate CDI’s review and believe State Fund and our stakeholders will benefit by the improvements we have made,” she wrote. “Overall CDI’s comprehensive review of its operations confirms the progress State Fund has made since 2007. State Fund is a much different, much stronger organization than it was just a year ago.

“CDI first conducted an operational review in 2007 and identified 110 findings for State Fund to improve and strengthen its organization. The follow-up 2008 operational review tested State Fund’s progress on those findings and extended the review to new areas of the organization,” she added. “State Fund has either resolved or made solid progress on nearly 90 percent of the 110 recommendations outlined in CDI’s 2007 report. CDI’s 2008 Operational Review contains far fewer and more routine findings than the 2007 report, which State Fund has already made substantial progress toward resolving.”

Among State Fund’s successes are:

• Reduced paid penalties on medical bills;
• Under a new chief information officer’s leadership, the organization has resolved most of CDI’s findings in the information technology area;
• Strengthened corporate governance programs;
• Developed a new talent management initiative and plans for leadership succession;
• Hired a general counsel that reports to the Board of Directors; and
• Remediated CDI concerns about the organization’s group program by defining expectations, performance metrics, mandatory audits and financial safety incentives for safety program participation.

Frank also said SCIF agreed with the Commissioner that California’s workers’ compensation market depends on a healthy State Fund and noted her organization is committed to resolving all outstanding issues while continuing to successfully fulfill its role in California’s economy.

Jennifer Vargen, SCIF Communications Director, said the workers’ comp insurer will continue to make progress and “can be counted on to stay the course. “The auditor’s ‘pencils’ went down on at the end of last year. State Fund has continued to make progress since that time. Jan Frank has consistently said organizational change is not a sprint, but more like a long distance event.”

A copy of the report can be found at http://www.insurance.ca.gov/0250-insurers/0300-insurers/0400-reports-examination/upload/StateCompensationInsuranceFund08.pdf.

Sources: CDI, SCIF