SENATE COMMITTEE ON

TRANSPORTATION AND ECONOMIC DEVELOPMENT

 

 

 

March 17, 2003                                                                                                       Hearing Room C

8:00 AM                                                                                                                         Tapes 56-58

 

MEMBERS PRESENT:         Sen. Rick Metsger, Chair

Sen. Bruce Starr, Vice-Chair

Sen. Ryan Deckert

Sen. David Nelson

 

STAFF PRESENT:                 Amy Joyce, Committee Administrator

Annastasia Suess, Committee Assistant

 

MEASURE/ISSUES HEARD: Informational Meeting – SAIF

                                                           

These minutes are in compliance with Senate and House Rules.  Only text enclosed in quotation marks reports a speaker’s exact words.  For complete contents, please refer to the tapes.

 

TAPE/#

Speaker

Comments

TAPE 56, A

002

Chair Metsger

Calls the committee to order at 8:04 a.m. and opens an informational hearing.

INFORMATIONAL HEARING

010

Bob Shiprack

Secretary Oregon State Building and Construction Trades.  Begins discussion on the State Accident Insurance Fund corporation (SAIF).

050

Shiprack

Continues discussion:

·        Provides suggestions

·        Voices current concerns with SAIF

·        Concludes discussion

099

Chair Metsger

Inquires about the concerns regarding possible premium increases.

105

Shiprack

Responds and elaborates. States additional concerns regarding the closure of the SAIF.

145

Chair Metsger

Asks what has had the largest impact on lower rates, and increased benefits to workers since the workers compensation reform.

160

Shiprack

Responds and elaborates.

200

Sen. Nelson

Inquires about the changes in SAIF over the last fifteen years, and wonders if taking reserves from SAIF would be detrimental.

230

Shiprack

Responds that the legislature needs to examine the actuaries extremely closely to insure that the employer premiums will not take a huge jump at a later date.

258

Greg Chaimov

Legislative Counsel. Asks how life would be different if SAIF were a state agency under the control of the Department of Administrative Services (DAS).

265

Shiprack

Responds that the oversight would be through the legislature.

272

Chaimov

Asks what legislative oversight would achieve.

275

Shiprack

Responds that the legislature could insure that the reserves were adequate.

300

Charlie Cheek

Legislative Counsel. Inquires about what is driving the Washington and California increases.

305

Shiprack

States that the investment income has been way down while medical costs are higher.

315

Vice Chair B. Starr

Asks what would change is SAIF became a privately held company.

325

Shiprack

Comments. 

370

Jessica Harris

Testifies on behalf of the Associated General Contractors.

385

Kevin Spellman

President of Emerick Construction Company. Begins discussion on worker’s compensation issues.

TAPE 57, A

010

Spellman

Continues discussion:

·        Contractor’s insurance rates

·        SAIF reserves

·        Concludes presentation

045

Harris

States the General contractors are very concerned with any changes to SAIF’s funds. States that if reserves are used, premium rates will likely increase to replenish the funds.

090

Chair Metsger

Inquires whether the earlier testimony on premiums from Bob Shiprack is a common concern with Emerick Construction.

105

Spellman

States that the concern is why there is a need to look at changing SAIF.

115

Vice Chair B. Starr

Asks if there is any concern with SAIF becoming a private or mutual fund company.

125

Harris

Responds and urges the legislature to closely examine the benefits of SAIF converting to a private agency.

130

Vice Chair B. Starr

Asks for comment on SAIF’s current political activities.

140

Harris

Responds.

145

Sen. Nelson

Comments on the testimony of SAIF being a success story.

155

Steve Telfer

Alliance of American Insurers. Begins discussion on SAIF corporation and provides written testimony (EXHIBIT A).

300

Shawn Miller

National Association of Independent Insurers. Begins testimony on SAIF corporation.

350

Katherine Keene

President and CEO, SAIF Corporation. Begins testimony on SAIF corporation and provides written testimony (EXHIBITS B, C, D).

TAPE 56, B

010

Keene

Continues discussion:

·         Overview of the Conerly Report

·         Overview of the Michigan State Fund privatization

·         Concentration of markets

·         Concludes discussion

120

Chair Metsger

Inquires about the Michigan privatization and how it compares to Oregon’s current situation.

135

Keene

Comments, and offers to perform research on Michigan State to provide that data to the committee at a later date.

165

Chair Metsger

Asks if SAIF selects less risky businesses, and asks if the 64% of risk businesses that SAIF insures are businesses that have been initially rejected by SAIF and then reassigned as risk carries.

169

Keene

Answers the amounts quoted are voluntary market statistics, and do not include the assigned risk pools.

175

Chair Metsger

Asks what the negative impacts would be if SAIF were a full State agency.

185

Keene

States that history of the change in SAIF status shows that in the late 1970’s there was a hiring freeze for state agencies. SAIF was impacted by this freeze and SAIF was unable to fund the positions the employers needed.  Since the late 1980’s SAIF has been able to add staff as needed.

192

Chair Metsger

Asks again what are the disadvantages if SAIF is pulled into a full state agency.

200

Keene

States there would be less operating flexibility around staffing, contracting, training and incentives.

215

Chair Metsger

Cites the 2002 Year end report and asks if the overall salaries increased 35% in 2002.

220

Keene

Defers to the Vice President of Human Resources.

230

Cecil Tibetts

Vice president of SAIF Human Resources.  States the total compensation costs have substantially increased on the health care benefits not salaries.

238

Chair Metsger

Asks what SAIF’s response to the Governor’s comment which suggested that SAIF’s corporation could be helpful to the public purpose by utilizing it’s structure to help with Tort reform.

242

Keene

Responds.  States that SAIF is going to offer some suggestions that might be helpful to the problems facing that line of insurance.

250

Chair Metsger

Asks when those suggestions will be available.

255

Keene

States they will available as soon as possible.

270

Chair Metsger

Asks if SAIF were to be a full independent insurer what would be the advantages and disadvantages to the corporation.

280

Keene

States that mission alter to maximize profitably of the new enterprise. Says that if this were the mission, to increase profitably SAIF would eliminate the riskiest customers to decrease the risk of who is insured.

285

Chair Metsger

Asks about the denial rates of SAIF at 35% higher than private companies.

300

Keene

States that SAIF’s denial rates have been consistent for over 10 years and further elaborates on SAIF’s denial policy.

365

Sen. Deckert

Inquires about why SAIF does not re-adjust it’s loss reserves and surplus to meet the reserve adequate levels.

385

Keene

States that SAIF’s  reserves are adequate, however there are not monies in surplus to replenish the reserves.

395

Sen. Deckert

Asks for clarification that there are no surplus dollars to re-adjust the reserves to ensure the reserves are adequate.

420

Mr. Steffler

Comments on Mr. Conley’s report.

TAPE 57, B

015

Keene

Comments on the level of reserves.

025

Sen. Deckert

Asks if the rates exhibit submitted by Mr. Telfer earlier today are accurate.

030

Sherman

Responds and elaborates.

040

Keene

Clarifies the terminology “pure premium rate”.

055

Sen. Deckert

Asks what other public agencies employ a team of private sector lobbyists.

060

Keene

Comments.

070

Sen. Deckert

Asks why SAIF feels the need to employ lobbyists.

075

Keene

States that SAIF is directed to be competitive, and that SAIF’s competitors choose to meet with SAIF in the capitol rather than in meeting. States that SAIF has been able to get more quality time with legislatures employing lobbyists.

 

Sen. Deckert

Asks if Ms. Keene plays a role in appointing new members to the board.

080

Keene

Comments that the statutes require three of the board members be current policy holders and when the governor’s office is considering a new member, SAIF will inform them of the potential candidate is within requirement levels.  States SAIF will occasionally suggest a candidate who is a policy holder that have a pretty good grasp of the essential elements of the business.

083

Sen. Deckert

Asks if Ms. Keene goes to the governor to identify candidates that would be strong representatives for the board.

087

Keene

Responds that it has not been necessary in the past, as SAIF has always been comfortable with the Governor’s choices.

095

Sen. Nelson

Asks for clarification of SAIF’s percentage of the market share.

106

Keene

States that SAIF’s market share has increased in the last two years, due to 19% of the premium volume represented by other carriers left the state under duress and SAIF had the ability to pick up the coverage.

135

Chaimov

Asks for the relationship between SAIF and AOI.

140

Keene

Refers to exhibit B which provides a list of twenty five different trade associations and business organizations that SAIF has had group safety incentive programs with. AOI has been on the list since a change in stature in 1990.  States that there have been two group programs with AOI, a small business focus program and another program focused on larger businesses.

225

Chaimov

Asks for comments on the allegations that an employer that optioned insurance through SAIF somehow became a member of AOI.

230

Keene

Responds and elaborates.

250

Chaimov

Asks for information on the records on which SAIF basis it’s decision to maintain reserve and surplus amounts.

265

Keene

States that SAIF will provide that information, and that essentially the information is provided in the exhibit provided.

270

Cheek

Asks what is SAIF’s denial rate compared to Liberty’s denial rate.

275

Keene

Answers and elaborates.

299

Cheek

Asks for a percentage of denials are sustained through litigation as opposed to settlement.

310

Keene

Responds.

315

Cheek

Asks if a negotiated settlement is considered a satisfactory resolution.

320

Keene

Confirms.

322

Tibitts

Elaborates on the denial rate practices.

325

Vice Chair B. Starr

Asks for comment on the proposal for SAIF to become a private industry and how it will impact the companies ability to provide low cost rates.

330

Keene

Responds.

375

Vice Chair B. Starr

Asks what would the effects to SAIF operations would be if SAIF were to become the issuer of last resorts.

380

Keene

Comments.

400

Vice Chair B. Starr

Asks if SAIF is a public agency, why there were very in-depth political activities by SAIF.

410

Keene

States the intent of the investigation by SAIF was to see where their competitors made their contributions.

TAPE 58, A

020

Vice Chair B. Starr

Asks for clarification on the appropriateness of a Public agency funding a political activity.

040

Keene

Confirms, states that the records SAIF researched were available to the public.

045

Chair Metsger

Asks why, if SAIF was researching it’s major competitors, why they felt the need to research the Oregon Restaurant Association and the Oregon Grocers Association as they are not SAIF competitors.

052

Tibetts

Responds that SAIF’s major competitor often uses surrogates to bring up many issues, and there are relationships with other businesses where they come in together.

075

Chair Metsger

Inquires about the private insurance issue that was mentioned in earlier  testimony from SAIF.

080

Telfer

Comments and states that it is difficult to surmise what might happen if SAIF were to privatize.

090

Vice Chair B. Starr

Asks for comments on the advantages and disadvantages of privatization or mutualization of SAIF.

095

Telfer

Comments and states this would create an opportunity for better competition. 

105

Sen. Nelson

Asks for clarification of testimony that Liberty Northwest has 15% of the market and SAIF has 35%.

110

Telfer

Confirms.

125

Chaimov

Asks how the committee can figure out if whether overall rates in Oregon are or are not lower as a result of SAIF’s presence in the market.

135

Telfer

States that an extensive study would be needed to access what would happen with or without SAIF presence.

142

Cheek

Asks for clarification of how many states have no accident funds.

150

Telfer

States there are twenty states without State Accident funds.

185

Chair Metsger

Closes the informational hearing and adjourns the committee at 10:05 a.m.

 

EXHIBIT SUMMARY

 

A – Informational, written testimony, Steve Telfer, 4 pp

B – Informational, written testimony, Kathleen Keene, 4 pp

C – Informational, written testimony, Kathleen Keene, 37 pp

D – Informational, written testimony, Kathleen Keene, 7 pp