SENATE COMMITTEE ON

TRANSPORTATION AND ECONOMIC DEVELOPMENT

 

 

March 26, 2003                                                                                                       Hearing Room C

8:00 AM                                                                                                                         Tapes 69-72

 

MEMBERS PRESENT:         Sen. Rick Metsger, Chair

Sen. Bruce Starr, Vice-Chair

Sen. Ryan Deckert

Sen. David Nelson

 

STAFF PRESENT:                 Jim Wiles, Committee Administrator

                                                Greg Chaimov, Legislative Counsel

                                                Charlie Cheek, Legislative Counsel

Annastasia Suess, Committee Assistant

 

MEASURE/ISSUES HEARD: Informational Hearing – Invited Testimony – SAIF Corporation

                                                           

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 69, A

002

Chair Metsger

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

INFORMATIONAL HEARING

005

Charlie Cheek

Legislative Counsel. Asks about the role SAIF has played in the recent past to maintain the comparatively lower rates in Oregon’s compensation market.

015

Joel Ario

Insurance Administrator, Department of Consumer Business Services (DCBS).  Provides detailed information on pure premium’s and the carrier’s low cost multipliers.

110

Cheek

Asks for comment on the testimony by SAIF’s executive director that ‘Oregon’s Workers Comp market was one of the most regulated markets in the country’.

115

Ario

Provides an opinion. Defers the question to John Shilts.

120

John Shilts

Administrator, Workers Compensation Division (DCBS).  States that DCBS has a large regulatory presence in Oregon.

135

Cheek

Asks what Oregon does differently than other states which might be account for such a large presence.

140

Shilts

States that there are three major areas Oregon does differently:

·        Workers Benefit Fund

·        Large Administrative Dispute resolution

·        Return to Work programs

180

Cheek

Asks what the insurance division feels about the idea of the mutualization of SAIF and what will have to be accomplished to do this.

190

Shilts

States that it would take a long period of time and work to accomplish.

205

Ario

Comments on the key issue would be what would happen to the current surplus of SAIF should the decision be to mutualize SAIF.

218

John DiLorenzo

Attorney, Davis Wright Tremaine, LLP. Testifies on behalf of Oregonians for Sound Economic Policy, Inc (OSEP).  Reads written testimony (EXHIBIT A).

TAPE 70, A

050

DiLorenzo

Continues testimony.

120

Sen. Deckert

Asks that in terms of SB 469’s proposal to split the surplus, how the surplus can be the State’s money.

125

DiLorenzo

States that any moneys beyond the actuary belong to the policyholders.  States that SB 469 is an attempt to compromise between the state and policyholders.

150

Sen. .Deckert

Asks for clarification on SB 469.

155

DiLorenzo

Direction to the AG’ to offer a settlement to the class action plaintiff’s.  States the settlement would first have to be accepted by the courts.

160

Sen. Nelson

Asks for clarification on the profitability status of OSEP.

165

DiLorenzo

States that the corporation is non-profit.

170

Sen. Nelson

Asks if the corporation would be willing to provide articles of appropriation.

173

DiLorenzo

Confirms.

175

Sen. Nelson

Asks who the members of the board are.

180

DiLorenzo

States the membership of the board is available to the public.

185

Sen. Nelson

Asks if members of the Liberty corporation are members of the board.

190

DiLorenzo

States he does not believe so at this time. Offers to provide the information to the committee.

200

Sen. Nelson

Asks if any of the members are lobbyists that have been employed by Liberty or SAIF in the past.

270

Sen. Nelson

States that the public opinion seems to be in favor of SAIF corporation.

280

DiLorenzo

States that he concedes that many of SAIF programs are good, necessary programs for many people. 

300

Sen. Nelson

Asks if it is the activities of SAIF are the issue or are the benefits that SAIF has provided to Oregon citizens.

315

DiLorenzo

States the concern is how SAIF is being run.

317

Sen. Nelson

Asks about general funds.

320

DiLorenzo

States many state agencies are not run on general funds.

322

Sen. Nelson

Asks about the statute.

330

DiLorenzo

Responds.

340

Sen. Nelson

Asks about the good things that SAIF has provided.

350

DiLorenzo

States that SAIF has done many good things; however, the good do necessarily outweigh the bad or counter the bad practices SAIF performs.

390

Sen. Nelson

Asks about the testimony that stated SAIF could not be sued in Federal Court.

400

DiLorenzo

States that SAIF will avail itself of every advantage of being a state agency whenever it can and yet keep open the opportunity to act like a business whenever it wishes.

TAPE 69, B

005

Sen. Deckert

Asks about the political nature of SAIF and the issue being discussed.

020

DiLorenzo

Comments and elaborates.

036

Sen. Deckert

Mentions that SAIF is a unique organization (refers to this as a Hybrid organization) operating under a mission given by the Legislature.

040

DiLorenzo

Responds.

050

Greg Chaimov

Legislative Counsel. Asks which branch of government decides whether SAIF has excess surplus and if so, who receives the excess.

053

DiLorenzo

States that the question has yet to be resolved.  States that SAIF would feel that only SAIF could determine whether it had excess surplus, and that there are others who feel it is a legislative determination.

060

Cheek

Asks for clarification that Mr. DiLorenzo believes SAIF is a state agency.

065

DiLorenzo

States that SAIF has declared itself a state agency, and in various court proceedings the court has concluded that SAIF is a state agency.

070

Cheek

Asks if SAIF is a state agency, why any excess surplus would be beyond the authority of the legislature to direct its disposition as provided in ORS 656.634.

075

DiLorenzo

States that it is not the position.  States that any surplus post 1982, the state has the right to appropriate the funds.

090

Cheek

Asks for clarification that the legislature should do this on a biennial basis.

 

DiLorenzo

States the legislature could do this whenever it deemed it appropriate provided the Governor concurred.

101

Cheek

Asks if the legislature did not do this regularly, the monies could then be returned to the policyholders.

112

Steve Telfer

Oregon Legislative counsel, Alliance of American Insurers. Provides a brief summary of the three panelists to testify.

133

Ann Nelson

Executive Vice President, Employers Insurance Company of Nevada.  Begins discussion on the history of Nevada’s State Industrial Insurance Funds.

260

Doug Dirks

President and CEO of Employers Insurance Company of Nevada. Begins discussion on the legislative process to privatize the state insurance fund.

·        Loss portfolio transfer (Safety net)

·        Obtain a private letter ruling (no tax liability)

·        Qualifying examination

·        Form a new mutual insurance company

350

Dirks

Continues discussion on the formation of the company

·        Transfer the liabilities and funds

·        Current company practices

·        History of company premium rates

·        History of Nevada’s market place

·        Impact on employers in Nevada

TAPE 70, B

055

Dirks

Concludes testimony.

060

Mark Hogle

Executive Vice President and COO, Accident Fund Companies of Michigan. Begins discussion on Michigan’s accident fund.

·        History of Michigan’s state accident fund

·        Process of due diligence

·        Results of privatization

·        Maintaining policy holders

·        Board Members

·        Michigan’s rainy day fund

200

Sen. Nelson

Asks about the 2 billion unfunded liabilities in Nevada whereas Oregon has a 500 million dollar surplus.  Asks the difference between Nevada and Oregon as most Oregonians are happy with SAIF corporation.

210

Dirks

Responds on the history of the revamped insurance company in Nevada.

240

Hogle

States that in Michigan there was a large surplus at the time of the sale, and the customers were happy, but unaware of the actual lack of dollars available.

250

Sen. Nelson

Asks what the Michigan premium cost ranking is.

252

Hogle

States right in the middle.

255

Sen. Nelson

States Oregon is ranked at 35th in lowest premium as opposed to ranking 5th a short time ago.

260

Hogle

States that the ranking is pure premium, which is based on dividing premium by losses.  Comments a doubt that any group of experts would testify having state fund contributed to that.  States other dynamics caused decrease in rates across the United States.

280

Sen. Nelson

Asks for the population of Michigan.

285

Hogle

Offers to provide this information to the members following the hearing.

290

Sen. Deckert

Asks for clarification on the testimony.

292

Hogle

Continues

310

Sen. Deckert

Asks what are the chief criticisms in the last five years of the new systems in Michigan and Nevada.

330

Hogle

Responds.

380

Dirks

States from the Nevada standpoint, there was some dislocation.

405

Ann Nelson

Comments on the current Nevada legislature.

TAPE 71, A

010

Sen. Deckert

Asks what the rationale Michigan courts used to determine their fund was a state agency.

020

Hogle

Offers to provide the information from Michigan state to the committee.

025

Vice Chair B. Starr

Asks about Oregon’s current competition market and how privatization would affect policyholders and rates in Oregon.

035

Hogle

Responds and elaborates.

080

Dirks

Comments on Nevada’s policy on branching out in jurisdictions.

092

Vice Chair B. Starr

Comments on both Michigan and Nevada’s executive push into privatization.

102

Hogle

Responds.

122

Cheek

Asks if there is an assigned risk pool in Nevada.

125

Dirks

States yes.

130

Cheek

Is it a voluntary

135

Dirks

States there are two carriers.

140

Chair Metsger

Asks for comment on telephone conversations from Michigan leaders regarding the changes resulting from Michigan’s privatization.

160

Hogle

Comments on testimony.

170

Chair Metsger

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

 

EXHIBIT SUMMARY

 

A – Informational, written testimony, John DiLorenzo, 56 pp