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California's State Compensation Insurance Fund To Lay Off 1,500 By June 2012
By Lonce LaMon - October 6, 2011

It’s the first time since The Great Depression of the 1930s that State Compensation Insurance Fund has announced lay-offs.   The quasi-state agency of California workers’ compensation insurance plans to lay off at least 1,500 employees by next June of 2012. 

And, it’s not surprising.  State Compensation has not just fallen prey to a Second Great Depression, being disguised under the language of an economic Recession; it also has not innovated its technology in order to operate its business on a par with business technologies and practices of the 21st century.

The company announced today that it is spending 90 cents of every premium dollar just to operate.  The industry average to operate is 40 cents per dollar of premium. 

This writer has had State Compensation as a workers’ compensation insurer in the very recent past.  Its inefficiencies are staggering, even as perceived just on the surface.   Applications are still incredibly long and written out on paper, mailed or faxed.  They are not emailed or submitted through a web interface.  No, there’s not a PDF file application.  It’s like the way things were at my first job right out of college.    

Endless paper is mailed through snail mail.   Pathetically little is communicated electronically or via email.   Mounds of paper documenting frivolous information, such as switching the name of the insured from the last name first to first name first is snail mailed to one’s physical mail box with ten or more pieces of paper to describe the mere order of a name.  Documents are routinely snail mailed Certified or Registered, which is very costly. Just to email them would cut down tremendously on expense.

The claims adjusting is also incredibly inefficient.  Claims are not often denied, and cases go on for years without being settled.   This writer had a case of a trip and a fall on a carpet inside an office go on for 9 years that paid out over 1.5 million dollars in medical and indemnity expenses.  No amount of information or assistance on my part was efficacious enough to speed up a settlement.  This case dragged on along with others at a snail’s pace.  During one year my experience modification was 151%.  

But even if one were to ignore this part of the reality, just by the sheer volume of the snail mail and the overwhelming deluge of printed paper, it looks and feels just like business back in the 1960s.  To be stuck functioning with old communication methods and practices is overwhelmingly costly in today’s age.  It’s like commuting to work on horseback.  It’s incredibly slow and there’s no place to shelter, feed, or water your horse once you arrive at your desk.  And if you were to pay for the cost to board your horse it would be a thousand times the price of our already over-priced gasoline.  The world has moved on.  State Comp has not. 

"We spend more operating the company than we do on benefits to injured (workers)," Tom Rowe, State Fund's president and CEO, said in an Oct. 6th memo to employees. Rowe said State Fund is overstaffed by 30 percent, but only in part because it hasn't reduced staff as premium volume has plummeted in recent years, from a high of $8 billion in 2004 to just $1 billion today.

Tom Rowe explained that State Fund needs to reduce itself by 2,000 jobs.   500 jobs will go by natural attrition, but 1,500 will have to be further eliminated via lay-offs.   Presently the company has 7,300 positions.  This is down from its peak of 9,300 positions in 2005.  After the reduction the number will hit just over 5,000.  This will put it approaching half its size from 2005 to 2012--in just seven years.    

Spokeswoman Jennifer Vargen said the cutbacks will occur statewide, from Ureka to San Diego. It has a small corporate staff of roughly 75 in downtown San Francisco.  Other major employment centers in the immediate Bay Area include Pleasanton and Vacaville. Other State Fund offices in Northern California include San Jose, Sacramento, Redding, Stockton, and Santa Rosa.

Some offices statewide were previously earmarked for closure.  In December of 2010, The Oxnard, Glendale, Burbank, Commerce, San Jose, and Santa Rosa locations were named to be entirely closed down.

lonce@adjustercom.com

 
 

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