Statement For Statement: Commissioner’s and SCIF’s PR Battle
By Robert Warne - June 2, 2003Insurance Commissioner, John Garamendi and the State Compensation Insurance Fund (State Fund) rounded off an intense week of verbal volleys on a subtly softer note than how things began May 27.
By Friday, State Fund had released a statement related to the PricewaterhouseCoopers LLP findings and recommendations, and the Commissioner responded as well.
In a letter sent to its brokers State Fund President Dianne C. Oki said, “You may have read recent press reports in which State Fund has been described as 'near insolvency' or in 'serious, serious trouble'. These words might make great newspaper headlines, but you deserve the truth. To set the record straight: State Fund is solvent.”
She explained how State Fund’s actuarial firm, Milliman USA certified it has $8.8 billion in reserves contrary to PricewaterhouseCoopers’s findings that it is underreserved by $800 million.
To bolster its position a portion of the A&J Liquors decision was cited in which the judge said, “At all relevant times and in all material respects, State Fund's management acted in good faith toward its policyholders with respect to the matters of reserving, dividends and premiums.”
According to Oki, to raise State Fund’s reserves by $800 million right now is an unrealistic expectation for a non-profit entity with no access to capitol markets. By having to shuffle its books around to increase its reserves would not be in the best interest of policyholders, the workers' compensation system or California's economy.
She urged brokers to contact legislators and said, “State Fund is not the problem; the problem is the workers’ compensation system.”
Garamendi followed up with, “I am fully aware of the conflict between State Fund and its auditor.”
He also called on the legislature to immediately address the explosive increase in medical costs, over-utilization of services, litigation, fraud, and claims handling.
It is tough to discern what Garamendi’s next move will be but he did say, “We will continue to work with State Fund, its auditors, and our own actuaries to determine the appropriate reserves level. We expect this issue to be resolved some time in June.”
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