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A few Indian Tribes throughout the U.S. have written indemnity insurance policies for employers which cover costs for medical treatment for work place injuries and compensation for lost wages at lower rates, as an alternative to state authorized Workers' Compensation insurance in California. 

But the state is cracking down on these Indian run operations because this esoteric indemnity insurance is being sold as a legitimate substitute for Workers' Compensation, or is being clothed as Workers' Compensation in California, which it is not considered under present state law. 

It is ironic that this alternative, Indian reservation developed "Workers' Compensation insurance" is being sold much less expensively to a handful of employers in mostly the Inland Empire region of California at a time when state legalized Work Comp insurance premiums have tripled over the past few years and the governor and Legislature are frantically working overtime to find a solution that will lower the premiums employers in California pay for Work Comp Insurance.  It is interesting that "sovereign nations" which is how Indian reservations are defined, are now competing with California Workers' Comp--which comprises a business community that can't get competitive within itself--because of what many believe is the fault of California law.

With the unemployment rate in California still hovering around 6.5%, Governor Schwarzenegger is aggressively courting the Legislature to reform the Work Comp system in order to boost the economy by allowing employers to pay less for Work Comp insurance and, consequently, allow them to retain more money which will, in turn, he hopes, allow businesses to hire more workers. 

One 134 member Indian tribe in Inyo County has been selling alternative Workers' Compensation insurance to small businesses in the Inland Empire.  John Bracken, the vice chairman of the Fort Independence tribe, is also the chief executive officer of Independent Staffing Solutions, the tribal company that offers indemnity insurance that substitutes for Workers' Compensation insurance.  The reservation is located in Owens Valley and Independent Staffing Solutions has 10 to 15 clients in the Inland Empire, according to Bracken.

The California Department of Insurance is investigating Independent Staffing Solutions to determine whether the business is based in a reservation.  The state is equally cracking down on similar operations run by other tribes; charges were filed in November 2003 against insurance brokers suspected of selling illegal policies offered by Mainstay Business Solutions, another reservation-based operation. 

State regulators say the businesses are illegal because they are not permitted, or certified as self-insured under the state labor code.  But, John Bracken argues that Indian insurers don't need to meet the requirements because they operate in sovereign Indian nations.  Yet, there remains the issue that California employers are required to hold Workers' Compensation insurance, and that the state doesn't yet recognize these Indian alternative indemnity policies as legitimate Workers' Compensation policies.  The policies involve indemnity insurance, and the claims are handled in tribal court. 

Independent Staffing Solutions is not seeking any new clients until the controversy is resolved in the Legislature.  Assemblyman Bill Maze, R-Visalia, recently proposed legislation to legalize the program offered by Independent Staffing Solutions.