Another Self-Insured Group Gets Assessed

Another California workers’ comp self-insured group (SIG) faces financial demons from it’s past. Both current and former members of the Healthcare Industry Self-Insurance Program (HISIP) of  California group are being asked to cover more than $3 million in deficits from two recent program years. Group members are jointly and severally liable for one another’s claims and payments. 

Management at HISIP did not return calls seeking comment, but in a letter to members, HISIP chief executive officer Paul Pinckney, CPCU, says the deficit stems from the 2007 and 2008 plan years.

“Over the years our business had acted and reacted to the commercial insurance market. We have earned profits in some years and have incurred losses in others. We enjoyed rapid growth early on and loss of Members and their contributions in recent years,” Pinckney says in a letter. “An unfortunate fact is that when Members leave for other insurance plans, their losses remain within our portfolio of losses and related expenses. We began incurring deficits, negative member equity, due to such losses in the 2007 and 2008 program years.”

HISIP now seeks to erase those deficits through a $1.1 million assessment for the 2007 program year and a $2.1 million assessment for 2008, according to the letter from HISIP. One broker, who agreed to speak on background and who has several clients facing an assessment, says many former members still are reviewing their options. “Some have already sent the check in and others are just going to wait and see what happens next,” he says.

The group, which primarily covers nursing homes, assisted living facilities and other health facilities, was initially put together and run by the failed California Risk Managers of California (CRM California) organization that also organizes the failed Contractors Access Program (CAP). Cap is in the final stages of being disbanded after falling $38 million into the red. CRM surrendered control of the group last July and was operating the group during the plan years in question. 

CAP’s funding problems were first couched in an assessment letter looking to bring in about $7 million. A $22 million assessment followed shortly therafter, and independent management brought in by the state found the deficit to be even higher at $38 million.

But Joe Diaz, a regional director for the California Association of Health Facilities (CAHF), says such assessments won’t be the case for HISIP.”We were aware they were going to send out the letter,” he tells Worker’s Comp Executive, noting that the move is intended to strengthen the business in anticipation of the market turning. “It’s a normal procedure, and the self-assessment was done by a full board vote.” Increasing Workers Compensation Insurance rates for members in California.

CAHF is not a member of HISIP, but many of its member organizations are. Diaz notes that he routinely fields questions about the SIG from members.

HISIP’s assessment letter states that “we are required by our regulators and prefessional services team to re-capture some of the deficit amounts for those years.” But the Department of Industrial Relations says OSIP was unaware of HISIP’s assessment letter.

The group has 63 active members, according to the official sources, but more than 200 members have dropped out of the group since 2007. CAHF’s Diaz acknowledges the membership losses but most were smaller accounts.”In terms of units of premium accounts, you have larger entities in the program today than you did of the individuals that actually made numercially larger numbers, but smaller premium load in the prior years,” he notes.

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