The insurer must get permission to sell workers' compensation coverage outside of Rhode Island.

01:00 AM EDT on Friday, May 27, 2005

BY LYNN ARDITI
Journal Staff Writer

The Beacon Mutual Insurance Co. has proposed a bill in the General Assembly that would save the company an estimated $3 million to $5 million a year by allowing it to sell workers' compensation insurance outside the state.

The measure is aimed at offsetting the additional costs to Rhode Island's largest workers' compensation insurance carrier if Governor Carcieri succeeds in requiring the company to pay taxes like other insurers, Beacon's top executive, Joseph A. Solomon, said yesterday.

The bill was introduced by sponsors into the House Finance Committee on Wednesday.

Beacon, which has about 76 percent of the Rhode Island market, has not been paying the state's 2-percent tax on premiums since the General Assembly granted it an exemption in 1992. Beacon also won a federal tax exemption in 1996.

During his budget address earlier this year, Carcieri decried Beacon's tax exemption as depriving the state of about $3 million a year in tax revenues, and said it gives Rhode Island's dominant workers' compensation insurer an "unfair advantage" in the market. His proposed budget would repeal the exemption.

Beacon was formed by the General Assembly in 1990 as the state Workers' Compensation Insurance Fund. The "fund" was to provide Rhode Island employers with low-cost coverage for on-the-job injuries to their employees.

The state loaned Beacon $5 million to get started and the company has since grown into the state's leading workers' compensation carrier. As of the summer of 2004, Beacon has more than 240 full-time employees and some 14,635 policyholders, according to Solomon.

In recent years, Beacon has been trying, without success, to get General Assembly approval for its subsidiary, Castle Hill, to sell workers' compensation insurance to any employer in any state. A bill introduced last year on behalf of Castle Hill stalled.

In the absence of that approval, Solomon said, Beacon has been spending $3 million to $5 million a year to partner with another insurance carrier to sell coverage to Rhode Island businesses operating outside the state.

The bill introduced this week essentially rewrites state law setting out Beacon's authority. It says, among other things, that Beacon would be allowed "To exercise all of the rights and privileges of a domestic mutual insurance company. . ."

"Basically what this legislation does," Solomon said, "is makes The Beacon like every other insurance company doing business in the state of Rhode Island."

In addition to allowing Beacon to sell insurance outside of Rhode Island, the bill also removes language that requires the company to provide workers' compensation coverage at the "lowest possible price."

Sponsors of the House bill are Representatives Brian P. Kennedy, D-Hopkinton; Steven M. Costantino, D-Providence; Peter Kilmartin, D-Pawtucket; Raymond C. Church, D-Smithfield; and Gregory J. Schadone, D-North Providence.

Lynn Arditi can be reached at 401-277-7335 or by e-mail at larditi [at] projo.com