The state's dominant workers' compensation carrier seeks to free itself from restrictions built into its creation.

01:00 AM EDT on Thursday, June 2, 2005

BY LYNN ARDITI
Journal Staff Writer

A bill proposed in the General Assembly by The Beacon Mutual Insurance Co. could have a "radical impact" on Rhode Island's workers' compensation system, Governor Carcieri's deputy chief of staff told the House Finance Committee yesterday.

"The governor is deeply troubled by the intention of this legislation," said Jeffrey Grybowski. "The big unknown in this legislation is: what impact would it have on premium rates?"

A companion bill was introduced yesterday in the Senate Labor Committee.

The House bill would, among other things, allow Beacon to sell insurance coverage outside of Rhode Island, remove the governor's authority to appoint Beacon board members, limit state regulators' ability to hold hearings on Beacon's rates, and officially sanction Beacon's use of its own rating system, rather than the rate guidelines that other insurance companies coming into Rhode Island are required to adopt.

"This is the kind of bill that requires a tremendous amount of public debate," Grybowski said. The bill, introduced last Thursday, should be set aside for "thorough analysis," he said.

The House Finance Committee, whose chairman, Steven M. Costantino, is one of the bill's sponsors, also heard testimony from Joseph Torti, Department of Business Regulation associate director and superintendent of insurance, who called the proposed bill "a major, systemic change to the system."

Beacon is the state's dominant workers' compensation insurer, with about 76 percent of the Rhode Island market.

Beacon proposed the bill in order to offset the additional costs to the insurer if Carcieri succeeds in requiring Beacon to pay a 2-percent tax on premiums, like other insurers, said Beacon's top executive, Joseph A. Solomon.

If approved, the bill would save Beacon an estimated $3 million to $5 million a year, Solomon said, by allowing it to sell workers' compensation coverage outside the state. Beacon currently spends that much money each year, Solomon said, to partner with another insurance carrier to sell coverage to Rhode Island businesses operating outside the state.

To get around restrictions on the sale of coverage out of state, Beacon created a subsidiary, Castle Hill Insurance. But other states have refused to license Castle Hill because of "regulations that prevent companies that are state controlled from conducting business out of state," Solomon told the committee.

Beacon insures about 90 percent of employers in the state, Solomon said, and many of those employers have business outside of Rhode Island.

The DBR's Torti said that one of his major concerns is that the bill would exempt Beacon from basing its rates on those set by a national nonprofit rate advisory group, the Nation Council on Compensation Insurance.

"It may or may not give them an advantage" with respect to other insurance companies, Torti told a reporter during a break in the hearing. "We don't know."

The Finance Committee did not vote on the measure yesterday.

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