01:00 AM EDT on Friday, June 17, 2005

BY LYNN ARDITI
Journal Staff Writer

PROVIDENCE -- The Senate yesterday quickly passed a bill to rewrite the law that governs the state's dominant workers' compensation insurer, Beacon Mutual Insurance Co.

The bill, supported by business groups but opposed by the governor and state regulators, would transform Beacon from a nonprofit created by the General Assembly to provide low-cost coverage for Rhode Island employers, to a for-profit mutual insurer that can sell insurance outside the state.

Yesterday's 24-8 vote in favor of the bill means that the Senate now has 1 more than the 23 votes necessary to override a veto.

A vote scheduled for yesterday in the House on a companion bill was delayed. It is now expected to be taken up next week.

If the House approves the measure, it would trigger a veto by Governor Carcieri, his deputy chief of staff, Jeffrey Grybowski, said after yesterday's Senate vote.

"We don't think the fight's over," Grybowski said. "We don't think either committee had a good discussion about the implications of the bill."

The governor and the state Department of Business Regulation have raised concerns that the legislation would dismantle key regulatory controls over Beacon and make it easier for the state's dominant insurer to raise its rates.

Beacon provides workers' compensation coverage to about 90 percent of all Rhode Island employers, according to the state Department of Business Regulation.

Beacon, as a nonprofit, is currently exempt from state and federal taxes. The insurer's top executive, Joseph A. Solomon, has described the bill as a compromise between the governor's desire to tax Beacon and the insurer's interest in providing coverage to Rhode Island businesses that operate outside the state.

Yesterday, Sen. Roger R. Badeau introduced the amended version of the Senate bill by listing its supporters, whom he said include the Northern Rhode Island and Providence Chambers of Commerce; the Independent Insurance Agents Association of Rhode Island and the Rhode Island Builders' Association.

"Over the last 15 years," said Badeau, a Democrat who represents Woonsocket and Cumberland, "there has not been one increase in rates."

Badeau read off three amendments to the bill, the vote was called and the bill passed without debate.

The amended version of the Senate bill (No. 1143, Substitute A):

Replaces Beacon's original mission to "ensure that all employers in the state of Rhode Island have the opportunity to obtain workers' compensation insurance at the lowest possible price" with the following:

"The corporation shall offer all employers in the state of Rhode Island the opportunity to obtain workers' compensation insurance at just and reasonable prices consistent with sound rate setting principles";

Allows for annual rate increases of up to 5 percent a year without prior regulatory approval. The original version of the bill set the ceiling at 10 percent a year;

Adds the word "excessive" to the section of the bill that says any rate filing made by Beacon becomes effective within 90 days "unless found by the director [of business regulation] to be excessive, inadequate or unfairly discriminatory . . . "

Beacon would file its own rates with the state Department of Business Regulation by Sept. 30, "and from time to time thereafter," the bill reads.

Of the eight senators who voted against the bill, four were Republicans and four were Democrats.

"I have great concern about how this would modify the role of Beacon in the market," said Sen. Elizabeth H. Roberts, D-Cranston, after she voted against the bill. "It's been a big success. I'd hate to change its mission and role in the market."

Beacon "was created to provide the lowest priced workers' comp possible," said Sen. Marc A. Cote, D-Woonsocket. "That's being eliminated. They're using the word 'reasonable' now. I believe we're straying from the original intent" of the law.

Besides Roberts and Cote, the other six senators who voted against the bill were: Senate Minority Leader Dennis L. Algiere, R-Westerly; Sen. Leo R. Blais, R-Coventry; Sen. Kevin A. Breene, R-West Greenwich; Sen. June N. Gibbs, R-Middletown; Sen. J. Michael Lenihan, D-East Greenwich and Sen. James C. Sheehan, D-North Kingstown. Six senators did not vote.

Lynn Arditi, a Journal staff writer, can be reached at (401) 277-7335 or by e-mail at larditi [at] projo.com