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Report on Self Insurance Groups - page 6 / 40





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Report on Self Insurance Groups

service provider contracts, and regular records of key actions by the Board of Trustees as well as the composition and structure of the Board. Evaluate potential changes to the audit process:

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    Consider randomly selecting claims for audit to reflect a cross-section of the case inventory and then extrapolating the results of the audit to the entire case inventory for purposes of requiring increased deposits and revised actuarial projections.

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      Evaluate which aspects of SIG operations can best be reviewed by claims auditors and which by the independent CPAs who prepare the certified, independently audited financial statement.

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      Adopt requirements for the format of independent audits to include the selected items, which may include but need not be limited to reinsurance, contracts with service providers, freedom from prohibited conflicts of interest, reliable processes to assure required disclosures of group financial information to members and prospective members, management of funds in accordance with regulations, and collection of contributions due from members.

The Director should disapprove reinsurance coverage that results in an unreasonable concentration of risk in a small number of reinsurers that would endanger the entire SIG

program in the event of collapse of one reinsurer. Require each SIG to file its rate plan and adhere to its rate plan.

Clarify whether

experience modification or any other reduction from a uniform rate for each classification in a SIG is permitted. Enhance the independence and fiduciary responsibility of trustees:

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    Require that trustees receive approved training or otherwise demonstrate understanding of the fiduciary duties of trustees and the operations of workers’ compensation group self insurance.

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      Review Board minutes for adherence to procedures.

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      Ensure that Board members are involved in communications between the Director or the OSIP Manager and the group administrators.

Unhesitatingly enforce regulations, even if enforcement requires shutting down a group:

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    New York waited too long to act in some cases, until the requisite remediation was too onerous for some groups to remain viable.

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      A small number of California SIGs have reported deficits. These should be corrected forthwith. Corrective action should take into consideration any pattern which may occur, such as chronic deficits in a single group or multiple groups administered by a particular administrator.

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      Existing regulations do not clearly specify the time in which a group must correct any deficiencies before the group may be ordered to take specific actions.


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