CRM (Compensation Risk Managers) entered the workman’s’ compensation business in 1999 in an effort to help alleviate the shortage of affordable workers’ compensation insurance for California’s sizable health care industry workforce. They began offering coverage to health care workers through a new program call Healthcare Industry Self Insurance Program (HISIP)
HISIP was designed to serve employees of nursing homes, assisted living, hospitals and all other related healthcare facilities and institutions throughout California. CRM expected HISIP to save employers as much as 20-40% percent compared with current state fund rates. With the rising costs of both workers’ compensation insurance and health care greatly contributing to California’s financial problems, CRM hoped that their new HISIP program would impact the bottom line for each of these industries. HISIP was created with the participation of only two core members who contributed a total of $3,325,028 in written premiums which help launch the program and provide workers’ compensation insurance for 1,087 workers that were collectively employed. By 2004 CRM reported gross written premiums of $125 million which was a 27% increase from the previous year.
SO WHAT WENT WRONG
Recession, management, shortage of funds, slow payment of claims, loss of members, and Law suits all contributed to the failure of the program. The group’s membership tumbled in recent years and a significant amount of the deficits is tied to former members. The Office of Self Insurance Plans (SSIP) reported the group had dwindled to just 34 active members Attorneys for the Healthcare industry Self Insurance Program (HISIP) notified current and former members of the workers’ comp self- insured group (SIG) that they had a bill to pay to bring the SIG into full compliance with state financial standards. The letters were a part of a plan to close a deficit that is reported to be in the $25miillion to $28 million range. Former members were offered a payment plan if they rejoined otherwise the whole amount was due. The carrot was not attractive enough to bring more members into the fold and more law suits followed. CRM of California exited the self-insured group administration market and SIS took over management of the group in the fall of 2010.
In December of 2013 the Self-Insurers’ Security Fund filed a lawsuit in Orange County Superior Court seeking to recover liabilities the Security Fund was required to assume when the Healthcare Industry Self Insurance Program of California (HISIP) was placed in default earlier in 2013. The suit seeked to recover an estimated $39 million from 308 former members of HISIP, who were required to reimburse the Security Fund by statute. According to the Complaint, HISIP was a non-profit mutual benefit corporation made up of healthcare-related entities in California. It was authorized to act as a self-insurance group allowing members of HISIP to meet their statutory requirement to secure their workers compensation obligations through membership in the group. Each member of HISIP agreed, upon joining, to be jointly and severally liable for the compensation liabilities of all other members that arose during its period of membership. However, not enough members paid such assessments and HISIP went into default. The Office of Self Insurance Plans (OSIP) within the Department of Industrial Relations (DIR) issued the order declaring HISIP in default and requiring the Security Fund to take over claims- paying responsibility The Security Fund has been paying the compensation claims of HISIP members’ employees since that time.