HCR179

WHEREAS, providing adequate monetary compensation, medical care, and vocational rehabilitation for injured workers at affordable premium costs to employers remains a worthy and desired goal for the citizenry of the State of Hawaii; and

WHEREAS, Article 14A of the Insurance Code, Chapter 431, Hawaii Revised Statutes (HRS), was enacted in 1996 with the stated purpose of establishing the Hawaii Employers' Mutual Insurance Company (HEMIC) "to provide workers' compensation coverage to employers of the State at the highest level of service with the lowest possible cost, consistent with reasonable and applicable actuarial standards and the sound financial integrity of the company" and "to provide the highest standard of workplace safety and loss prevention, to encourage employer involvement, and to be responsive to each policyholder's experience, practice, and operating effectiveness"; and

WHEREAS, from January 1, 1977, through December 31, 2007, HEMIC has been excluded from the surplus requirements of domestic mutual insurers, by Section 431:14A-103, HRS, and from the levy on gross premiums of workers' compensation insurers under sections 386-152 and 386-153, HRS, for the first $25,000,000 of written premiums in each calendar year; and

WHEREAS, HEMIC was tasked to work with policyholders, health care providers, and employees to develop, implement, and monitor workplace safety and health and return to work programs, including the development of workplace accident and injury reduction plans, and to promote safety programs to policyholders by analyzing reports of industrial accidents of members, conducting risk and hazard identification studies, and conducting educational programs to prevent frequently recurring industrial accidents; and

WHEREAS, assigned risk coverage as authorized in section 431:14-116, HRS, was discontinued for workers' compensation insurance on December 31, 1996, with the expectation that HEMIC would provide insurance coverage for such risks and would assist Hawaii employers entitled to workers' compensation coverage but who were unable to purchase such coverage in the voluntary insurance market or through self-insurance; and

WHEREAS, section 431:14A-109.5, HRS, establishes an oversight council for HEMIC whose responsibilities include the review of HEMIC's annual financial report, triennial examination reports by the Insurance Division, and actuarial certifications of loss reserves so that they may determine whether the company is fulfilling the purposes for which HEMIC was established; and

WHEREAS, HEMIC is required to compile and maintain statistical and actuarial data relating to its determination of premium rates, the incidence of work injuries, the cost of injuries, and other data relating to work injuries and submit this information annually to the Insurance Commissioner; and

WHEREAS, HEMIC is empowered to conduct annual accountings of its incurred loss experience and expenses and, with due regard for the solvency of the company, to declare and apportion dividends to policyholders according to classifications of policies established by its board; and

WHEREAS, for all the foregoing reasons, the Legislature believes that an audit of HEMIC is necessary to assess HEMIC's fiscal performance and management and insure it fulfills the statutory purposes for which it was created; now, therefore,

BE IT RESOLVED by the House of Representatives of the Twenty-fourth Legislature of the State of Hawaii, Regular Session of 2007, the Senate concurring, that the Auditor is requested to conduct an audit and an impact assessment report on the Hawaii Employers' Mutual Insurance Company; and

BE IT FURTHER RESOLVED that the Legislature requests that the audit and impact assessment address:

(1) Whether HEMIC has fulfilled the statutory objectives for which it was created by providing the highest possible quality of workers' compensation insurance at the lowest possible cost;

(2) Whether it should continue to be the sole workers' compensation carrier in the state that is given the power under statute to designate differing tiers of high risk employers;

(3) Whether the Oversight Council as established by section 431:14A-109.5, HRS, is providing meaningful oversight of HEMIC with regard to its: operating expenses, profits, board member recruiting and election processes, executive compensation packages, dividends, and political lobbying expenditures;

(4) Whether HEMIC's expenditures with regards to advertising, operations, and political lobbying reconciles with its statutory mandate to provide the highest possible quality of workers' compensation insurance at the lowest possible cost;

(5) Whether its net income for 2005 and 2006 reconciles with its statutory mandate to provide the highest quality of workers' compensation insurance at the lowest possible cost;

(6) Whether it has effectively implemented workplace safety and loss prevention programs for its shareholders;

(7) Whether it has prudently managed its finances and justified the special treatment it has received in exemptions from surplus requirements for domestic insurers, and exclusion from the levy on gross premiums for the workers' compensation Special Compensation Fund;

(8) Whether it has met existing needs of marginal insureds and has provided reasonable cost insurance as was intended when the assigned risk pool was abolished;

(9) Whether HEMIC has established fair and reasonably inclusive standards for such insureds who have been unable to obtain insurance in the voluntary insurance market;

(10) To what extent the need for workers' compensation insurance of insureds from the former assigned risk pool are being met;

(11) Whether HEMIC's standards and practice for servicing the injured employees of its insureds are consistent with community practice of private insurance carriers and government entities in terms of prompt resolution and payment of compensable claims;

(12) Whether HEMIC has fairly and reasonably allocated its profits between executive compensation, internal personnel costs, dividends to shareholders, and payments to injured workers it insures; and

(13) Whether HEMIC's reserve is on track to be fully funded;

and

BE IT FURTHER RESOLVED that the Auditor is requested to submit findings and recommendations to the Legislature, including any necessary implementing legislation, not later than twenty days prior to the convening of the Regular Session of 2008; and

BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the Auditor and to the Insurance Commissioner, who in turn is requested to transmit copies to the Hawaii Employers' Mutual Insurance Company.

OFFERED BY:

_____________________________

Report Title:

Requesting the auditor to audit the Hawaii Employers' Mutual Insurance Company.

HOUSE OF REPRESENTATIVES	H.C.R. NO.	179
TWENTY-FOURTH LEGISLATURE, 2007
STATE OF HAWAII