R.I.’s Beacon Mutual pursues rate cuts, restructuring plan

Beacon Mutual, Rhode Island’s biggest workers’ compensation writer with about 90 percent of the business, has some big plans.

First is its plan to lower the loss cost portion of premiums for most employers by an average of 27.7 percent and, for some, by as much as 36 percent.

Second is its plan to change state control over its corporate structure and rates, a plan that includes allowing it to cover out-of-state risks for its existing customers.

The first plan, lowering rates, must win approval from the Department of Business Regulation, which is not considered a problem. Rhode Island has not had an increase in workers’ comp rates for 15 years. Just last month, the company announced its largest-ever dividend, a 12 percent return worth $20 million. Also, state officials just signed off on a 4.2 percent reduction in loss costs for risks not insured through Beacon Mutual, effective Jan. 1. The other insurers filed through the National Council on Compensation Insurance.

“This filing represents another major step for the Rhode Island workers’ compensation system,” commented Joseph A. Solomon, Beacon Mutual’s president and chief executive officer.

Governance plan
The restructuring plan, however, must get signed by Gov. Donald Carcieri, who does pose a problem. The legislature last year approved a similar plan but Carcieri vetoed it and he has come out strongly again this year in opposition to the restructuring. Carcieri argues it would weaken public oversight of the insurer.

Beacon Mutual says its customers have asked it to also cover their out-of-state exposures. However, the fact that a majority (five) of its nine directors are public appointees prevents it from writing coverage in 20 states that block competition from “government-controlled” insurers. So its legislation would reduce the public appointments to three.

The legislation would also give Beacon latitude to provide discounts to small businesses. Currently, only businesses with premiums above $5,000 can be rewarded for their good experience.

Solomon maintains the legislation improves on what is already a good situation for Rhode Island. “Beacon remains a non-profit. Beacon remains Rhode Island based,” he says.

Gov. Carcieri sees it differently. Carcieri’s staff and DBR Director Michael Marques urged the General Assembly to nix the change in board appointments, reminding lawmakers of their decision last year to increase oversight of not-for-profit Blue Cross/Blue Shield of Rhode Island in the wake of a scandal involving its board.

“In this context, why weaken the corporate governance of Beacon? Why remove public oversight and place the company in the hands of insiders?” they asked the labor committe.