The Governor on Beacon Mutual

Governor Carcieri has put forth his case against the privatization of Beacon Mutual in today's ProJo. First, there are risks:

Rhode Island employers should worry about this expansion because Beacon is not just any insurer. Beacon has two statutory duties that no other insurer has: First, Beacon must offer insurance at the lowest possible cost to Rhode Island employers; it cannot raise rates just to fatten profits. Second, Beacon is the "insurer of last resort" in Rhode Island.

Other workers'-comp insurers may decline to cover an employer for a variety of reasons, but Beacon may not. This obligation is the bedrock on which our entire workers'-comp system is founded. The governor's appointments to the board are designed to ensure that Beacon fulfills its public mission.

If Beacon is permitted to expand outside Rhode Island and its management is not as successful in competing in those new markets as it predicts, the out-of-state losses could affect our own workers'-comp market. A failure by Beacon to profit in other states could drive up rates for Rhode Island businesses. Why should Rhode Island employers place at risk the reserves that they have built up at Beacon to pay losses from out-of-state businesses?

Then, the rush to push the legislation through doesn't pass the smell test.

Instead of a well-studied proposal that would benefit the people and businesses of this state, we seem to have on our hands another example of the Rhode Island insider network plying its trade at the State House. Did we learn nothing from the scandals involving the insiders at Blue Cross? Did the General Assembly miss the national debate over corporate-governance standards?

We don't need another out-of-control nonprofit insurer. We've seen this story before.

Instead of weakening public scrutiny over this public corporation, we should be increasing Beacon's corporate-governance standards. I will introduce legislation in the next General Assembly to do just that.

Finally, there are the questions about the money Beacon is spending and taking in. How are they spending what they're taking in?

Instead of acceding to the demands of Beacon's well-paid management team, let's start asking it hard questions: Why did Beacon rack up travel expenses of more than $600,000 in 2004 to operate a company that insures only Rhode Island businesses? Is it appropriate for board members of a nonprofit company to profit from their public service? And, most important, why does Beacon need to continually add to its surplus, when the surplus already stands at $115 million, on top of its $274 million in loss reserves?

Shouldn't more of Beacon's $6.4 million profit in 2004 be returned to the policyholders?

Instead of falling over itself to approve this insider legislation at record speed, the General Assembly should be holding hearings to get to the bottom of these questions.

Yes, they should. I would say we are going to be seeing another veto pretty soon.