SACRAMENTO — Gov. Arnold Schwarzenegger's plan to raise $1 billion by selling part of the state's scandal-plagued workers' compensation insurance company is running into strong flak from small-business advocates, the insurance industry and the state's elected insurance commissioner.
The governor wants to help reduce a $24-billion budget deficit by giving private insurers a chance to buy about half of customers' policies at the government-controlled State Compensation Insurance Fund.
Opponents got a powerful new voice Wednesday when Insurance Commissioner Steve Poizner warned that "a hasty or ill-considered sale could wreak havoc on the already volatile workers' compensation market."
The commissioner also released a list of 18 legal, financial and technical questions that he said should be answered before a sale takes place.
"Any sale would have ramifications throughout California's business community," warned Poizner, who is vying to be his party's gubernatorial candidate next year to succeed Schwarzenegger, a termed-out fellow Republican.
The upshot, Poizner said, could be a surge in premiums for tens of thousands of small companies when they could least afford extra costs.
Other critics argued that a sale could cause long-term damage to the company generally known as State Fund.
Private insurers said they were worried that forcing such a dramatic change at the country's largest workers' compensation insurer could create market turmoil at a time when medical costs are rising and profits are dropping.
Leading the opposition are Sacramento advocates for 175,000 small and medium-size businesses that rely on the fund for affordable insurance. Opponents fear that selling the nonprofit company's least risky policies could cause the price of workers' comp coverage to skyrocket for employers that stay with State Fund.
"It just sounds crazy to me," said Scott Hauge, the president of Small Business California, an advocacy group, and owner of a San Francisco insurance brokerage that sells State Fund policies. "Most of the small businesses that are with State Fund are there because they can't go anywhere else. If they are a more risky type of business, their rates will go way up."
State Fund Chief Executive Janet Frank was more circumspect in her comments, noting that issues surrounding the proposed sale require "substantial and thoughtful analysis because of their complexity and because the stakes associated with them are so high."
