CALI Responds to SCIF

Friday, February 22, 2013  
February 12, 2013

Mr. Tom Rowe
President \ Chief Executive Officer
State Compensation Insurance Fund
P.O. Box 8192
Pleasanton, CA 94588

Mr. Rowe –

The California Association of Licensed Investigators [CALI] urges the State Compensation Insurance Fund [State Fund] to take action to prevent the start of State Fund’s new program that sacrifices the integrity of the state’s workers compensation program for cost savings.

CALI is the world’s largest association representing individuals in the private investigator and security professions, with over 1,400 members located primarily in California. Our association provides leadership, education and legislative advocacy, as well as embracing efforts to increase professionalism and consumer understanding of these fields.

CALI is quite concerned with the January 24 State Fund announcement of its new program to manage investigation services used by various departments within SCIF by contracting with two companies—"HUB Enterprises” and "Veracity Research Company [VR] Investigations” that are based in Louisiana and Texas.
In order to save money, this program will lead to investigations of workers compensation claims that fail to ferret out fraud and abuse. The burden of the costs of inappropriate and false claims paid by State Fund will be borne by employers and will not be available to employees.

While the exact criteria of this program remain under wraps, the little information State Fund has provided confirms that:

  • State Fund has reneged on its repeated commitment regarding a fundamental issue: that the chosen companies will provide oversight and management of investigations performed by licensed private investigators who are not their employees.
    • At least one of the two chosen companies has employee investigators who will be performing the same investigations it is supposed to oversee on the part of outside licensed private investigators. This is a fundamental conflict of interest.
    • The decision of State Fund to renege on this commitment calls into question the veracity of all State Fund statements about this new program.
  • The two chosen companies have the built-in incentive to drive down investigation costs in order to increase their own profits. The loss is to the quality of the investigations aimed at uncovering fraud and abuse.
  • State Fund pursued a Request for Proposal [RFP] process that did not follow state government bidding requirements, required proposals on an unreasonably short timeframe [several days], demanded confidentiality, and included arbitrary and unreasonable demands [thirty-five employees].
  • Sensitive, personal information regarding employers and employees will be at substantial risk as they will be handled by companies that are based out-of-state.
  • The new program will be at the expense of California jobs.
    • SCIF has rejected proposals submitted by California-based companies.
    • The two chosen companies can hire investigators in-house to perform the investigations.

This new program will imperil efforts to properly investigate claims, will encourage fraud, will place at risk the premium dollars paid by policyholders, will jeopardize the quality and integrity of investigations, and will sacrifice the integrity of the workers’ compensation program for cost savings.

CALI urges State Fund to halt implementation of this program and identify alternative approaches to cost savings that do not impede the effectiveness and efficiency of investigations of workers compensation fraud and abuse.

I can be reached at 951-677-3500 x26. Our legislative advocate, Jerry Desmond, Jr., can be reached at 916-441-4166.

Michael Julian
Michael Julian CPI PPS, President
California Association of Licensed Investigators
National Business Investigations