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How AB 53 got chewed up in the state Assembly


If you want to see how quickly a bill in Sacramento can change, submit one to the California Assembly, stand back and see what happens.

Consider the case of Assembly Bill 53, a measure that could benefit minorities, disabled veterans and women.

You’d think piranha has gotten hold of the bill.

Introduced in December by Assemblyman Jose Solorio (D-69th District), AB 53 is aimed at creating transparency by requiring the largest insurance companies doing business in the state to annually report on how much they contract with diverse, women and disabled veteran-owned businesses.

The measure had broad support from the California Department of Insurance, California National Organization for Women, Consumer Federation of California, and dozens of diverse business and community organizations. But it obviously needed more.

AB 53 was designed to impact companies with gross revenues of more than $25 million, requiring them to submit a plan annually for increasing contracts to women, minority and disabled veterans businesses.

But what came of the bill after the insurance companies got wind of it is not pretty. It changed–drastically–chewed almost to shreds. In fact, with the enforcement measures taken from it, the Greenlining Institute, one of its sponsors, withdrew support to assess whether its coalition wanted to continue with it.

That’s what happens when minorities, women and disabled veterans don’t put enough activity behind a good measure that is opposed by a well-heeled, well-oiled industry lobby. They lose out.

“The industry has beaten it so much that it will not be considered this legislative session,” said Samuel Kang, general counsel for the Greenlining Institute. “It’s mostly due to the insurance company resistance to efforts for transparency. One of the primary tactics was to take as many enforcement characteristics out of the bill as they could.

“Because the industry was pressuring the Legislature to take out enforcement measures, it was too much pressure to continue to pursue the bill this legislative session,” Kang added. “It was made into a two-year bill [rather than an annual one]. The full consideration of the bill will be delayed until the next Legislative session. So the immediate consequence is that it will be considered in 2012.”

However, Kang notes that the bill is not guaranteed to be taken up in the next session unless the business owners demand that it be.

What that requires is for ethnic and diverse business owners and women-owned businesses to contact their representatives in Sacramento, as well as the insurance commissioner to tell them that increased transparency and accessibility to the big insurance companies is needed, he said.

Nicole Mahrt, a spokeswoman for the Association of California Insurance Companies (ACIC), explained that “many insurers are national companies and don’t just operate in California or one state, so when they procure something it’s done through their corporate offices on a national basis.

Many of our companies work in coalitions that try to encourage the use of women-owned and veteran vendors. We don’t fit in that one-state-type model.”

To do a procurement program on a state-by-state basis would be too costly and inefficient, she said, but explained: “We would be happy to report the procurement programs that we are doing a national basis.”

But Kang maintains that insurance companies grab $130 billion in premiums from the state annually, and much of those premiums get funneled to Zurich and other corporate offices abroad.
If that is true, it would be nice to keep a few billion in the state.

“What AB-53 would have done would have made the big insurance companies report how much could have stayed in the state,” Kang said. “Considering that our budget deficit is around $10 billion, when you’re talking about a $130 billion industry, you can see the impact.”

A statement issued by the Insurance Commissioner Dave Jones’ office, said: “Commissioner Jones is strongly supportive of the intent of AB 53 because, very importantly, it aims to increase procurement from women, minority, and disabled veteran business enterprises. However, he has expressed some concerns about the cost burden that would be placed on the Department of Insurance to implement the provisions of the bill.

“That being said, the commissioner has conveyed these concerns to the bill’s author and they are working toward resolving these issues, including … the last set of amendments taken to the bill.”
Mahrt said the ACIC was planning to work with Solorio “to explain what we are doing.”

Those who would back AB 53 are urged to contact Assemblyman Solorio’s Sacramento office at (916) 319-2069 or his district office at (714) 939-8469. Letters should be written to: Insurance Commissioner Dave Jones, California Department of Insurance, Consumer Services Division, 300 S. Spring St., South Tower, Los Angeles, CA 90013.