Last week was a time of celebration. It was, after all, the second anniversary of SB 899 becoming law. The Governor's Office appropriately feted the event, with a variety of employers, public and private, acknowledging that reductions in costs have allowed business expansion, businesses remaining here in California, and, in the case of local governments, freeing up much-needed resources for schools, law enforcement and basic essential services. The obligatory wailing from injured-worker advocates, who insist that nothing that has happened over the past three years in terms of reform is any good, stayed true to their message, including the "ludicrous" profits of insurance companies.

Given the lack of coverage of this auspicious event, it would seem that the well-choreographed messages from both the governor and those who find the reforms unconscionable were consigned to the scrapheap of "been there, done that" releases that have been an almost monthly occurrence since April 19, 2004. But one interesting quip that deserves recognition came from a blog by Labor & Workforce Development Agency Secretary Victoria Bradshaw, who offered the following:

"SB 899 also ensures that fairness will prevail in the claims procedures by allowing penalties to be assessed against insurance companies for unfairly denying claims."

For those of you who lobby for insurance companies, what you see when you look up is a very large muffler. The penalty provisions to which the secretary refers are likely the various audit penalties already on the books or that soon will be on the books, in the case of violations of the new utilization review regulations. In case anyone takes time to notice, the penalties apply to all payers of benefits, whether self-insured employers, insurance companies, third-party administrators, legally uninsured employers or joint powers authorities.

But then, it wouldn't benefit the administration to point out that all claims payers need to do a better job – and, in fact, the most recent audit reports available show that insurers do a better job of meeting their obligations to injured workers than other payers – anymore than you will hear injured-worker advocates talking about the obscene profits of self-insured employers or the added revenue for other projects now available to local governments.

Come to think of it, even the business community, which gleefully expects the insurance industry to act as an ATM when it comes to funding initiatives, independent expenditure campaigns, or contributions to a host of pro-business candidates for office, is doing a fairly good job of distancing itself from the insurance industry. While yet to succumb to the siren song of labor ("Why do you let insurance companies do what they do?"), it isn't because business advocates want to have insurers as members of their club, it's just that they sort of have to.

In spite of significant reductions in premium, and in spite of a calendar year loss ratio that is respectable and profitable (as opposed to accident year numbers that have only a slight bearing on reality and certainly not what labor and applicants' attorney advocates claim), employers still are looking for ways to game the system. Bills still are paid under the table, insured employers still try to pay medical-only claims directly so that payments don't affect their experience modification, and there is support in the business community for AB 1862 (Vargas), a bill that would significantly expand the definition of first aid and create more opportunities for unscrupulous employers to avoid paying their fair share. We don't have time to get into the issue of hiring illegal aliens or "independent contractors" to avoid paying workers' compensation benefits or payroll taxes.

The broom now apparently held by both labor and the administration is not only strong enough to sweep employer misconduct under the table but the entire insurance industry under the bus. Profitability and a vibrant insurance marketplace go hand in hand. You cannot have one without delivering the other.

The administration should know this better than most, given that its joint venture with the California Chamber of Commerce, also known as the State Compensation Insurance Fund (SCIF), was able to increase its reserves for old claims by $1 billion this past year and, while its market share is decreasing, still has more than 35 percent of this multibillion-dollar marketplace. Given that labor wants an exclusive state fund, it is a bit odd that this criticism is so virulent, because it is rather hard to make claims of obscene profits without SCIF being obscenely profitable. But then, it is equally odd for the administration to be silent on the issue of profitability when it knows just how close to disaster the market was in 2004.

Then again, at the end of the day, somebody has to be there to take the blame for the world not being perfect. If the insurance industry serves any purpose for policymakers in Sacramento, it remains the one institution uniquely qualified to keep people pointing fingers rather than looking in the mirror.