Oklahoma Considers Privatizing State-backed Workers’ Comp Insurer
In a recent meeting of a task force considering privatizing Oklahoma’s state-backed workers’ compensation insurer, CompSource Oklahoma, Nevada insurance executives said workers’ comp rates have dropped in that state since the agency providing such insurance was privatized 10 years ago.
Nevada opened up its workers’ compensation insurance market when it transformed the agency from a monopoly to a mutual insurance agency owned by its policyholders, said Douglas Dirks, president and CEO of Employers Holdings Inc.
“Rates have gone down fairly consistently since the market was opened,” Dirks said.
The Oklahoma Legislature created Compsource – formerly known as the State Insurance Fund – in 1933 as the state’s workers’ compensation insurer of last resort, issuing policies to employers that private insurers will not accept.
State law requires all employers to have insurance to compensate injured workers. But some state lawmakers believe Oklahoma should not be in the business of writing workers’ compensation insurance and that a state agency like CompSource should not compete with private insurers.
The legislative task force members are considering selling the agency or mutualizing it, meaning it would be owned by its members. CompSource has about 26,000 policyholders and writes 35 percent of workers’ compensation policies in the state. Other employers are insured by private companies or are self-insured.
Dirks said Nevada officials opted to mutualize its agency after deciding against a stock company because the state is prohibited from owning stock in a private company.
“We believe that what we did in Nevada worked very well for us,” Dirks said. The company’s share of the workers’ compensation insurance market fell from 65 percent to just 6 percent, but Employers Holdings now provides insurance to small businesses in 30 states, he said.
Nevada officials worked with the Internal Revenue Service to determine that policyholders’ share in the new mutual company would not be a taxable transaction and obtained guarantees that all the agency’s workers still would have a jobs with the state, said Ann Nelson, executive vice president of Employers Holdings.
“Every single one of our employees found a home,” she said.
The statute creating the Oklahoma task force requires it submit a report of its findings to the governor and legislative leaders by Dec. 1, including suggestions for any legislation. The statute says lawmakers intend to privatize CompSource no later than Dec. 31, 2010.
Still, the report may recommend the idea be studied longer, said Mike Seney, a task force member and senior vice president of operations for The State Chamber, a business and industry group that represents 1,500 employers statewide.
“I think it can work but it has to be done right,” Seney said. “I would rather do it right than rush into it.”