Measure to Privatize Oklahoma’s Compsource Dead for the Year

The author of legislation authorizing the sale of Oklahoma’s workers’ compensation insurance agency said he does not have enough votes to pass it in the state House and that the bill appears dead for the year.

But Rep. Dan Sullivan, R-Tulsa, said he hasn’t given up on the plan to privatize CompSource Oklahoma. Sullivan said a task force formed last year to look into privatization will continue to study the idea as well as ways to make CompSource more competitive with private insurers.

“The idea of privatization is not dead,” Sullivan said. “We’re going to continue to work on it.”

At the very least, Sullivan said he will urge lawmakers to make it easier for state agencies and other CompSource customers to secure private workers’ compensation insurance and require CompSource to bid competitively against private insurers.

He also said CompSource should be regulated by the state Department of Insurance like private workers’ compensation insurers.

“At least we’re bringing the marketplace to a more competitive level,” Sullivan said.

State law requires employers to have insurance to compensate injured workers. CompSource, formerly known as the State Insurance Fund, was created by the Legislature in 1933 as the state’s workers’ compensation insurer of last resort, issuing the insurance to employers that private insurers wouldn’t accept.

Following a series of meetings last year, the task force recommended CompSource be privatized, but task force members were divided over how to do it.

Sullivan, Sen. Cliff Aldridge, R-Midwest City, and one other task force member recommended that CompSource be sold. But five members recommended mutualization, in which it would be owned by its policyholders, similar to plans adopted in Nevada and other states in recent years.

An actuary who studied CompSource last year said it could be worth up to $350 million if sold to a private insurer.

CompSource has 26,000 policyholders and writes 35 percent of the workers’ compensation policies in the state. Critics say the agency’s business has expanded over the years and its status as a government operation exempt from premium taxes and other costs gives it a pricing advantage over private insurers.

Sullivan and other supporters of privatizing CompSource say the state should not be in the business of writing insurance. But opponents have expressed concern that privatization could lead to dramatic increases in workers’ compensation insurance rates.

Attorney General Drew Edmondson, a Democratic candidate for governor, has said he opposes selling CompSource because it might make workers’ compensation insurance unaffordable for some small and startup businesses.

Stating that “CompSource has proven to be a strong economic development resource for Oklahoma businesses,” Jason Clark, CompSource president and CEO, said the agency opposes a sale of the organization.

Rep. Dave Dank, R-Oklahoma City, said schools, government agencies and a variety of high-risk employers like rural fire departments might find it impossible to find affordable workers’ compensation insurance if Compsource is absorbed into the private insurance market.

He said he favors mutualizing Compsource to get government out of the insurance business while still protecting the thousands of workers covered by CompSource.

Two task force members – Dan Ramsey, president of the Independent Insurance Agents of Oklahoma, and Mike Clingman, director of the Office of State Finance and executive director of the State Insurance Fund between 1991 and 1995 – said they also favored mutualization.