Group divided on worker's comp privatization

A legislative task force recommended Thursday that Oklahoma's workers' compensation agency be privatized, but it was divided on how to achieve that.

Following months of study, the Task Force on the Privatization of CompSource Oklahoma drafted a list of recommendations for the future of the agency that include mutualizing it, meaning it would be owned by its policyholders, or selling it outright.

Legislation that would authorize the state to sell the agency would likely result in a lawsuit challenging the state's ownership of its assets, said Rep. Dan Sullivan, R-Tulsa, co-chairman of the task force.

Officials familiar with Oklahoma's worker's compensation system have told task force members that the state Supreme Court has never clarified whether the assets of CompSource - created by the Legislature in 1933 as the State Insurance Fund - are owned by the state or its policyholders.

"We should first determine who is the owner," Sullivan said. Officials of a Chandler-based insurance company said last month that the state could raise between $150 million and $200 million if it sold the agency to the highest private bidder.

The state has been experiencing a deepening budget shortfall that has pushed tax revenue $388.3 million below estimated collections during the first three months of the fiscal year that began on July 1. State agencies have been forced to reduce their budgets by 5 percent.

Three members of the task force, including Sullivan and Sen. Cliff Aldridge, R-Midwest City, also co-chair of the task force, recommended that CompSource be sold. Five others recommended mutualization.

The recommendations will be forwarded to the governor and legislative leaders by Dec. 1. The statute that created the task force says lawmakers intend to privatize CompSource no later than Dec. 31, 2010.

State law requires employers to have insurance to compensate injured workers. CompSource, a nonprofit insurer, said it has 26,000 policyholders - including state, county and municipal government agencies - and writes 35 percent of the workers' compensation policies in the state.

The agency specializes in small firms or those whose workers have dangerous jobs in fields such as the oil and natural gas and construction industries, which private insurers will not take because the chance of paying claims is too high.

But CompSource has been criticized over the years by those who believe its status as a state agency gives it an economic advantage over private insurers and that the state should not be in the business of writing insurance.

Others, including members of the task force, have expressed concern that privatization could erode CompSource's status as the state's workers' compensation insurer of last resort and force dramatic increases in workers' comp rates.

Dan Ramsey, a task force member and president of the Independent Insurance Agents of Oklahoma, said he believes the task force should not recommend selling Compsource merely as a way of raising revenue for the state during lean economic times.

"I think that's shortsighted," said Ramsey, who favors mutualization. "I don't think that was the purpose that CompSource or the State Insurance Fund was founded on."

Mike Seney, a task force member and senior vice president of operations for The State Chamber, said he favors mutualizing the agency similar to how the workers' compensation agency in Texas was privatized in 2005.

"That is closer to maintaining the original purpose of CompSource," Seney said.