Maryland: Insurers laud decision not to take money from state comp fund

The American Insurance Association praised lawmakers in Maryland for dropping a provision that would have transferred $20 million in surplus funds from the state's Injured Workers' Compensation Fund.

The Maryland Legislature eliminated the measure in the Budget Financing Reconciliation Act that was aimed at helping lawmakers balance the state's budget. Proponents of the plan contended that it would serve as a prepayment of premium tax by the IWIF in exchange for the fund's privatization.Questions were raised about the plan's constitutionality.

"IWIF's surplus must remain beyond the reach of politicians seeking to narrow the state's budget gap," said Tammy Velasquez, vice president and director of state affairs for AIA. "The Legislature correctly recognized that IWIF's surplus belongs to its policyholders and not the state. A raid on IWIF's surplus, inappropriate under any circumstances, would not have contributed to the privatization of IWIF and would merely serve as evidence of ongoing state control. True privatization would require that IWIF operate on a level playing field with private insurers."

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According to the AIA, a bona fide privatization would require the IWIF's statutory authority to be repealed, resulting in either an assets sale, or restructuring; segregating and securing pre-privatization liabilities; imposition of the same premium tax to which the private market is subject; and conversion of the board from one designated by the governor to one designated by policyholders.

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May 13, 2010

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