Election Results Draw General Optimism From Workers' Comp Community

Many workers' comp stakeholders are breathing a sigh of relief at the failure of California voters to legalize marijuana. At the same time, they are pondering the next move in Washington state after the rejection of a significant initiative there and hoping that result doesn't discourage Ohioans who might be considering a similar move.

"Overall, we hope there's some opportunity for changes in some states," following the 2010 elections, said Paul Blume, senior vice president of state relations for the Property Casualty Insurers Association of America. "We're optimistic that given the correction or tsunami, especially in the states, we're hopeful workers' comp laws will be changed where they need to be changed."

Efforts to open competition. One of the most closely watched election issues for the workers' comp community was in Washington state. An initiative that would have opened the state's workers' comp system to private insurers was defeated despite a strong push by business leaders and workers' comp insurers. Washington is one of four states with a monopolistic workers' comp system.

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Proponents said the measure would help lower workers' comp costs by allowing competition from private insurers. They said a lack of competition has resulted in an expensive and inefficient system that has pushed up costs despite a significant decrease in workplace injuries.

Opponents argued it would increase costs to small businesses in particular by requiring them to pick up the entire tab for workers' comp premiums. Washington employees currently pay a portion of the premiums.

The vote in Washington state came as Ohio lawmakers are considering whether to abolish the monopolistic state fund. The Ohio Senate created a task force last year to analyze the system with an eye toward possibly opening it to private insurers.

The election of Republican John Kasich as governor in Ohio may help insurers' efforts there.

"He may work to open that state to competition," said Bob Hartwig, president of the Insurance Information Institute. "It's by far the largest monopolistic state. Many insurers have been very interested in providing insurance there."

Gubernatorial elections. An estimated 26 new governors were elected this month. That will likely mean many new insurance commissioners.

"That's one of the biggest wildcards -- how will their approach to regulation be, including workers' comp," Hartwig said. "We won't really know until the new governors take over and appoint new [insurance] commissioners."

Two of the largest states with new governors, California and Florida, will be eyed carefully by workers' comp stakeholders.

The election of former California Gov. Jerry Brown has some watching with interest.

"He has a strong relationship with labor," said Joseph Paduda, principal of Connecticut-based Health Strategy Associates. "Labor has gone after improvements in indemnity compensation and other areas. I'd expect the management of the [California] Division of Workers' Compensation would change and that there will be some movement toward accommodating labor on issues they're concerned with."

PCI's Blume concurred. "We need to be on the defensive," Blume said. "There's potential for increased regulation on the workers' comp side."

In Florida, Paduda speculated that the election of Republican Rick Scott "bodes ill for Florida's workers' comp insurers and employers." Scott's opponent, Florida Chief Financial Officer Alex Sink had supported legislation to prevent price-gouging by physicians who dispense drugs to workers' comp claimants. "Given the background and strong support of Scott by individuals and corporations who profit from physicians dispensing drugs, I'll be very surprised if he signs any bill that curbs" the practice. Paduda said the practice has added millions to workers' comp loss costs.

In Illinois, the gubernatorial election results were unclear at press time. But Blume said insurers were hopeful that workers' comp reform could be forthcoming, regardless of the election outcome. "Both gubernatorial candidates have said we've got to bring business to the state, and one way is to fix the comp system," he said.

Congressional changes. The leadership change in the U.S. House of Representatives may ultimately have a positive impact on workers' comp insurers. "This tidal wave of Republicans was swept in by a storm of economic anxiety of high unemployment," Hartwig said. "To the extent there are pro-business policies adopted by the new Congress and that the president might be amenable to, one of the major benefits would be to workers' comp. If the unemployment rate goes down, this is an opportunity to restore billions of dollars in lost payroll exposures."

Hartwig said workers' comp would be the first line of insurance to benefit from any uptick in employment. At the same time, he warned that could be tempered by actions of the Federal Reserve Board.

In early November, the Fed announced it would purchase $600 billion in Treasuries, a move to increase demand for government bonds and, by raising their prices, push long-term interest rates down.

Read more at the WorkersComp Forum homepage.

December 6, 2010

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