Governor-Elect Vows Change to Ohio Workers' Comp System

The winds of change are blowing through Ohio, and some experts believe the Buckeye State could be on the verge of a significant overhaul of its workers' compensation system, up to and including privatization.

By JOSHUA CLIFTON, a Chicago-based writer who covers workers' comp and disability issues

Riding the Republican tidal wave to victory in November, Governor-elect John Kasich is sending strong signals that reforming workers' compensation will be a critical component of his administration's agenda when he takes office in January. Kasich recently tapped state Sen. Steve Buehrer, R-Delta, to take the reins at the Ohio Workers' Compensation Bureau, marking the first change in leadership at the agency since Marsha Ryan was appointed by current Gov. Ted Strickland in May 2007.

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In a press conference to announce the appointment, Kasich said that employers--large and small--have steadily beat the drum for reform in recent years and that reducing workers' comp costs is critical to stimulating Ohio's stagnant economy.

"When the rates in other states are lower and when our system is a mess of red tape and anti-business promises, then the need for reform becomes urgent," he said.

The Ohio Chamber of Commerce and other employers groups believe Buehrer is the right man to helm the bureau, which has been mired in controversy in recent years. Despite serving as the human resources director for the agency in the 1990s, Buehrer was not connected with the 2005 investment scandal led by a prominent GOP fundraiser that resulted in a three-year investigation, 20 convictions and costs of an estimated $300 million.

TO PRIVATIZE OR NOT TO PRIVATIZE?

The biggest question ahead for employers in Ohio is whether the state--one of only four in the country with a monopolistic workers' comp system--will open its doors to privatization. A task force, created through a Senate resolution in 2009, is currently studying that issue and examining successful efforts made by West Virginia, Nevada and other states to open their workers' comp markets to private competition. A report was expected by the end of the year, but it has been pushed back until June 2011 to give the new administration the opportunity to provide input and suggestions.

Tony Seegers, director of labor and human resources policy at the Ohio Chamber of Commerce, doesn't believe that Kasich will pursue a wholesale privatization in the state.

"That doesn't mean that someone won't introduce legislation to privatize," he said. "But I think, overall, competition won't be the focus of the administration's policies, but rather efficiency. Kasich has said that there are areas of workers' comp that he believes private industry can improve upon and programs that it could better administer. This may mean allowing in a private managed care organization or interjecting some sort of competition."

Bruce Wood, associate general counsel and director of workers' compensation for the American Insurance Association, said that there hasn't been a lot of serious discussion about simply privatizing the entire market--that is, privatizing the Ohio fund in addition to allowing in a private market.

"The discussion, rather, has been around the nature and contours of the insurance mechanism," he said.

The association and its members, Wood said, believe in the merits of a private market and would support such a plan.

"It is really more of a political question," Wood added. "The policyholder community would need to be strongly supportive of such an initiative in order for it to succeed. We also feel that it's important that any legislation moving forward would provide for an overall level playing field in the private market, and actually encourage the private market to participate and blossom in the state."

Will the recent failed effort in Washington state to privatize the workers' comp market hurt Ohio's chances?

"That effort, which didn't get off the ground, had the important element of strong employer support, but it also had strong opposition by the governor, legislative branch and organized labor," Wood said. "That illustrates that employer support, in itself, isn't enough."

In Ohio, however, both legislative houses and the governor seem to be more inclined to support legislation that would open the state up to private insurers, Wood said. So in politics, anything is possible.

"I didn't think I would be alive long enough to see West Virginia not only allow private workers' comp insurers, but actually become an entirely private market," he said. "So it is hard to predict."

Read more at the WorkersComp Forum homepage.

December 10, 2010

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