Counterpoint: Comp's Enduring Value
The state-run system has proved itself over the past 100 years and deserves to be strengthened.
So you want to privatize workers' comp insurance? You've heard that opening up the system to the private sector is the way to provide efficient services, lower employer premiums and injured workers headed back to work sooner? Back off!
If we've learned anything about privatization over the past decade, it's that we ought to be very careful what we wish for.
Remember that it's because of these workers' comp funds, part of a no-fault system and under state control, that employers have an incentive to improve jobsite safety and provide better working conditions for workers.
In workers' comp, we're dealing with lives, injured lives. As a line, workers' comp is closer to life and health than it is to property/casualty. As we know, though, private health insurers have already taught us a painful lesson: They prefer covering pristine lives.
But for those with lives already injured and broken -- lives with "pre-existing conditions," I believe the term would be, premiums are through the roof.
Is that what we want? Do we want employers paying exorbitant rates of the handful of workers with a higher injury risk profile? In Texas, where employers have the choice to opt out, some small employers aren't even bothering to provide workers' comp coverage. Is that what we really want? I don't think so.
Remember that the state-based workers' comp system is a no-fault safety net designed to prevent plaintiffs from suing employers. So far, it has done a good job of slamming the door on plaintiff's attorneys trolling for new business.
Look at what happened in the professional liability/medical malpractice markets 20 years ago. That's when prices shot so high in the wake of legal disputes that no carrier was willing to underwrite the malpractice exposure at prices anyone could afford.
The system's "exclusive remedy" protections prohibit injured workers from suing their employer for work-related injuries, precisely to avoid astronomical price hikes for employers. That would all disappear under a privatized workers' comp system.
Yes, some state funds have been poster children for mismanagement and fraud, and billions of dollars were wasted by state-run workers' comp funds. West Virginia, whose fund went bankrupt several years ago, comes to mind.
Yet, many other funds are solvent and, indeed, serve as incubators for new, progressive ideas: Just look at Maine, Oregon and Wisconsin.
The issue isn't whether funds are state-run or privatized. It is whether the funds are well managed, of which there are plenty to show us the way.
CYRIL TUOHY is managing editor of Risk & Insurance®. He can be reached at firstname.lastname@example.org.
November 1, 2012
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