Workers Comp nearer privatization

The Utah Senate has voted to privatize the Workers Compensation Fund — the state's insurance pool for workers injured on the job.

Thursday's preliminary vote came as Utah Attorney General Mark Shurtleff and WCF are negotiating a settlement to a lawsuit filed by WCF challenging the state's claim of ownership.

"There will be a monetary settlement as part of this transaction," said Sen. Curt Bramble, R-Provo and sponsor of SB165. "There are discussions on both sides of this issue to settle the issue of ownership. Whether that is $50 million or some other number, we will see that in a week or 10 days."

The bill passed a preliminary vote by a 22-7 margin and will receive a final Senate vote as early as today before moving to the House for public hearings.

The bill has been particularly contentious, pitting the executive branch — the governor's office, state treasurer and state auditor — against the fund first created by the state to help small businesses that could not afford worker-injury insurance in the open market. It is commonly referred to as the "insurer of last resort."

Utah's WCF has been phenomenally successful. It now has the second-lowest rates in the nation, and through a for-profit subsidiary called Advantage, it now sells workers compensation policies in neighboring states.

That practice has raised consternation in some states, which claim its tax-free status gives it an unfair and illegal advantage over worker compensation funds in those states. Idaho revoked Advantage's license to do business there, citing a state law that prohibits insurance companies that are directly or indirectly controlled by another state.

The out-of-state business is a lucrative part of WCF's portfolio that helps keep Utah rates down, and WCF, in order to keep that business, is seeking privatization of the fund to comply with the Idaho requirements.

SB165 changes the way WCF's board of directors are chosen, removing the governor's role of nominating the board. Instead, three members of the board would be chosen by the state insurance commissioner, three by the policyholders and the CEO, the seventh member, would be confirmed by the Senate.

That change, Bramble said, should satisfy Idaho's concerns while still retaining the fund's tax-exempt status from the Internal Revenue Service.

But the change makes some lawmakers uneasy, especially in light of conflicting information coming out of the governor's office.

"If we choose wrong, we will have catastrophic problems," said Sen. Lyle Hillyard, R-Logan. "To vote for this bill now with conflicting information floating around makes me extremely nervous."

Many lawmakers are concerned that if WCF goes private and eventually goes belly-up, lawmakers will be faced with the daunting task of creating a new WCF from scratch — something that would cost far more than the $50 million being mentioned in the settlement talks.

WCF currently has about $600 million in reserves to pay losses, and $250 million in equity in the fund. Who owns that equity — taxpayers or policyholders — is at the heart of the settlement negotiations.

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E-mail: spang@desnews.com