Leavitt warns lawmakers about privatization

Reiterating the position he announced over the weekend, Gov. Mike Leavitt on Monday released the details behind his insistence that the state's Workers Compensation Fund forego efforts to fully privatize.

In a letter addressed to the Utah Legislature, Leavitt urged lawmakers to resist making any statutory changes that would allow the fund to sever its ties with the state.

"We have come to the conclusion that rather than privatize WCF, the state needs to refocus and redefine WCF's original core mission to serve Utah employers as a nonprofit, tax-exempt insurer of last resort," the letter said.

The fund has sought a severing of its ties to the state because it is in jeopardy of losing $30 million in business that it has outside of Utah.

That business is written by its for-profit subsidiary Advantage, which Leavitt said has been "aggressively" courting Workers Compensation business elsewhere.

Leavitt, whose family is in the insurance business, said that aggressive courtship, which has raised the ire of private-sector insurance carriers, threatens the fund's tax-exempt status from the federal government.

"We have come to believe that maintaining the tax exemption is extraordinarily important," Leavitt wrote. "The tax exemption helps keep rates low, helps guarantee the long-term stability of WCF, facilitates the availability of insurance and on the whole gives a significant boost not only to the residual market but also to Utah employers generally."

Originally established in 1917 by the Utah Legislature with an initial $40,000 investment, the Utah Insurance Fund was set up to be the carrier of last resort — to serve that residual market of employees and employers who can't get workplace insurance elsewhere.

The Workers Compensation Fund eventually evolved into a quasi-state agency, with the governor retaining the ability to appoint its board of directors.

It is that appointment power that is dooming the WCF's prospects of writing insurance in other states.

At issue, however, has been assuring there remains a carrier of last resort and what return, if any, the state gets for its "founding" equity in the fund.

Leavitt's letter said he doesn't believe the fund can continue to operate its for-profit subsidiary without losing its tax-exempt status. He wants the fund to withdraw from that business and divest itself of the subsidiary.

But the fund's chief executive officer and top legal counsel believe otherwise, as do certain lawmakers.