NU Online News Service Aug. 23, 3:53 p.m. EDT
Privatizing workers' compensation insurance in Ohio would give more choices to consumers and open up a new market for insurers, the Insurance Information Institute's (I.I.I.) president told state officials.
Robert P. Hartwig, president and economist with the I.I.I., said that with a move from a monopolistic state fund to a competitive market, the state workers' comp fund would continue to exist, but "buyers would have far more choices."
He made the case before Insurance Director Mary Jo Hudson and members of a task force chaired by State Sen. Tim Grendell, R-Chester Township.
The 23-member bipartisan task force represents employees, employers, insurers, managed care organizations, third-party administrators, local governments, business owners, lawyers and legislators, according to Sen. Grendell's office. The group's job is to evaluate the current workers' comp insurance offerings from the Bureau of Workers' Compensation (BWC) to determine if they are competitive with offerings available in other states and to examine the efforts made by other states to open their workers' comp markets to private competition.
"There's interest, at least on the part of some, of moving to at least a partial privatization of that market," Mr. Hartwig said. "The meeting went well, [and] the task force has been hearing from various experts in the area of workers' compensation over the last several of months on this particular issue "
He told NU Online News Service that 46 states allow competition. "Ohio is one of only four that do not, and it is by far the largest."
At the hearing, he said he discussed the history and the origins of the workers' comp market in Ohio. "A century ago, the decision to go with a monopolistic solution was quite reasonable," he said. "Given that few insurers wrote workers' comp, there was very little experience in that area and a number of other states had made similar decisions.
But of the original seven states that had monopolistic funds, he pointed out, three have partially or completely privatized their markets. "So the question remains, are employers–the buyers of workers' comp coverage–best served by a situation in which the state is the only seller?"
He estimated that with privatization, there would be between 65 and 80 private insurers likely to compete in the state.
Gauging the net impact on pricing is difficult, "because it would be a multiyear process and different factors would be influencing the market then. But we're not talking about dissolving the state fund. The state fund would continue to exist if the state wanted it to as a competitive marketplace, or would continue to exist as a residual market," Mr. Hartwig said.
The difference, he said, is that buyers of insurance would have "far more choices than they do today. Businesses choose their insurers for a variety of reasons, with price being but one factor."
Other factors are risk management programs designed to reduce loss and how the program dovetails with other commercial coverages.
But while it's easy to make a compelling argument that allowing competition is preferable–"That's the American way, after all"–Mr. Hartwig noted there are caveats. For one, smaller insurers would need to be given a level playing field on which to compete, "and the benefit to competition wouldn't be realized if a small number of large insurers were able to dominate the marketplace."
The state, he said, is now in the early stages of evaluating options and will be considering the issue through the remainder of 2010.
Mr. Hartwig added, "There aren't many growth opportunities in the [property and casualty] world, including the workers' comp world. This is one that some private carriers are looking toward."
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