Insurance Group Urges Repeal of Mo.'s Workers' Comp Second Injury Fund

June 14, 2007

In testimony today before an interim House committee, the American Insurance Association (AIA) today called for the repeal of the state's Workers' Compensation Second Injury Fund (SIF).

"With hundreds of millions in projected deficits just around the corner, Missouri should retire this relic of a compensation mechanism," said Steve Schneider, AIA vice president, Midwest Region. "Abolishing the Second Injury Fund would not impact the amount of benefits that any injured worker will receive. It simply means that going forward all benefits will be internalized to employers and their workers' compensation insurers, instead of being 'socialized' throughout the marketplace via a catch-all pool."

The Missouri House of Representatives Interim Committee on the Workers' Compensation Second Injury Fund held a hearing today to address solutions to the deficits and unfunded liabilities facing the state's SIF. Second injury funds have been abolished in 19 states since the early 1990's, most recently in Arkansas and New York.

Schneider said that repealing a SIF does not mean that its debt is erased. The SIF's unfunded liability still must be financed, usually in continued existing assessments, until all of its outstanding claims are paid and the deficit is resolved.

"There is no magic wand which can be waved over the problem until it disappears," added Schneider.

According to the Missouri Department of Labor and Industrial Relations, the Missouri SIF's liabilities are projected to increase from only $8 million for this year, to $227 million by 2011.

The following states have repealed their Second Injury Funds:

STATE YEAR

Alabama 1992

Arkansas 2007

Colorado 1993

Connecticut 1995

District of Columbia 1998

Florida 1997

Georgia 2004

Kansas 1993

Kentucky 1996

Maine 1992

Minnesota 1995

Nebraska 1997

New Mexico 1996

New York 2007

Rhode Island 1998

South Dakota 1999

Utah 1994

Vermont 1999

West Virginia 2003

The American Insurance Association represents approximately 350 major insurance companies that provide all lines of property and casualty insurance.

Source: AIA