Mountain Climbing

It’s not that the public sector can’t do anything right; it can and does and it very often handles the jobs nobody else wants to do. Monopolies just aren’t good policy— whether they are held by a private firm or a public agency.

It’s also not good policy for a public agency to be given unfair advantages to “compete” for business with private firms. That’s not real competition any more than it is when private firms cheat or rig bids. Uneven playing fields tend to encourage new monopolies down the road.

West Virginian know all of this well from recent experience. Just look at what the Mountain State has done with its workers compensation market, which for a long time was monopolized by one state fund but which is now bursting with opportunity.

The former monopolistic state fund was reconstructed. It opened its doors as private insurer BrickStreet Mutual on Jan. 1, 2006. It remained the sole provider of workers’ compensation in the state until July 1, 2008, when the state opened the market to competition and BrickStreet was forced to compete with other private firms on a level playing field.

The result of this thoughtful, orderly transition is a healthy new private insurer, BrickStreet Mutual (which has paid back all the money the state gave it to get started), and a workers’ compensation market with some 150 new writers.

The move to private competition is not only lowering prices but also raising service levels and improving the treatment of workers’ claims, according to Insurance Commissioner Jane Cline.

During the transition, Cline’s office assumed the role of administrator of the claims of the state’s old fund that occurred before July 1, 2005. Cline says that the old fund was “saturated with fraud by providers, employers and employees.”

Since the switch, Cline says that claim protests have fallen 68 percent; claims disputes are being resolved in a shorter period of time; claims adjusters have fewer claims to manage, and the unfunded liability on “old fund” claims has dropped from $3.1 billion to $1.5 billion.

The open workers’ compensation market, which celebrated its first anniversary July 1, is also performing well, according to Cline. As of June 30, 2009:

• Overall premiums have dropped 30.3 percent, or more than $150 million.
• 198 different workers’ compensation insurance companies have filed rates and forms.
• Of those 198 companies, 154 have active workers compensation policies in the voluntary market.
• There are 120 policies in the residual market representing premium of about $1.9 million.
• More than 90 percent of all claims are ruled upon within the first 30 days.

In climbing from monopoly to marketplace, the Mountain State has shown how the public and private sectors working together can create new opportunities and elevate service for citizens to new heights.

Topics Claims Workers' Compensation