The state of Oklahoma could raise between $150 million and $200 million if it sold the agency that writes worker’s compensation insurance to the highest private bidder, officials of a Chandler-based insurance company told members of a legislative task force on Oct. 7.
Representatives of National American Insurance Co. urged a panel that is studying ways to privatize CompSource Oklahoma to launch a competitive bidding process for the agency, which provides workers’ compensation insurance to high-risk businesses that cannot obtain the insurance from private companies.
Company officials presented a plan for selling the agency at a time when the state is experiencing budget shortfalls and state agencies have had to reduce their budgets by 5 percent because of declining tax revenue.
“It’s certainly given us something to think about,” said Rep. Dan Sullivan, R-Tulsa, who co-chairs the nine-member task force. “They see something there that has value.”
State law requires employers to have insurance to compensate injured workers. CompSource, a nonprofit insurer, said it has 26,000 policyholders – including state, county and municipal government agencies – and writes 35 percent of the workers’ compensation policies in the state.
The agency specializes in small firms or those whose workers have dangerous jobs in fields such as the oil and natural gas and construction industries, which private insurers won’t take because the chance of paying claims is too high.
But CompSource has been criticized over the years by those who believe its status as a state agency gives it an economic advantage over private insurers and that the state should not be in the business of writing insurance.
The task force is considering either selling the agency or mutualizing it, meaning it would be owned by its members.
Lance LaGere, National American’s chief operating officer, said a competitive bidding process for the agency should require bidders to buy CompSource’s assets and liabilities.
LaGere rejected suggestions raised in previous task force meetings that CompSource’s assets actually belong to policyholders who would benefit from the agency’s sale instead of the state.
“There is no question that CompSource is a state agency and if it is a state agency, its assets have to go to the state if it is dissolved,” LaGere said.
He said CompSource claims federal and state income tax exemptions based upon its status as a unit of the state and refers to itself as an integral part of the state.
This means if CompSource “is dissolved, sold or ceases to do business, its assets net of its liabilities revert to the state,” LaGere said.
He said any legal issues surrounding the agency’s relationship with the state should be resolved by the Oklahoma Supreme Court.
“The Legislature shouldn’t give away an entity worth at least $150 million just because someone says there may be legal questions,” LaGere said. “The stakes are too high just to walk away.”
Skeptics have said selling CompSource won’t be easy because it has a loss ratio of nearly 100 percent, the result of insuring employers whose workers have the highest chance of injury.
But LaGere, who said 40 percent of National American’s business is worker’s compensation insurance, believes the agency could become profitable by making it more efficient and working with customers to lower risks.
Private, commercial insurance carriers serve as the insurer of last resort for high-risk businesses in Missouri and Nebraska, he said.
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