Privatization of Utah Workers’ Comp Fund Fails as Legislature Adjourns

Private insurers won a victory this week as legislation to privatize the Utah Workers’ Compensation Fund (WCF) died in the final hours of the 2004 Utah legislative session.

However, the defeat of this legislation (SB 165) does not resolve the controversy regarding the Fund’s future. There is some indication that the governor may appoint a study committee to examine the issue over the summer. During the last two sessions, legislators in Utah have not approved measures that would take away the governor’s ability to appoint WCF’s board of directors and make other changes designed to move the Fund from state control.

WCF, like other such state funds, was originally created as a residual market to offer coverage to employers who could not get insurance on the open market. However, the Utah state fund has been allowed to become a quasi-governmental organization whose wholly owned subsidiary, Advantage, operates in several states. Some states such as Idaho have prevented WCF from expanding into their state due to the fund’s link to Utah state government. The situation in Idaho prompted the move by WCF to push for further privatization.

“We are pleased this measure failed,” said Ann Weber, regional manager for the Property Casualty Insurers Association of America (PCI). “Private companies should not have to compete with government-sponsored entities that have accumulated large surpluses due to their tax-free status.”
In other legislative action this session the House Business and Labor Committee defeated HB 221, which would have banned the use of credit-based insurance scores. Utah passed legislation on the use of credit in 2002.

PCI and others in the insurance industry worked with legislators and realtors to pass appropriate legislation concerning loss history databases. Senate Bill 52 prohibits the use of a consumer inquiry to increase a policyholders premium when that inquiry is not a demand for payment of a claim. “The legislation will enable insurers to use loss history databases to access prior claim information for use in underwriting and rating. Access to this information benefits consumers by ensuring that consumers who pose lower risk of loss do not subsidize higher risk consumers,” said Weber.