Vote Against Privatizing Workers’ Comp Gets Mixed Reactions in Montana

March 29, 2004

A special committee’s recommendation against privatizing the Montana’s main workers’ compensation program is a combination of good news and bad news for the people involved.

The State Fund’s 265 employees will be relieved to learn that their jobs are secure,” Fund President Laurence Hubbard said after the decision came at Friday’s meeting.

“Now we can focus on what it is we do.”

Some private insurers, however, complain that the State Fund has an unfair advantage over for-profit insurance companies.

“It comes down to: Why is the state in the insurance business?” said Stephen Beckham, vice president of government affairs for Liberty Northwest insurance.

The study committee, created by Senate Bill 304 in the 2003 Legislature, was charged with studying the possibility of selling the Montana State Fund or otherwise tweaking the laws that govern the agency.

Employers are required by state law to have worker’s compensation insurance. It pays workers for lost wages and medical bills when they are injured or sickened on the job.

The 1989 Legislature split work-comp into two entities, the Montana State Fund (or the new fund) and the Old Fund, to deal with a $500 million potential deficit. The Old Fund handles claims for workers injured before 1990.

The committee voted Friday to take the much bigger Montana State Fund off the discussion agenda at Friday’s meeting and limited the sale consideration to the Old Fund. No decision was reached.

The State Fund came under scrutiny in the 2003 Legislature after news stories revealed its former chief, Carl Swanson, already the highest-paid employee in state government, also had a uniquely generous retirement account, far more lucrative the plans for other state employees. Swanson resigned in February after canceling his unusual retirement benefits.

Sen. Royal Johnson, R-Billings, chairman of the committee, said Friday that he voted against selling the State Fund because no one could find a fair, affordable way to offer work comp insurance to every business.

Private companies can refuse to sell insurance to businesses that might be risky, like farm workers or roofers or other employers with a higher rate of on-the-job accidents. Without the State Fund to sell insurance to those employers, some feared private insurance companies might agree to insure those businesses only if they could jack up their rates beyond what was affordable.

Teamster representative Don Judge told the committee members he supported their decision, and he encouraged them to look carefully before deciding about selling the Old Fund.

A consultant told the committee the state would have a difficult time getting rid of the Old Fund’s $106.3 million in liabilities.

It is unlikely that any buyer or reinsurer would be interested, Bruce R. Hockman of Philadelphia told the committee. In addition, he said, the liabilities could grow because of unpredictable factors such as advances in medical technology, fluctuating interest rates and court rulings.

Copyright 2004 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Topics Workers' Compensation

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