By now Ohioans are well aware of the numerous problems plaguing the state’s Bureau of Workers’ Compensation- the Coingate scandal, the bad investments, the mismanagement- but few know what to do about it. Ohio’s state legislators are currently debating reform and restructuring to the program. One idea beginning to surface is that of privatizing the entire Bureau and turning over responsibility of handling claims and dispensing benefits to a private mutual company.
States began creating workers’ compensation funds around the turn of the century, however they began to divest from workers’ compensation in the 1980’s and 90’s. By now, most workers’ compensation systems are handled by a quasi-public firm. Currently, Ohio is one of only five states nationwide still running workers’ compensation with a total state-run monopoly. One of those five, West Virginia, is set to privatize their state-run system and remove itself from the insurance industry by the end of this year.
With Governor Joe Manchin’s signing of SB 1004 on February 16, 2005, beginning next year businesses within West Virginia are estimated by Manchin to enjoy a 15% reduction in their premiums, which is estimated to save the state’s employers $160 million, according to a report his office issued that month. The law also allows the state to bond out of $3 billion in unfunded workers’ compensation liabilities while at the same time transferring the whole workers’ compensation bureaucracy to a private firm by the beginning of next year.
Another state leading the way in this area is Nevada, which went private in 1999. Now Nevadans are reaping the benefits of a free market insurance system which has contributed to one of the most friendly business climates in the nation, says a September 2005 article by Sierra Pacific Economic Development. By privatizing the 86 year-old system, Nevada freed up 800 positions from state government and saved taxpayers $2 billion annually.
Between 2002 and 2004, Nevada’s employers saw a 12% drop in their workers’ compensation premiums, which Sierra Pacific describes as continuing a trend in the state- 20% since privatization. Next-door neighbor California, on the other hand, has seen a 90% increase in their premiums since 1999 and as found by an independent study by the State of Oregon, are the highest in the nation.
While America’s workers’ compensation premiums have gone up in recent times, Nevada’s private system has sent them down. Sierra Pacific quoted Derek Reinke, research analyst of the Oregon Department of Consumer and Business Services as saying of Nevada’s system “it looks like you managed to have a rate decrease while most of the folks were going up.”
West Virginia and Nevada’s benefits from privatization could be applied to Ohio. Employers can be saved over $300 million annually from this system, and can be relieved from one of the nation’s last remaining monopoly systems. They would also see their premiums drop (currently the fifth highest in the nation according to Oregon’s study), which is a major factor in where businesses choose to locate themselves. If nothing else, the State of Ohio can quit lagging behind the wave of change and join the rest of the country in privatizing at least part- if not all- of their system. The new private, competitive system will ensure lower premiums to employers. This will meet the need of attracting new and diverse businesses to the state of Ohio and put an end to the state’s long struggles against flight and drain of capital, allowing for benefits to all Ohioans.
