Posted on 08 May 2013 by Neilson
Oklahoma lawmakers have passed legislation that will reform the operations of CompSource Oklahoma, the states workers' compensation insurer of last resort. The renamed CompSource Mutual Insurance Co. will begin operations as a mutual insurer owned by policyholders on Jan. 1, 2015, if the bill is signed into law.
The state Senate cleared the bill, HB 2201, with amendments the House agreed to on May 6. Gov. Mary Fallin is expected to have it on her desk for consideration.
The bill requires the revamped CompSource Mutual to pay premium taxes to the state and to follow Oklahoma Insurance Department regulations. CompSource Mutual also would have to provide workers compensation to any worker in the state. The bill would exempt the new company from the Oklahoma Insurance Rating Act and the Property Casualty Competitive Loss Cost Rating Act until three years after the company begins operation.
The Property Casualty Insurers Association of America sees the bill as an improvement over CompSource's current operations. This bill goes a long way toward creating a more competitive environment in the workers compensation market in Oklahoma, said Trey Gillespie, PCIs senior workers compensation director. However, because the state can still appoint members to CompSource Mutual's board of directors, PCI does not regard the bill as a true privatization effort.
The bill makes CompSource Mutual ultimately subject to rating laws and loss-cost reporting laws that in time should make the company a true market competitor, he said. It will reduce their competitive advantages in time a great deal, Gillespie said. Also, the bill would require CompSource to pay assessments to the Property and Casualty Insurance Guaranty Association.
Still, the bill leaves CompSource Mutual with some competitive advantages, compared with insurers in the private market, he said. Because the company is not subject to open rate-making on the same basis as private carriers, it is able to create classification systems that make it hard for employers to leave CompSource and provide an accurate picture on what competitors in the market should bid on business.
I suspect there will be ongoing efforts in the future to address the remaining competitive advantages CompSource has, Gillespie said. These include CompSource's ability to gain a federal tax exemption because the state appoints the majority of the CompSource Board of Directors and because CompSource is the residual workers compensation market in the state, he said.
Gillespie said the Oklahoma bill is part of a trend in states looking to reduce the competitive advantage for state workers compensation programs and create a more competitive environment for private workers compensation insurers. He said discussions in Maryland and Missouri regarding their respective workers compensation providers and the movement of legislation to privatize Texas Mutual represent movement toward creating more competitive markets.
CompSource Oklahoma is not rated by A.M. Best.