CompSource plan may be in trouble by Oklahoma legislation: Legislator wants state out of insurance business [The Oklahoman, Oklahoma City]

Mar. 7--Legislation calling for the sale of the state's workers' compensation insurance agency may be in trouble.

"We're continuing to look at that issue," said Rep. Dan Sullivan, R-Tulsa, the author of House Bill 2662, which calls for the sale of CompSource Oklahoma by Dec. 31, 2011. "Frankly, it's a matter of counting noses at this point to see exactly what our strategy's going to be.

"We are very much behind the effort to privatize CompSource because, frankly, the government should not be in the insurance business. We don't do this in any other line of insurance. We're looking at what are the options at this point to make that happen."

This week is the deadline for bills that started in the House or Senate to get out of their respective chambers. A similar measure, Senate Bill 2232 by Sen. Cliff Aldridge, R-Midwest City, is waiting to be heard on the Senate floor.

Lawmakers last year passed legislation calling for the privatization of CompSource, which has about 300 employees. Selling it is one option; another is mutualizing it, meaning it would be owned by its members.

"There's more of an inclination towards mutualization than sale at this point," Sullivan said.

New language calling for mutualization instead of a sale could be inserted in both measures, he said.

Higher rates feared

Opponents to selling CompSource say it would result in higher insurance rates for small businesses, state agencies and volunteer fire departments that can't buy workers' compensation insurance elsewhere.

Most Oklahoma small business members of the National Federation of Independent Business oppose the plan, based on a poll sent to members.

When asked whether Oklahoma should privatize CompSource, 55 percent of respondents answered no, while 25 percent said yes, and 20 percent were undecided, said Benny Vanatta, state director for the group's Oklahoma chapter.

"We listen to what our members say, and we take their message to the Legislature," Vanatta said. "And on this issue, their message was loud and clear.

"CompSource was created in 1933 to keep workers' comp rates competitive and help employers who couldn't afford private insurance, and it's just as important today as it was then. We realize that times are tough and some insurance company would pay Oklahoma a lot of money for CompSource, but putting the agency in private hands would lead to higher rates, and our members can't afford that."

The State Chamber's board of directors earlier came out against the proposal. Letters were delivered about two weeks ago to Sullivan and Aldridge before the committees they head advanced both proposals.

"Policyholders, small business owners that are members of my board, felt like the state doesn't own it," Mike Seney, The State Chamber's senior vice president of operations, said then.

Court may decide

Sullivan said the purpose of HB 2662 is to have the issue of whether the state may sell the insurer decided by the state Supreme Court. It's unclear whether the policyholders or the state owns CompSource, which is considered a state agency.

CompSource officials, who oppose the proposed sale, sent a letter to policyholders saying that a sale to the highest bidder would result in "a substantial premium rate increase" for many of them.

"I cannot see the logic in a sale of CompSource Oklahoma," said James Stergiou, the actuary for CompSource who served on a task force that discussed privatizing the agency. "Over the long term, I would expect a 10 to 20 percent rate increase for the overall market."

The task force, led by Sullivan and Aldridge, looked into the issue last year. Its members voted 5-3 for policyholders to own the system.

It's estimated that CompSource could be sold for about $350 million, Sullivan said. The insurer writes 35 percent of the workers' compensation policies in the state.

Any money from a sale would go to the state's general fund. An estimated $180 million of trust money held by CompSource would remain with the agency whether it is sold or turned over to its policyholders, he said.

If it were sold, the buyer would continue to provide required workers' compensation insurance to businesses and state agencies that private insurers will not take because the chance of paying claims is too high, Sullivan said.

A high-risk pool could be established, he said. The pool would spread high-risk agencies and businesses among the companies that write workers' compensation policies in the state.

U.S. Rep. Mary Fallin, R-Oklahoma City, who is running for governor, said last week she opposes the sale of CompSource.

Sullivan met last week with Gov. Brad Henry, who would have to sign legislation into law.

The governor does not pass judgment on a bill until he has had an opportunity to review the final version, said his spokesman, Paul Sund.

"It is not yet clear whether this particular legislation will make it through the legislative process given the questions that have been raised about it," Sund said.

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