Oklahoma Bill Would Allow State Agencies an Alternative to CompSource

Oklahoma state agencies would be permitted to purchase workers' compensation insurance on the open market instead of the state-backed provider under legislation now before the state Senate.

The House of Representatives approved H.B. 2658 by 54-43. An emergency clause to make the law effective immediately upon a signature from Gov. Brad Henry failed to receive a required two-thirds majority.

Currently, state departments and agencies must purchase their workers' compensation coverage from CompSource Oklahoma, the state fund. They can only go to another insurer if CompSource declines to write the coverage, said the bill's sponsor, state Rep. Dan Sullivan, R-Tulsa.

"We want to remove the basic stronghold that CompSource has on the state agencies," Sullivan said.

"Government-sponsored workers' compensation insurers often benefit from an express government preference, such as a statutory designation over a part of the market," American Insurance Association spokesman Willem Rijksen said. "AIA supports measures that allow private carriers to compete for business on a level playing field."

The Sullivan bill would also extend the tenure of a task force established to consider privatizing CompSource. Sullivan proposed legislation to privatize the carrier earlier this year, but pulled it, saying he did not have enough support (BestWire, March 17, 2010). Sullivan said he will try again in the next legislative session.

The legislature had formed a task force last year to consider privatizing the 77-year-old nonprofit, a self-funded insurer that provides coverage for businesses and government agencies (BestWire, Oct. 15, 2009). Oklahoma's Supreme Court would first have to determine whether the state's largest workers' compensation insurer by market share is a state asset. Insurance Commissioner Kim Holland had also previously supported mutualization as an option, mentioning it again in an interview with BestWire.

CompSource Oklahoma serves approximately 27,000 businesses and government agencies. It was created by the state in 1933, but it does not receive state-appropriated funding. The company reported $263.4 million in direct premiums written in 2008, according to BestLink. BestLink provides online access to A.M. Best's Global Insurance & Banking Database.

CompSource management has opposed privatization. Attempts to reach CompSource for comment were unsuccessful.

The top five writers of workers' compensation insurance in Oklahoma in 2008, according to BestLink, were: CompSource Oklahoma, with 35.2% market share; American International Group Inc., with 12.7%; Liberty Mutual Insurance Cos., with 10.2%; Hartford Insurance Group, with 4.7%; and Travelers Group, with 4.3%.

(By Sean P. Carr, Washington Correspondent: [email protected])