Senator proposes private status for Missouri Employers Mutual [Columbia Daily Tribune (MO)]

JEFFERSON CITY -- A bill to privatize Missouri Employers Mutual Insurance Co. and strip away its public mission as a workers' compensation insurer for small businesses was introduced this week by Sen. Jim Lembke, R-St. Louis.

The need for the company, called a "public corporation" in state law, has passed, Lembke said. Missouri Employers Mutual is now the dominant workers' compensation carrier in the state, with almost six times the market share of its nearest competitor.

"Because of the way it was created and the statutory language, it has an unfair competitive edge because of its tax status," Lembke said.

The Columbia-based Missouri Employers Mutual has tax-free status because it was created by state law and because the governor has authority to appoint a majority of its board members.

The company, which had built itself quietly from small beginnings to its commanding market presence, made news last year as a result of board member scandals and leadership crises. Two longtime board members, both now dead, were indicted in federal court. The remaining board members fired former Gov. Roger Wilson as company president without explanation after the company's most profitable year ever.

In his place, the board installed St. Louis attorney Jim Owen, a school classmate and friend of Gov. <person>Jay Nixon. Owen was given the job permanently in December.

The turmoil drew the attention of state Auditor Tom Schweich, who is conducting the first-ever audit by his office of the company.

Missouri Employers Mutual was created by the General Assembly in 1993 in response to a crisis in workers' compensation insurance. Rates were rising, and small employers found few choices for coverage. The company was given a $5 million state loan and directed to serve that market.

It repaid the money soon after opening in 1995 and continued growing. Lembke's bill would convert it to a regular mutual insurance company, subject to taxes and with no special status in state law. The new company would retain the assets that remained after conversion and be barred from using the same name.

It is no longer needed, Lembke said, "not in the current market as it has evolved."

Sen. Kurt Schaefer, R-Columbia, said he hasn't studied Lembke's bill thoroughly and hasn't decided whether to support it. But he said he is worried small businesses could find themselves squeezed again if they have no dedicated carrier.

Missouri Employers Mutual is directed by law to focus on covering companies that pay less than $10,000 a year in premiums.

"There is a public policy reason to have Missouri Employers Mutual" because state law makes it a crime for employers to not have workers' compensation coverage, Schaefer said.

The company itself hasn't taken a stand on the measure, spokeswoman Jennifer Peck said today in an email.

"We're carefully studying its potential impact," she said. "Our focus -- as always -- will be to strive for the very best outcomes for the more than 12,000 policyholder owners who depend on MEM."

Reach Rudi Keller at 573-815-1709 or e-mail [email protected].

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This article was published on page A1 of the Wednesday, January 11, 2012 edition of The Columbia Daily Tribune with the headline "Senator proposes dropping MEM's public status: " Click here to Subscribe.