Should workers’ comp be privatized?

WOOSTER -- Should Ohio be like a majority of states and privatize workers' compensation insurance?

Barry Henderson, vice president of Ports Petroleum, put that question to Lt. Gov. Mary Taylor and Ohio Bureau of Workers' Compensation Administrator Steve Buehrer at a business roundtable Monday at the Wayne County Public Library.

Henderson was appreciative of recent reforms at the bureau, which have benefited Ports. Though the BWC has made a lot of progress, it has not gone far enough, he said. Ohio is one of only a handful of states with a government-run workers' compensation program, and Henderson wanted to know if there are any efforts to privatize it.

The issue is something then-gubernatorial candidate John Kasich looked at before voters elected him, Taylor said. The policy team's goal was to privatize workers' compensation, however, there are a lot of hurdles, including having to amend the state constitution.

The measure likely would pass the state Legislature, but it would end up on the ballot. "It's going to be challenged," Taylor said. The issue has been on the ballot before, and it was overturned handily, she added.

"I don't think that's the pathway today to improving the system and trying to get you more bang for your buck as a business owner," Taylor told Henderson. Most of the people and groups one would think want it privatized do not, she added. Most insurance companies do not want workers' compensation privatized, said Taylor, who also serves as director of the Ohio Department of Insurance. "It's an interesting thing. You would expect they would want it."

Buehrer, who served in the Ohio House of Representatives with Taylor and served as a state senator, said during his time in the Senate he brought together proponents and opponents to discuss the merits.

However, when voters had the opportunity to voice their opinions at the ballot, they twice rejected it, the last time in the 1970s, Buehrer said, adding not all business groups are in favor.

"I think an argument can be made why it is a good idea," Buehrer said. States where workers' compensation has been privatized have seen lower premiums and other benefits. But, what will happen with Ohio's group rating discount? No other state has a "generous" discount, he said. Also, who will serve as the residual carrier if the insurance provider does not want to carry a small company? Will the bureau have to do it?

There are some benefits to having a government-run program, Buehrer said. If the BWC operated like a private insurance company, it would have to place in reserves the full amount of its liabilities. Today, the bureau has $32 billion in liabilities and $24 billion in cash.

While it seems as if the bureau is underfunded, because it can hold its cash, it can invest it. The assumption is the BWC will earn 4 percent, and it has been earning about 11 percent, Buehrer said.

Also, if the BWC converts to a private system, then it will have to fully fund its liabilities, which means businesses will have to pay more to make up the difference, Buehrer said. "We would lose investment income, we don't pay taxes and we don't pay shareholders." Those in other states pay a portion of those costs in their premiums.

"If it happened, it would need a full debate," Buehrer said. "Ultimately, voters will decide."

Paul Williams, president of Wooster Motor Ways, revisited an issue he has discussed with Taylor at an earlier business roundtable dealing with workers' compensation for drivers who cross state lines.

When Wooster Motor Ways' drivers leave Ohio, they need workers' compensation coverage issued by those other states. It is costly, and Williams wanted to know about changing the situation.

Buehrer said this matter will require legislative action, not a constitutional amendment. Ohio will accept workers' compensation coverage from other states if they, in turn, accept Ohio's. However, Pennsylvania and Kentucky decided not to recognize Ohio's coverage.

The state is looking at the possibility of seeking proposals from insurance carriers who will be able to offer workers' comp coverage in the other states. This carrier would "stand in the (bureau's) shoes in other states," Buehrer said. The premiums might be higher.

Reporter Bobby Warren can be reached at 330-287-1639 or [email protected]. He is @BobbyWarrenTDR on Twitter.