Missouri looks to privatize workers compensation fund | Clegg ...

JEFFERSON CITY, Mo.?Missouri legislators are considering a set of bills that
could restructure Missouri Employers Mutual Insurance Co., joining other states
that have worked in recent years to privatize their workers compensation funds.

The bills would sever ties between the state and Columbia, Mo.-based MEM,
ending its status as a ?public corporation.? The legislation is expected to be
taken up again after the Senate returns on March 19 from spring break.

Jamey Murphy, chief of staff for state Sen. Jim Lembke?who sponsored two
privatization bills?said such legislation aims to help insurers compete with
MEM, which holds 16% of workers comp market share in the state.

?It?s an unfair advantage to competitors, in our minds, because (MEM is)
still tax exempt,? Mr. Murphy said.

Missouri?s largest workers comp insurer would lose its federal tax exemption
if it lost public status, and would have to consider cutting back on some
services that it provides to its policyholders?most of whom are small
businesses, President and CEO Jim Owen said.

MEM would have to decide ?whether a private company no longer having that
federal tax exemption would want to continue to do those public purpose mandates
that it has by statute,? Mr. Owen said.

Mixed results in other states

Other states recently have had mixed results in attempting to privatize their
state workers comp insurers.

A plan to privatize Denver-based Pinnacol Assurance stalled in February after
a task force appointed by Colorado Gov. John Hickenlooper?which included
policyholders, labor representatives, agents and public interest groups?raised
numerous questions about the proposal.

Arizona passed legislation in 2010 that will privatize the Arizona State
Compensation Fund next year, however Washington voters rejected a similar
proposal that same year for its monopoly workers comp system.

MEM?s operations

Mr. Owen said he?s hopeful that legislators will see that MEM operates
differently than other state workers comp funds. MEM is not a state agency, and
does not receive state funding, according to Missouri?s workers comp law.

Still, MEM has several connections to state government. Three of five MEM
board members must be approved by Missouri?s governor after their election by
policyholders, and the mutual insurer has the ability to issue revenue
bonds.

Unlike private insurers, MEM also is mandated by the state to underwrite
policies for all insurance agents in Missouri and operate a workplace safety
program for all policyholders.

Mr. Owen said MEM operates such programs at a ?significant administrative
cost,? and likely would put them on hold if the insurer became a private
corporation.

?The idea behind the exemption is if you?re getting that $3 million tax
break, you?re supposed to put that money back into the state,? Mr. Owen said. ?I
don?t know that a (for-)profit board would want to continue to do that.?

Bills? requirements

Missouri S.B. 660, introduced by state Sen. Eric Schmitt, would require MEM
to restructure itself as a private mutual insurer by Jan. 1, 2013. The bill also
would require MEM to pay $127 million in surplus premiums to the state?s general
revenue fund.

Similar bills introduced by Sen. Lembke?S.B.s 866 and 624?would give a
January 2014 deadline for MEM?s privatization, but would not require MEM to
contribute funds to state coffers.

Source: http://clegginsurance.com/missouri-looks-to-privatize-workers-compensation-fund

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