Monopolistic State Run Workers Comp Programs
State run Workers Comp programs have experienced many problems. The usual State Fund lacks a major component.
Workers Comp used to be a very simple process where benefits were paid, forms were filed, and everything was copasetic. My, how those times have changed. Workers Comp soon became a contentious process where attorneys, rehabilitation professionals, and other parties were added into the mix on a large percentage of the claims. The number of litigated or settled files skyrocketed.
The State Funds were not running their programs like a business. They were keeping their Workers Comp analyses very simplistic while companies such as Liberty Mutual(c), and Travelers (c) used very complex analyses to match the complex world that Workers Comp was becoming very rapidly. In other words, the State Funds were running their programs as a program not like a business with a profit motive.
Experience Mods, Classification Codes, Loss Costs, etc. were becoming a very exact science on what insurance carriers charged their insureds. State Funds ran up huge deficits where if the Fund was a carrier in a Rated state, the Insurance Commissioner would have put the carrier into receivership. West Virginia, for example, was running up a huge deficit very rapidly, but now the market is changing to a free-market system.
Not all monopolistic states are in that much trouble. However, I think that over the coming years, you will see a switch to private insurance from the monopolistic states that are in place.
One important note – The California State Fund is a quasi-governmental entity. SCIF is an insurer of last resort. However, they still operate as a carrier, not a fund. They are not a pure Monopolistic State Fund.
Next Up – Monopolistic States Examined
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