Problems Faced By State Run Workers Compensation Systems
The problems experienced by state run workers compensation systems have increased lately.
There are many challenges that are faced by state-run Workers Compensation programs.
The ones that are most prevalent as of now are:
- Solvency – Many state funds have had to have larger injections of cash from their respective state legislatures to survive
- Fraud
- Mismanagement
- Have To Take All Applicants – the funds have no right of refusal
- Lack of Accountability – See BWC Ohio for an example of a monopolistic state workers comp system with no accountability. I have written many articles on the BWC in this area.
- Not Using Good Business Models
- No Competitive Forces – Competition tends to make a company operate at a higher level of efficiency
- No Profit Motive – Without a profit motive, the bullet point above on solvency becomes more apparent
- Customer Service Issues
- Deficient Claims Handling Service – the lack of customer service goes hand-in-hand with less than desirable claim handling.
There are states that have converted or are now in the process of converting their state run Workers Compensation systems to privatized systems. Nevada has been successful and West Virginia is in the process with Governor Manchin taking the lead to push the system from the State Fund of Brickstreet(c) to an open market as of 07/o1/08. The West Virginia Insurance Commissioner Janet Cline has taken a tiger by the tail and has tamed it for the most part.
California’s State Fund (SCIF) was a quasi-state run system as they held an extremely high percentage of the Workers Comp insurance market for many years. Their new Insurance Commissioner Pozner is in the process of cleaning up SCIF.
Up Next – What is the main reason for the problems that State-run Workers Comp programs are experiencing?
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