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Monopolistic State Funds vs Competitive State Funds


Monopolistic vs Competitive State Funds

All competitive state funds are a hybrid sort of insurance carrier.

A few weeks ago, I posted on whether State Funds are necessary for Workers Compensation coverage. One of the blog readers posted a response that pointed out that State Funds should be analyzed by splitting the group into Monopolistic and Competitive. I think that was a great request.


American Flag Competitive State Funds
Wikimedia Commons – Frydolin

Monopolistic state funds do not have competitors attempting to write Workers Comp coverage. Employers must secure policies from a quasi-governmental agency. Monopolistic state funds have fallen out of favor due to misappropriation or mishandling of funds such as in the case of the BWC in Ohio.

The remaining four states that are still monopolistic are North Dakota, Ohio, Washington, and Wyoming. Washington has recently passed new Workers Compensation legislation. Unless I am mistaken, Washington did not open their market to the free market system.

I am not a big proponent of monopolistic state funds. This is likely due to the transformation of Nevada and West Virginia to open markets for Workers Compensation. These two states have been very successful in opening their Workers Compensation system to the voluntary insurance market.


Competitive State Funds compete with other insurers as part of a free voluntary market system. The states with these funds are Arizona, California, Colorado, Hawaii, Idaho, Kentucky, Louisiana, Maine, Maryland, Minnesota, Missouri, Montana, New Mexico, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, Texas, and Utah.

Vector of Competitive State Funds landscape
Wikimedia Commons – PaulaD.MezaD

They often function as the insurer of last resort when the employer has an E-Mod or X-Mod that is too high to place in the voluntary market. The other time a competitive state fund functions as the insurer of last resort is when the voluntary market will not write a certain group of employers such as trucking companies or temporary employment agencies.

California’s SCIF is the largest competitive state fund. At one time, SCIF was the largest writer of Workers Comp in the nation. One of the main complaints against competitive state funds from the voluntary market is that they are competing against the taxpayers of a state when trying to underwrite a quote for a certain employer.

One of the things that I have noticed about competitive state funds is they seem to be much more expensive than their voluntary market counterparts.

The bottom line is that Competitive State Funds do have their place in a voluntary free-market Workers Compensation insurance system. I am not so sure of a monopolistic system due to the successes of WV and NV in converting to a free market system.

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One Response

  1. I believe some state funds as listed in the blog are not tax payer supported. For instance in Maine MEMIC, Maine Employers Mutual Ins Co., was created by an act of the legislature but it is a mutual company owned by the policyhholders. Any surplus goes back to the policyholders and any deficit is made up by the policyholders. The State has no statutory right to its funds. I believe RI and Hi are the same but I am less familiar with them.


James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications


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