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Legislative efforts to mutualize CompSource need more work

by The Oklahoman Editorial Board Published: March 5, 2013

The residual market includes new businesses without an established worker safety record. In other states, those companies are typically insured by a state fund for only a year or so. By then private carriers have enough data to set rates for those consumers, prompting those companies' exit to the private market. In comparison, the anticompetitive advantages enjoyed by CompSource have made it the Hotel California of workers' comp: Companies may enter any time they like, but they can never leave. This outcome seems likely to continue under the privatization plans being discussed.

Oklahoma must provide coverage for the residual market, but that doesn't require a designated carrier of last resort. In auto insurance, an assigned risk pool handles residual coverage. In that system, all carriers basically take turns writing residual coverage to equitably share risk.

Policymakers must be mindful that anti-competitive protectionism usually increases consumer costs in the long run. Or it generates unintended consequences when prices are kept artificially low (consider Fannie Mae and Freddie Mac's role in causing the Great Recession).

Instead of creating a level playing field and allowing the free market to sort things out, these privatization plans appear to continue tipping the scales in favor of CompSource, setting competitors up for failure. This could steer Oklahoma to near-monopoly control of its workers' comp market — while easing state oversight of the market's biggest player.

Here's an alternative: Treat all companies the same.

by The Oklahoman Editorial Board
The Oklahoman Editorial Board consists of Gary Pierson, President and CEO of The Oklahoma Publishing Company; Christopher P. Reen, president and publisher of The Oklahoman; Kelly Dyer Fry, editor and vice president of news; Christy Gaylord...
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