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Posts published in “Day: July 23, 2009”

Well, we have state insurance funds . . .

The widely-expressed fear of a federal health insurance fund - a federal health insurer of last resort - doesn't just seem but is simply weird. If nothing of the sort had been tried before, that, might be another matter; if we had to look solely to other countries for counterparts, that might give some understandable pause too. But there are already a number of more limited programs long in existence. The point that Medicare has done a similar job (it's been underfunded, but still does remarkably well with great efficiency) has been made often enough. But there are other examples too.

Odd that the state insurance funds have been so little mentioned in all of this. A lot of people in the country, and everyone in the Northwest, has been living comfortably with those for years, even if relatively few people pay a lot of attention to them.

A bit of history. About a century ago, a movement developed to provide health protection for workers and compensation (formerly workmen's, now worker's) for injuries and other health issues growing out of the workplace; the gain to employers was some immunity from lawsuits. Wisconsin passed a worker comp law in 1911, and all other states had done the same by 1948; about 98% of workers around the country are estimated to be covered. Among other things, this meant that employers had to provide some sort of insurance for their workers.

Nationally, much of this insurance was and remains private - conventional private insurers writing policies. But a dozen states, responding to concerns (we're talking about the 1910s and 1920s here) by businesses that they couldn't easily afford the premiums, decided to set up their own worker comp insurance funds, not to take over the market as a monopoly, but to provide an alternative to private insurance coverage that had become unaffordable. (Does this situation suggest any parallels to today?) The states doing this included Oregon, Washington and Idaho.

In Oregon, this is the State Accident Insurance Fund (SAIF), set up as a state agency in 1914, and in 1980 re-designated as a state-chartered corporation; but its board of directors is appointed by the governor. It writes about half of the worker comp policies in the state, covering somewhat over a half-million people. There has been some controversy surrounding it, including some legislative complaints about public disclosure. But when another insurer led a ballot initiative effort in 2004 to abolish SAIF and move to an all-private insurance system, 61% of the voters backed SAIF.

Idaho created the State Insurance Fund in 1917, as it site says "for the purpose of providing a reliable source of workers compensation insurance for Idaho employers and to provide security for the payment of benefits to covered workers. The law provides for the State Insurance Fund to be self-supporting from premium and investment earnings. The State Insurance Fund is not tax-supported and the State of Idaho is not liable for any indebtedness incurred by the Fund." There've been a few small dustups concerning the SIF over the years, but nothing massive. It too historically has insured around half of the worker comp cases in the state, with private insurers splitting up the other half.

Washington runs a worker comp insurance program through its Department of Labor and Industries, a direct state agency as opposed to the slight remove in Oregon and Idaho. In its description, "The agency manages claims and pays benefits out of an insurance pool called the Washington State Fund. The fund is financed by premiums paid by employers and employees." That's in line with the Oregon and Idaho programs.

In all three cases, private employers have the option of where to get their worker comp insurance, and not everyone goes for the state option. But the state option numbers do seem stable. One reason may find reflection in an incident in 2002 involving the Association of Washington Business, when the insurance fund there announced a 41% rate increase. Post-outcry, that increase was lowered to 29%, still large and of concern to the business community. But if you follow the link to the AWB's press release, notice the tone: There's a sense that these rates and conditions can be negotiable. They may have recognized that similar negotiations with a private insurer, where no political leverage is to be had, would be a more difficult proposition.

At the same time, these state programs haven't driven private insurers out of the market. A bunch of companies do this, either as a major part of their business or as a smaller stream. Options are out there.

Other states, California being one of them, have similar programs. None are perfect. Most seem to work at least reasonably well.

Well enough, in fact, that the thought has occurred here: Why not extend these worker comp programs to provide health insurance generally?