Workers Comp Fund of Utah wants to be privatized

Workers Comp Fund of Utah wants to be privatized. The issue is explained in the first article and the background is given in the subsequent articles. I also put in one very recent article related to workers comp and undocumented workers.

February 23, 2004, Monday

SECTION: Final; Pg. B1

LENGTH: 1026 words

HEADLINE: Workers Comp bill is lobbied for hard; Is it a done deal? The governor and the fund's competitors hope not; WCF lobbies for privatization

BYLINE: Kirsten Stewart , The Salt Lake Tribune

BODY:
It has been said that Utah will pay a price if it surrenders control of the Workers Compensation Fund (WCF).

In less than two weeks, a proposal to do just that has advanced dramatically through the 2004 Legislature. If it passes, Gov. Olene Walker and other state leaders fear the privatizing of the WCF could jeopardize the insurance safety net for 30,000 Utah businesses that cover on-the-job injuries through the fund.

But the WCF's competitors say the measure is as good as law, and the price already paid.

Trading on the state's "good will and a federal tax exemption," the quasi-public, nonprofit insurer has accumulated $ 829 million in assets that it has leveraged to lobby elected officials in Utah and Idaho, says Keith Bateman, vice president of Property Casualty Insurers Association of America, an insurance trade organization in Des Plaines, Ill.

While perfectly legal, these lobbying efforts alarm Bateman. "Why is this privatization scheme so important that they have 10 to 15 lobbyists working on it? It makes you wonder."

Over the past six years, the WCF has wined and dined elected officials, mostly in Utah, pumping more than $ 107,000 into campaign accounts and spending thousands more annually on a Delta Center suite to entertain lawmakers at Jazz games. Utah House Speaker and gubernatorial hopeful Marty Stephens has netted $ 20,000. Idaho Gov. Dirk Kempthorne has pocketed $ 7,500. And former Utah Gov. Mike Leavitt, who was opposed to cutting the WCF loose, received $ 12,000.

There is no telling how much the fund has shelled out hiring a stable of high-profile lobbyists, nor how much of the $ 82,000 these lobbyists report spending over the past six years went to wooing lawmakers on behalf of the WCF. Some of that cash was spent entertaining other clients.

In addition, the WCF shelled out more than $ 1 million last year on consultant studies and legal briefs to aid Utah officials in their decision-making. And the fund easily could spend $ 1 million more retaining two high-priced law firms to represent them in lawsuits pending in Idaho and Utah. The Utah case, a dispute over whether the state or the fund's policyholders own the WCF, is scheduled for a first hearing today..

Officials with the WCF defend their influence peddling.

"The reason you lobby is to suggest needed changes. In this case we're suggesting a change that would benefit Utah companies and their employees," said the fund's legal counsel Dennis Lloyd. "We're regulated by the state so it's very logical that we discuss efforts to adapt to a changing market with legislators."

Since its creation in 1917, the WCF has steadily eased away from state control and now wants to sever its last tie: the governor's power to appoint its board of directors.

Doing so would allow the fund to continue to write insurance in Idaho through its for-profit subsidiary Advantage. Advantage's clients, many of them multistate companies with operations in Utah, are the WCF's most lucrative. They subsidize coverage for small, risky businesses in Utah that private insurers consider too costly to cover, said Lloyd. The WCF's federal tax exemption also helps the fund shoulder this so-called "insurer of last resort" burden.

Trouble is, the WCF violates Idaho's ban on government-owned or -controlled insurers.

Utah Sen. Curtis Bramble is sponsoring Senate Bill 165 which he believes will solve Idaho's concerns while preserving the WCF's tax breaks. But opponents say Bramble's plan sounds too good to be true, especially in light of conflicting information coming from Idaho.

Bramble's bill, which already has passed the Utah Senate, does appear to have Idaho Gov. Kempthorne's support.

"The governor is trying to find an option for the company to continue doing business here," said Kempthorne spokesman Michael Journee. "We've heard complaints from businesses that will be out of insurance without Advantage."

But Idaho's insurance regulators have reservations about Utah's disputed ownership in the WCF. An administrative law judge is weighing Bramble's privatization proposal, but is hesitant to rule on hypotheticals, said Shad Priest, chief administrator at Idaho's Insurance Department.

"What makes this slippery is it seems like every day WCF comes up with a new approach to coming in compliance with our statute," Priest said.

Utah's executive branch officials -- the governor, state treasurer and auditor -- have, for now, rejected the WCF's offer to settle the ownership dispute for $ 50 million.

Bramble wants lawmakers to pass his bill with assurances that it won't go into effect until next summer, pending favorable rulings in Idaho and Utah.

"It's like the chicken or the egg, something has to come first," Bramble says.

But competitors worry Bramble's bill could be the "Trojan horse" that allows the WCF to steal the state-created fund -- along with its corner on the Utah market and $ 220 million surplus.

"It's tough enough competing against the fund now," Bateman says. "But if it somehow managed to wiggle out of covering the residual market, it would be impossible."

Says Gary Thorup, an insurance industry lobbyist: "Once the umbilical cord is cut, the baby can not be reattached to the mother."

Were the WCF free to cherry pick high-yield clients, the fund's executives could fast become rich. WCF Chief Executive Officer Lane Summerhays already earns $ 340,000 a year. The rest of the WCF's nine executives average $ 145,000 annually. But Lloyd says Utah law prohibits executives from "any personal enhancement" through privatization.

What's more, he said, the WCF has committed to the residual market by doing whatever it takes to retain its federal tax exemption.

In the WCF's defense, West Valley Democrat Sen. Ed Mayne notes that Utah relinquished ownership of the insurer in 1988 when it was losing money and state leaders feared having to pay for a bailout.

"We've already cut the cord," says Utah's AFL-CIO president. "Let's face it, the argument with the state is simply a monetary thing. Utah wants the money to help balance the budget."

kstewart@sltrib.com

LOAD-DATE: February 23, 2004

February 13, 2004, Friday

SECTION: Final; Pg. A15

LENGTH: 366 words

HEADLINE: Legislation on Workers Comp Fund may be revived

BYLINE: Kirsten Stewart , The Salt Lake Tribune

BODY:
Idaho's Insurance Department has, apparently, changed its mind about a proposal to privatize Utah's Workers Compensation Fund.

The development, coupled with verbal assurance from the IRS that the Workers Compensation Fund will retain its federal tax exemption if privatized, may have revived a legislative bill to cut loose the state's ties to the fund.

Two weeks after rejecting Sen. Curtis Bramble's latest attempt at privatization, Idaho insurance regulators are now saying they "essentially agree" with the proposal. News of Idaho's change of heart arrived Wednesday in a letter from Idaho Deputy Attorney General Thomas Donovan.

Bramble, R-Provo, circulated the letter on Thursday to legislative leaders and Gov. Olene Walker's staff in preparation for the first round of debate on his bill, which comes before committee early next week.

The bill was originally slated for a hearing before the Senate Business and Labor Committee, but Bramble moved it to the Revenue and Taxation Committee that he presides over as chairman.

The fund provides on-the-job injury insurance for employees of about 30,000 Utah companies, including those considered too risky for coverage by private insurers.

The agency has been steadily distancing itself from state governmental control and now wants to cut its last tie -- the governor's power to appoint its board of directors -- so it can continue to write insurance in other states through its subsidiary, Advantage Workers Compensation Insurance Co.

Bramble -- per Walker's advice -- is proposing that Advantage have its own board of directors to be appointed by policyholders and that the fund pay federal income taxes equal to the amount that Advantage would have incurred were it not for the tax exemption.

Lawmakers, though, have yet to seriously address Utah's economic stake in the fund, which was created with taxpayer dollars and nurtured under a federal tax exemption.

"Last year the settlement offer was $ 50 million," said Senate Majority Leader Michael Waddoups, R-Taylorsville. "But I've heard people say we can get $ 75 million and others say it's well worth more than $ 500 million."

kstewart@sltrib.com

LOAD-DATE: February 13, 2004

February 14, 2004, Saturday

SECTION: Utah; Pg. A10

LENGTH: 248 words

HEADLINE: Panel OKs bill severing link between WCF, state

BYLINE: Kirsten Stewart, The Salt Lake Tribune

BODY:
With little debate or discussion, a Senate committee advanced on Friday a complex bill to cut Utah's Workers Compensation Fund (WCF) free of its remaining state ties, despite resistance from the governor's office and competing insurers.

WCF provides on-the-job-injury insurance for employees of about 30,000 Utah companies, including those considered too risky for coverage by private insurers.

The agency has been steadily distancing itself from state governmental control and now wants to cut its last tie -- the governor's power to appoint its board of directors -- so it can continue to write insurance in other states (primarily Idaho) through its subsidiary, Advantage Workers Compensation Insurance Co.

Under the latest privatization proposal, sponsored by Provo Republican Sen. Curtis Bramble, WCF's board would be appointed by policyholders and the Utah Insurance commissioner.

Brian Farr, Utah Gov. Olene Walker's chief counsel, opposed the bill on Friday, arguing that having an insurance regulator appoint board members presents a conflict of interest.

Farr also is skeptical of reports that both the IRS and Idaho Insurance Regulators have signed off on Bramble's plan.

Nevertheless, the committee approved the bill in a 4-0 vote, with two members absent after Bramble pledged to negotiate a settlement with the state to pay for its disputed interest in the fund, which was created with taxpayer dollars and nurtured under a federal tax exemption.

LOAD-DATE: February 14, 2004

February 14, 2004 Saturday

LENGTH: 578 words

HEADLINE: Insurance fight goes to Senate

BYLINE: Jerry Spangler Deseret Morning News

BODY:

The war over Utah's Workers' Compensation Fund -- the insurer of last resort for workers injured on the job -- continues unabated, and now the fight goes to the full Senate.

On Friday, the Senate Revenue and Taxation Committee voted 4-0 in favor of SB165, which would, for all intents and purposes, privatize the fund but do it in such a way as to preserve its federal tax exemption and satisfy regulators in other states where WCF does business through a for-profit subsidiary.

"We have the planets aligned in many regards," said Sen. Greg Bell, R-Farmington. "It is a wonderful time to clarify once and for all the state's ownership. This will not happen again in your and my lifetimes."

SB165 is supported by a wide coalition of small and large businesses in Utah that want to see the fund operated as a private insurance carrier. But it is opposed by the governor's office, which says it does not give enough protection to Utah workers, and Utah's insurance industry, which says it gives an unfair competitive advantage to WCF.

The issue of state ownership is set to be resolved during a Feb. 23 trial wherein the courts could decide what ownership interest the state has, if any.

State Treasurer Ed Alter told the committee he is not opposed to privatizing WCF, but if lawmakers do so then the state is entitled to its full ownership interest.

WCF has offered the state $50 million for the state's interest in the fund, which made a $76 million profit last year. Alter places the value to the state at $250 million to $477 million, depending on how the state divests its interests.

The $50 million offer remains on the table, and Attorney General Mark Shurtleff is negotiating with the various parties on a settlement, said Sen. Curt Bramble, R-Provo and the bill's sponsor.

The fight over WCF began when an Idaho administrative law judge ruled that Advantage Insurance, a for-profit subsidiary of WCF that operates in other states, violated Idaho law because it was controlled directly or indirectly by a state government.

To keep the business in Idaho and other states -- other states have similar laws -- WCF and lawmakers set out to satisfy Idaho's concerns. SB165 would change the makeup of the board of directors to include some appointed by the state insurance commissioner and some appointed by policyholders.

Critical to the bill's passage is a ruling by the Internal Revenue Service that the changes would not jeopardize the fund's tax-exempt status, which keeps rates low and allows small businesses to participate.

In a telephone conference call earlier this month, the IRS indicated that the provisions found in SB165 would qualify for the tax exemption. But it won't put that guarantee into writing, which concerns the governor's office.

Bramble also indicated he has a letter from the attorney general's office in Idaho indicating the bill would satisfy Idaho's concerns.

But Brian Farr, chief counsel to Gov. Olene Walker, said that Idaho letter was based not on SB165 but on different proposals being floated to Idaho officials from the governor's office. In fact, Idaho does not like SB165.

Gary Thorup, speaking for the insurance industry, concurred with Farr, saying SB165 is flawed and that neither the IRS assurance nor a letter from the Idaho attorney general can guarantee the privatization plan will pass muster.

Thorup urged caution. "Once the umbilical cord has been cut, the baby cannot be reattached to the mother," he said. E-mail: mailto:spang@desnews.com

LOAD-DATE: February 14, 2004

February 18, 2004, Wednesday

SECTION: Utah; Pg. B1

LENGTH: 418 words

HEADLINE: Workers used up, cast off?

BYLINE: Paul Rolly and JoAnn Jacobsen-Wells, The Salt Lake Tribune

BODY:
Some Utah employers seem willing to look the other way when undocumented immigrant workers perform the most unattractive jobs, and government and insurance programs are collaborators until the worker is no longer useful.

Case in point: Two Mexican women, ages 30 and 43, came to Utah more than four years ago and got minimum-wage jobs at a furniture manufacturing plant. They were illegal immigrants, but nobody complained while they worked with dangerous, toxic chemicals.

After they were struck with a strange ailment that severely hampered their motor skills, they were referred to the University of Utah Hospital, where John D. Steffens and Jennifer Juhl Majersik concluded they had bromide toxicity from inhaling the chemicals and were disabled.

Attorney Mike Martinez says when the prognosis came back, Workers Compensation Fund of Utah sent them to its own doctor, who concluded they had suffered no debilitating injuries.

The women, who don't speak English, were then sent small settlement checks. One woman, who thought the $ 1,700 check was to make up for several months' worth of temporary disability checks the WCF was late in delivering, cashed it. She then was told the check was her settlement and she would get no more money or covered medical attention.

Martinez complained that, as her attorney, he should receive the correspondence. WCF wrote that he could appeal to the Labor Commission, a process that normally takes a year and costs thousands of dollars.

Ignorance is bliss: The Mexican Consulate's "Matricula" ID card contains a special security pattern, an infrared band on the back and security marks visible only with a special decoder, among other features.

The fraud-resistant ID, issued so officials can keep track of Mexican nationals in the United States, has opposition at the Utah Legislature. So, of the 104 legislators invited to open houses explaining Matricula last week, 12 showed up: Democrats Ron Allen, Patrice Arent, Duane Bourdeaux, Mike Dmitrich, Brent Goodfellow, Paula Julander, Ed Mayne, David Litvak and Roz McGee, along with Republicans James Evans, Howard Stephenson and Stephen Clark.

Spell check: A recent Salt Lake City School District newsletter notes the Utah Association of Public School Foundations is co-sponsoring a new Utah license plate to support public schools. Its slogan, according to the newsletter: "I Support Pubic Education."

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Paul Rolly and JoAnn Jacobsen-Wells welcome e-mail at rolly_wells@sltrib.com.

LOAD-DATE: February 18, 2004

February 20, 2004, Friday

SECTION: Final; Pg. A10

LENGTH: 296 words

HEADLINE: Bill privatizing WCF gains two victories

BYLINE: Kirsten Stewart , The Salt Lake Tribune

BODY:
Despite its late debut, with nine days left in the 2004 legislative session, a bill to cut Utah's Workers Compensation Fund (WCF) free of all state ties took two giant steps closer to passage on Thursday.

WCF officials are proposing to settle Utah's disputed interest in the state-created fund. And the Senate voted 22-7 to move up Provo Republican Curtis Bramble's privatization proposal, Senate Bill 165, for final approval as soon as today.

WCF Chief Executive Officer Lane Summerhays said he has "a handshake deal with the Legislature" to settle for $ 50 million. Gov. Olene Walker and other executive branch officials have opposed privatizing WCF.

Shurtleff said he doubts a deal will be struck before a state court hearing scheduled for Monday to decide the ownership question. WCF has sued the state, arguing it has no ownership claims to the fund and its $ 829 million in assets, other than being the largest policy holder.

WCF provides on-the-job injury insurance for employees of about 30,000 Utah companies, including those too small and risky for private insurers to cover. The agency in recent years has been steadily chipping away at state control and now wants to sever its last tie: the governor's power to appoint its board of directors.

Doing so would allow the fund to continue to write insurance in Idaho through its for-profit subsidiary, Advantage. Idaho is among a group of states that ban free-market competition by government-owned or -controlled insurers.

So Bramble has drafted legislation he believes will solve Idaho's government-control concerns while preserving WCF's tax exemption. Under SB165, policyholders would appoint three board members and Utah's Insurance Commissioner would appoint four.

kstewart@sltrib.com

LOAD-DATE: February 23, 2004

February 20, 2004 Friday

LENGTH: 519 words

HEADLINE: Workers Comp nearer privatization

BYLINE: Jerry Spangler Deseret Morning News

BODY:

The Utah Senate has voted to privatize the Workers Compensation Fund -- the state's insurance pool for workers injured on the job.

Thursday's preliminary vote came as Utah Attorney General Mark Shurtleff and WCF are negotiating a settlement to a lawsuit filed by WCF challenging the state's claim of ownership.

"There will be a monetary settlement as part of this transaction," said Sen. Curt Bramble, R-Provo and sponsor of SB165. "There are discussions on both sides of this issue to settle the issue of ownership. Whether that is $50 million or some other number, we will see that in a week or 10 days."

The bill passed a preliminary vote by a 22-7 margin and will receive a final Senate vote as early as today before moving to the House for public hearings.

The bill has been particularly contentious, pitting the executive branch -- the governor's office, state treasurer and state auditor -- against the fund first created by the state to help small businesses that could not afford worker-injury insurance in the open market. It is commonly referred to as the "insurer of last resort."

Utah's WCF has been phenomenally successful. It now has the second-lowest rates in the nation, and through a for-profit subsidiary called Advantage, it now sells workers compensation policies in neighboring states.

That practice has raised consternation in some states, which claim its tax-free status gives it an unfair and illegal advantage over worker compensation funds in those states. Idaho revoked Advantage's license to do business there, citing a state law that prohibits insurance companies that are directly or indirectly controlled by another state.

The out-of-state business is a lucrative part of WCF's portfolio that helps keep Utah rates down, and WCF, in order to keep that business, is seeking privatization of the fund to comply with the Idaho requirements.

SB165 changes the way WCF's board of directors are chosen, removing the governor's role of nominating the board. Instead, three members of the board would be chosen by the state insurance commissioner, three by the policyholders and the CEO, the seventh member, would be confirmed by the Senate.

That change, Bramble said, should satisfy Idaho's concerns while still retaining the fund's tax-exempt status from the Internal Revenue Service.

But the change makes some lawmakers uneasy, especially in light of conflicting information coming out of the governor's office.

"If we choose wrong, we will have catastrophic problems," said Sen. Lyle Hillyard, R-Logan. "To vote for this bill now with conflicting information floating around makes me extremely nervous."

Many lawmakers are concerned that if WCF goes private and eventually goes belly-up, lawmakers will be faced with the daunting task of creating a new WCF from scratch -- something that would cost far more than the $50 million being mentioned in the settlement talks.

WCF currently has about $600 million in reserves to pay losses, and $250 million in equity in the fund. Who owns that equity -- taxpayers or policyholders -- is at the heart of the settlement negotiations. E-mail: mailto:spang@desnews.com

LOAD-DATE: February 20, 2004

February 21, 2004, Saturday

SECTION: Utah; Pg. A6

LENGTH: 458 words

HEADLINE: Workers Comp bill moves on; The Senate votes to end state control of the insurance fund

BYLINE: Dan Harrie , The Salt Lake Tribune

BODY:
One of the most far-reaching bills of the 2004 Legislature -- one affecting 30,000 businesses and hundreds of thousands of workers -- is halfway to passage.

Senators on Friday voted 20-7 to surrender state control of the Workers Compensation Fund (WCF) in an effort to let the state-created insurance company continue its operations in Idaho and other states. The bill now goes to the House.

Eliminating the governor's power to appoint the WCF board and other changes in Senate Bill 165 will allow the company to "continue to provide workers' compensation insurance at very competitive rates," said the bill's sponsor, Sen. Curt Bramble, R-Provo.

But a handful of senators said they shared fears expressed by Gov. Olene Walker, State Treasurer Ed Alter and State Auditor Auston Johnson that the move could jeopardize the safety net for about 30,000 Utah companies who cover on-the-job worker injuries through the WCF.

"This is the biggest 'trust me' bill I've ever seen," said Sen. Beverly Evans, R-Altamont. "There are a lot of 'ifs' in here . . . and I feel sometimes we're speaking with forked tongues."

The "ifs" Evans referred to include questions about WCF's ability to retain its federal income-tax exemption if it is privatized, whether Idaho will allow the company to continue operating in that state under the new structure and how much the state of Utah will be paid to give up its interest in the fund.

Sen. Lyle Hillyard, R-Logan, warned his colleagues against "stepping out over this ledge." He called the proposal to cut loose WCF from state control "a gigantic decision."

But Sen. Mike Dmitrich, D-Price, said WCF's stellar financial performance in recent years has earned it credibility.

"How can we not trust a company that's been as successful as the Workers Compensation Fund has been?" Dmitrich asked.

Fellow Democratic Sen. Ed Mayne, of West Valley City, said Senate opposition to WCF privatization "almost looks like it's the Leavitt Group." His comments apparently referred to efforts by former Gov. Mike Leavitt and his brother Dane Leavitt, head of the Leavitt family's insurance company, to scuttle a similar bill last year.

Attorney General Mark Shurtleff, who in the past has opposed privatization of WCF, is negotiating a settlement payment for the state -- reportedly of about $ 50 million. Any deal would have to be approved by the Legislature and governor.

Johnson, the state auditor, continues to raise alarms about the deal. In a letter to senators Friday, he noted that WCF is the only independent entity created by the state that has blocked inspection of records by his office. "Anytime an auditor is denied access to records, his 'suspicion antennae' are raised," he said.

LOAD-DATE: February 21, 2004

February 21, 2004, Saturday