Oklahoma AG Opposes Sale of Workers’ Comp Agency

A proposal to sell Oklahoma’s workers’ compensation insurance agency could force businesses to pay higher rates and make the insurance unaffordable for new and high-risk employers, according to Attorney General Drew Edmondson.

Edmondson, a Democratic candidate for governor, said he opposes legislation pending in the House and Senate that would put the agency, CompSource Oklahoma, up for sale. An actuary who studied the agency last year said it could be worth up to $350 million.

“This may be good for insurance companies. It is not good for businesses in Oklahoma,” Edmondson said. “They could be priced out.”

The agency was created in 1933 to keep workers’ compensation prices competitive and to serve as a last resort for employers who could not afford private insurance. CompSource also has expressed its opposition to a “sale-to-the-highest-bidder” transaction.

“If that source disappears by being consumed by the insurance industry, then I would be concerned about startup companies being able to get workers’ comp insurance,” Edmondson said. “It is not a good move for consumers.”

The author of one of the privatization bills, Rep. Dan Sullivan, R-Tulsa, said he believes Edmondson’s opposition to the plan has more to do with his candidacy for governor than the merits of privatizing CompSource.

“Unless he has some legal objection, it appears he has his candidate for governor hat on and not his attorney general hat,” Sullivan said.

He said Edmondson and others who oppose selling CompSource assume that the private insurance market will not work for employers who are required by state law to have insurance to compensate injured workers.

Under the plan, workers’ compensation rates would be regulated by the state Insurance Department to prevent employers from being priced out of the market.

“They have the ability to keep rates from going up too fast,” Sullivan said.

A legislative task force recommended in November that CompSource be privatized. Some task force members favored mutualizing it, meaning it would be owned by its policyholders, while others wanted to sell it outright.

Supporters of selling CompSource say its status as a state agency exempt from state and federal taxes gives it an unfair advantage over private insurers and that the state should not be in the business of writing insurance.

CompSource, a nonprofit insurer, has about 26,000 policyholders – including state, county and municipal government agencies – and writes 35 percent of the workers’ compensation policies in Oklahoma.

Opponents have said its sale could eliminate a source for workers’ compensation insurance for businesses that cannot get it through other means. Private insurers often will not do business with small firms or those with workers doing dangerous jobs because the probability of paying claims is too high.

Officials familiar with Oklahoma’s workers’ compensation system have said the state Supreme Court has never clarified whether the assets of CompSource, once known as the State Insurance Fund, are owned by the state or its policyholders.

Sullivan has said passage of the CompSource legislation will likely result in a lawsuit challenging the state’s ownership of its assets.