A Little Competition for Workers Comp?
It's a tough time to be a business owner in Ohio. The rising unemployment rate and daily reports of companies shutting down are clear proof of this. While legislators and the governor look to ineffectual corporate welfare like the Third Frontier program to help businesses, there is another way that can make Ohio more business-friendly: reform the workers' compensation system. It's not a flashy project, but it is vital if Ohio businesses are to stay competitive with companies in other states.
The Bureau of Workers' Compensation (BWC) is a state government department that provides payments to workers injured on the job. It is funded by what are essentially taxes on businesses. The amount of money paid into this fund by business owners can be a significant burden on many, especially in this tough economy.
During the Taft Administration, the BWC was the scene of a number of scandals, including the infamous "coin-gate." Last year its twenty-year-old system for determining rates was modified by a state common pleas judge as a result of a lawsuit. In short, the state's workers' compensation system will not win any awards as Ohio's best-managed government program.
Ohio employers have no choice but to use it, though. Unlike business owners in almost every other state, Ohio employers must pay premiums to the state bureau. While forty-six states either have a private workers' compensation system or allow private companies to compete against the state program, Ohio is one of only four states operating a state-run workers' compensation monopoly.
After the investment scandals in 2005 there was talk of privatizing or partly-privatizing the BWC. Various groups opposed this move, saying that it would jeopardize reforms. Of course, these reform efforts have not prevented ongoing problems with the BWC.
In the face of problems with their workers' compensation systems, some states have ended their government-run programs. Nevada and West Virginia, for instance, privatized their workers' compensation programs in recent years. Since privatization in West Virginia, claims protests have gone down by 68%, premiums have dropped by 30.3%, and other improvements have taken place.
Even though they work well, private workers' compensation programs are not the norm in most states. Instead, they have a state-run program but private insurers can compete against it. While a completely private workers' compensation system may make the most sense for Ohio, opponents of privatization should have no problem with allowing competition with the current state monopoly. If business owners want another option, there is no reason to deny that to them.
A proposal merely to study allowing competition to the BWC met recently with fierce opposition in the State Senate. Unfortunately, the issue of workers' compensation competition has turned partisan. It should not be. Almost every other state in the union has some form of non-government workers' compensation insurance. Can anyone say with a straight face that Ohio businesses are faring better than their counterparts in other states?
There are many challenges facing Ohio business owners. One of them is paying for workers' compensation insurance. Other states have found a better way of providing this service. If Ohio wants to be have a competitive economy, it should follow the lead of these states and consider private alternatives to its poorly-run state monopoly.
Marc Kilmer is a policy analyst with the Buckeye Institute for Public Policy Solutions, a research and educational institute located in Columbus, Ohio.
