OPEA

Both House and Senate committees considered legislation on Wednesday to privatize CompSource, which provides an important safety net for business in workers compensation insurance. During the interim, Representative Dan Sullivan and Senator Clff Aldridge led a Task Force to discuss privatization of the service.  The Task Force and resulting legislation has been championed by large insurance corporations, looking to eliminate CompSource as a competitor.

HB 2662 by Sullivan and SB 2232 by Aldridge would sell CompSource for what is speculated to be a one-time profit of $350 million.  The proposed deal, while providing the state with cash, is fraught with problems, the first of which is the question of ownership. 

CompSource has been eyed in the past as a “cash cow” which some say can be sold off at a profit of hundreds of millions of dollars.  However, there are serious doubts as to whether the proceeds from the sale of CompSource would belong to the state.  In Moran vs. Derryberry, the Oklahoma Supreme Court held that the assets of CompSource belong to the policyholders.  The valuation of CompSource and distribution from the sale are seriously complicated problems which could keep litigants occupied with no final resolution to the issue for several years.

In addition to problems of ownership, the business community has voiced concern with losing CompSource as an insurer of “last resort” or the “residual market.”  Small businesses, start up businesses, and Oklahoma’s hazardous industries, such as energy and agriculture, have counted on CompSource to provide workers compensation at reasonable rates.  Also, CompSource provides coverage for state and local government, school districts and higher education.  Losing this market stabilizer is especially troubling in an economic downturn when businesses are struggling. 

Senator Cliff Aldridge told the Senate appropriations committee that selling CompSource was a matter of “philosophy.” 

“The state should not be in the insurance business and competing with private insurance,” said Aldridge.  “With this legislation, we are inviting a ‘friendly’ lawsuit to determine the ownership.”

“I am listening to the business owners in my district,” Senator Jay Paul Gumm said in debate opposing the bill. “This will cost jobs.  This will raise rates.  Where the rubber meets the road in small town Oklahoma, this is the biggest mistake you can make especially when the economy is down.  We can talk about philosophy.  Listen to Main Street.”

“When I started my business, I couldn't find workers compensation insurance,” said Senator Jim Wilson. “I used CompSource.  If this is passed, the rates are going to go up for businesses in Oklahoma.”

SB 2232 passed the Senate Appropriations Committee on party lines.  The vote had to be held open, while Senator Todd Lamb, the Republican Floor Leader, was called in to break a tie.

In what is an unusual partnership, OPEA joined the Oklahoma State Chamber of Commerce in Opposition to the privatization.  OPEA Deputy Director Scott Barger spoke against the bill in the House Business and Economic Development Committee. 

“Nothing is broken,” said Barger.  “The system is solvent, it is not a monopoly.  We have market competition.”

“So what are the concerns? What is the reasoning?  Are we selling state assets because of the budget or are there other motives?” said Barger alluding to the insurance lobby pushing the legislation. 

Both bills move on to their respective chambers and will eventually end up in conference committee.