Oregon Looks at Privatizing Workers Comp

Vote Slated for November Ballot

By Melody Finnemore

On the November Ballot, Oregon voters will decide whether to disband the State Accident Insurance Fund, a public company that provides worker's comp to 11,000 employers. If passed the measure would sell SAIF Corp. assets to the private sector.

SAIF was initially created over 15 years ago to provide insurance to companies who had no other alternative. But in 1989, the state legislature responded to years of escalating workers comp rates by transferring the fund to public ownership. Now it provides insurance to most of the construction market, including Association of General Contractors, Oregon-Columbia chapter members. Low rates are a given, partially because SAIF receives a federal tax exemption.

The ballot measure, backed primarily by Liberty Mutual Northwest, a member of Liberty Mutual Group, Boston, is a gambit to place insurance back into the private sector. Currently, Liberty Mutual holds 12 percent of the state's worker's comp market, about $110 million in premiums. Similar measures have been passed in Nevada and Michigan.

As president of West Coast Contractors, David Kronsteiner has watched rates skyrocket for liability insurance, health care coverage and nearly every other kind of insurance he must provide. Every kind except workers' compensation insurance, that is.

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"If you look back at the last 15 years or so, our workers' comp is much less now than it was then," said Kronsteiner, who employs 30 to 40 people each year at his Coos Bay, Ore., company. "A lot of the reason for the decrease is through the efforts of SAIF Corp. and the government's efforts to get the workers' comp system turned around."

Kronsteiner is one of many business owners in the building trades who plan to vote against an initiative that would abolish SAIF

AGC, whose members are covered under SAIF, agrees. "Measure 38, if it passed, would be disastrous," said Jessica Harris-Adamson, legislative manager for Associated General Contractors' Oregon-Columbia chapter. "The Department of Consumer and Business Services has estimated that companies in the high-risk area, and that includes construction companies, would see an increase in their insurance rates of about 35 percent."

At a time when liability and health insurance rates are climbing, it is essential to keep workers' comp rates affordable for business owners, industry trade associations and other employers, she said.

"AGC has a group plan with SAIF and we've seen our claims frequency rates go down 63.3 percent during the last 10 years," Harris-Adamson said.

Supporters of Measure 38 say those reductions are due more to legislation passed during the '90s that sought to emphasize safety and reduce litigation rather than any influence SAIF Corp. might have had. Court decisions that gave responsibility for safety to the general contractor have resulted in rigorous safety programs and back-to-work initiatives, greatly reducing workers comp claims.

"We believe real insurance reform will come only through privatization," said Lisa Gilliam, campaign director for Oregonians for Accountability, which partnered with Portland's Liberty Northwest, a private workers' comp provider, to propose the measure."We have the benefit of two states - Nevada and Michigan - that have been through this and have had incredibly successful results. We want those same results for the state of Oregon."

Gilliam said the termination of SAIF Corp. would inject about a half million dollars currently in SAIF's reserves back into the state's economy. It also would rid the state of an agency that has received its fair share of negative reviews regarding its management practices. Recent bad publicity for SAIF Corp. includes reports of mismanagement, failure to report lobbying expenses, the destruction of important documents and payments of more than $1 million in consulting fees to former Oregon Gov. Neil Goldschmidt.

The issue is very simple for Oregon voters, according to Brian Boe, vice president of public affairs for Liberty Northwest. "We need to ask ourselves if Oregon's workers' comp system is becoming a state monopoly and are we comfortable with that?" he said.

"That's where the system is headed and we don't think monopolies are good for the state, its workers or its employers."

A spokesman for the Committee for SAIF-Keeping, which hopes to defeat Measure 38, said the group has watched its list of supporters grow despite the negative headlines.

"It hasn't been difficult at all to garner support. To the contrary, people are coming out of the woodwork to support our efforts," said Drew Hagedorn, adding the list includes an array of backers ranging from small and large businesses to chambers of commerce and trade associations representing a board spectrum of industries.

"It's very important that one distinguish between the management practices Liberty Northwest has complained about…and the structure of SAIF and the workers' comp system. SAIF is very structurally sound. Since the reforms of the 1990s, SAIF has been a model of excellence as far as structure is concerned," he said.

Hagedorn said the state's workers' comp rates are a direct result of that structural integrity.

According to the Committee for SAIF-Keeping, abolishing SAIF would increase the cost of workers' comp insurance for Oregon employers by more than $108 million a year and decimate thousands of jobs. The measure's passage would be particularly devastating for the smallest of the 44,000 employers who insure with SAIF. The agency insures 60 percent of Oregon's small businesses and many high-risk businesses that private companies won't insure, all of which would be assigned to a special high-risk pool and forced to pay rates 30 to 50 percent higher than the cost they pay with SAIF, according to the committee.

Walsh Construction Co., which employs some 250 people in Oregon and has purchased workers' comp insurance from SAIF for the last 13 years, is one of many construction companies that signed up to support the Committee for SAIF-Keeping.

"SAIF is one of the few stage agencies that actually has improved the process and the product," said Andrew Beyer, Walsh's vice president and general manager. "The reality is that SAIF has provided a stable, reliable system for providing workers' comp insurance. This happens to be a situation where a state agency can actually do the job better."

For more information on Measure 38, go to www.oregoniansforaccountability.com or www.saif-keeping.com.