September 14, 2010
Joanne Doroshow (212) 267-2801
STUDY: I-1082 WOULD INCREASE
COSTS, REDUCE BENEFITS
NEW YORK – A new study released today by consumer coalition Americans for Insurance Reform (AIR) finds that Washington State’s non-profit state workers’ compensation system is “remarkably cost-effective, with higher benefits to workers, far lower expenses and profit” than either private or competitive insurance systems. The study by AIR, a coalition of nearly 100 non-profit public interest groups nationwide, says that I-1082, ‘[a]llowing private insurers into the remarkably efficient Washington State system would surely result in greater costs for employers, smaller benefits for injured workers, and increased burdens on the state.”
AIR’s report, BIGGEST BANG FOR THE BUCK: Washington’s State-Run Workers Compensation System, was written under the direction of actuary J. Robert Hunter, who is Director of Insurance for the Consumer Federation of America (CFA), former Commissioner of Insurance for the State of Texas, and former Federal Insurance Administrator under Presidents Carter and Ford. It was co-authored by Joanne Doroshow, Executive Director of the consumer group Center for Justice & Democracy.
In describing the study’s findings, Hunter said, “Our study shows that Washington State’s non-profit state run system is an incredibly efficient benefit delivery system for employees for the lowest possible cost to employers. I-1082 would do real damage to this great system. For example, if private insurers were allowed in, companies would cherry-pick only the safest jobs to insure, providing them with the largest profit. Meanwhile, the state would have to cover the high-risk occupations, destroying the required risk-spread to keep prices lower, and burdening state taxpayers.”
Among the findings by BIGGEST BANG FOR THE BUCK are:
- Over the 5-year period ending in 2008, the cost to private insurers to run their workers’ compensation systems was more than 90 percent higher than Washington State’s costs to run its state-system.
- From 2004 to 2008, Washington workers received $1.29 in benefits for every dollar paid in premiums. By contrast, the private insurer payout was 62 cents for every dollar in premiums paid.
- Total administrative and other expenses – salaries, commissions, marketing and advertising costs – averaged 36.5 percent of earned premiums for private insurers. For Washington State, expenses totaled only 19.3 percent.
Co-author Joanne Doroshow, Executive Director of the Center for Justice & Democracy, said, “Washington State’s non-profit state workers’ compensation system is amazingly cost-effective and economical. Voters should be extremely wary of the insurance industry’s misleading campaign about I-1082. This initiative would raise costs, lower benefits and create new burdens on Washington State. It is utterly indefensible.”
Full Study can be found here.
Americans for Insurance Reform is a coalition of nearly 100 consumer groups from around the country that works to strengthen state oversight of insurance industry practices. AIR is not connected to any trial lawyer or business group.