This is not true of all state-run funds, and would not be true in Michigan regardless of who controls the Accident Fund. The Accident Fund never has been required to accept an employer that did not meet its own underwriting standards. Employers unable to purchase insurance in Michigan's private market are assigned to the Michigan Workers' Compensation Placement Facility, a pool through which all workers' compensation insurers writing business in Michigan subsidize the losses from providing coverage to the employees of uninsurable employers.
Still, many supporters of state-run competitive funds believe that the very nature of a state fund allows it to serve the public interest better by keeping businesses out of the placement facility, even where the fund is not legislatively the insurer of last resort. Workers' compensation experts frequently offer Oregon as an example. Like Michigan, Oregon has a placement facility to which all employers can turn and be guaranteed coverage. The facility is a money-losing entity subsidized by insurers. Gary Raid, manager of the Oregon state accident fund (SAIFCO) speaks proudly of the role his fund has played in insuring employers previously insured at a higher cost by the state's placement facility. Working with the governor and insurance commissioner, SAIFCO (organized as a public corporation) has developed a method by which the number of insureds entering the placement facility is significantly reduced, and many of those currently covered by the facility are being removed to SAIFCO coverage. Jim Berquist, an actuary who has worked extensively with SAIFCO, notes, "I don't think the governor of a state could exert the same leverage on a private carrier to help meet this public policy goal."
Is SAIFCO truly meeting a "public policy goal" that could not be met by a private insurer? Although SAIFCO has been removing employers from the state's placement facility, it has not been underwriting these employers at a loss. Says Raid, "We discovered many risks in the pool for the wrong reasons—for example, due to their insurance carrier pulling out of Oregon and the business not looking for a new carrier." While it is true that Oregon's governor exerts more control over SAIFCO than he would over a private insurer (he appoints the members of SAIFCO's board of directors), he cannot legally require SAIFCO to follow a given course of action, any more than he could require that of a private insurer. Ultimately, the governor is limited to the influence of his office and his persuasive abilities.
In Oregon, then, it appears that too many insureds who would have been able to find insurance elsewhere were being placed in the facility (the state's insurer of last resort). SAIFCO's success in moving insureds from the placement facility may have little to do with management skill or a willingness to serve public policy, and more to do with inadequate shopping by businesses and the failure of insurance agents to search diligently for insurers other than the placement facility. Moreover, by recruiting new insureds who were incorrectly labeled as "high risk," SAIFCO has done nothing that could not be done by a private insurer—that is, the state-run fund has been acting in its own interest, and not solely at the behest of the governor.
Michigan history is replete with instances in which private businesses of all types have worked with political leaders to achieve public policy aims. Michigan's governor could certainly work with private insurers to remove good insurance risks from the Workers' Compensation Placement Facility. The primary obstacle to such an effort is probably the bad blood existing between the governor's office and the industry, fueled in part by the governor's efforts to increase taxes on insurance companies, and by certain comments such as this emanating from the attorney general's office: "[Insurers] must be good citizens by controlling their avarice."
Even without the intercession of the governor's office, the Accident Fund in Michigan periodically moves employers out of the Placement Facility. In 1985, the Accident Fund removed 77 employers from the Placement Facility and insured them at lower cost. In 1986, another 188 employers were voluntarily removed from the Facility and insured at lower cost by the Accident Fund.
The Accident Fund is not, and never has been, the insurer of last resort in Michigan. The Michigan Workers' Compensation Placement Facility will remain regardless of whether the Accident Fund is brought under state control. There is little reason to believe that state-controlled funds are more likely than private carriers to voluntarily attempt to insure employers found in the Placement Facility.