Around the country, state governments are searching for solutions to the difficulties plaguing workers' compensation systems. For states that run their own workers' compensation programs, privatization is emerging as one answer.
Numerous states operate workers' compensation insurance programs. State workers' compensation insurance monopolies exist in six states, while thirteen other states operate workers' compensation programs that compete against private firms in the state.
State-run workers' compensation funds often experience substantial operating losses and are liable to political manipulation. The assets and surpluses of such funds are tempting targets in times of revenue shortfalls. In 1982, the Oregon legislature took $81 million from the state's insurance fund and transferred it to the general fund. Two years later, the insurance fund had to raise its rates by 50 percent, largely because of the legislature's action.
Michigan Governor John Engler has called for privatizing Michigan's state-run workers' compensation fund, the Accident Fund of Michigan. The Mackinac Center for Public Policy has suggested the fund could be privatized by either spinning it off into its own private company or selling it entirely to another private firm. Montana is also considering selling its workers' compensation program.