III. Policy Options

Since the state's attorney general in 1976 found the Accident Fund to be a state agency, the Fund has spent an estimated $750,000 in legal and lobbying fees.[20] While it is difficult to determine the number of hours and the expense incurred by the attorney general's office and Michigan Insurance Bureau arguing the Fund's status, it is likely that the state has devoted resources at least to the same extent as has the Fund itself.

The Fund's 200 employees and 30,000 policy holders exist in a condition of perpetual uncertainty, affiliated with an organization whose structure and policies could change dramatically on any given court date.

It would be easy for the legislature to wash its hands of the matter, allowing the dispute to be resolved in the courts. However, if state policy makers believe a state-run Accident Fund best suits the needs of Michigan employers and injured employees, it is time to make that opinion clear. While an effort to expand state control over the Fund will result ultimately in a court challenge by Accident Fund officials, it would behoove state legislators to make their intentions known and to begin revising state statutes to avoid future controversy similar to the current legal morass. It is also appropriate that the courts be aware of how the current legislature interprets the history of actions taken by past legislatures with respect to the Accident Fund.

Conversely, if state policy makers favor an independent Accident Fund, they could end the current controversy by amending the Workers' Compensation Act and the Insurance Code with language specifying the Fund's independent status. In fact, the State Senate has taken the latter course in each of the last four sessions, most recently in March 1987. The House has never acted on Senate legislation nor produced a proposal of its own.

Inaction on the part of the legislature has contributed to a situation where neither the state nor the market is able to function properly. Governor Blanchard has made clear his belief that reducing workers' compensation costs is a top economic development priority, and that such reductions can best be achieved by state government manipulation of the workers' compensation insurance market. While this study has found that state efforts to manipulate the market and politically lower workers' compensation rates are Iikely to be unsuccessful and counter-productive, it is nonetheless true that the Governor's ability to implement such activist policies has been thwarted by the state's inability to control the Accident Fund. Yet, so long as the possibility of heavy government intervention exists, the working of the market is frustrated. Insurers and employers are unwilling to make commitments to the Michigan market that may be rendered inoperable by government action. Thus, insurers may refrain from entering the market, updating procedures, expanding sales forces, or spending money on long-term safety or educational programs. Other insurers decide to leave Michigan rather than face continued uncertainty.

Improvements in the workers' compensation insurance market so painfully won in 1981 could be lost if the Accident Fund situation is not resolved. Three policy options are available to state policy makers: a state-con- trolled Accident Fund competing with private insurers in the market; a monopolistic state fund that would legally bar private insurers from selling workers' compensation coverage; or a private Accident Fund placed on equal footing with the state's private mutual insurers. Each of these options is discussed in some detail below.[21]