A. A State-Run Competitive Fund

The stance of the state insurance commissioner and attorney general is that, by law, Michigan has a state-run competitive fund. (Although its rates may be set according to political rather than market conditions, such a fund is "competitive" in that it does not have a monopoly on the sale of workers' compensation insurance, and so competes with private insurers for business.) They hold that the Accident Fund, by refusing to yield to state control, is usurping the state's rightful authority. If the state prevails in current litigation with the Accident Fund, Michigan will indeed have a competitive, state-controlled fund.

Twelve other states—Arizona, California, Colorado, Idaho, Maryland, Minnesota, Montana, New York, Oklahoma, Pennsylvania, Utah, and Washington—have state-run competitive workers' compensation funds. As in Michigan, most of these funds were established in the early part of this century, at the same time state workers' compensation laws were passed. For the most part, the funds were established because no one was certain private insurers could, or would, offer such insurance. Further, nine of these states were at the time dominated by mining industries, thought to be particularly unlikely to be able to obtain workers' compensation in the private market. Representatives of mining firms lobbied hard for state funds that would guarantee coverage and, if necessary, could be made to subsidize rates.

A notable exception in this history is Minnesota, which established its fund as part of its move to open rating in 1984. The reasoning behind the establishment of the Minnesota fund was similar to that which insurance commissioners have cited in attempting to exert state control in Michigan: a state-run fund is necessary to assure that competition will take place under open rating, and to force private insurers to reduce profits by lowering rates.[22]

Statutes in nearly all of these twelve states are much more specific than Michigan's as to the nature of the state fund. In California, the fund's status is specified in the state constitution. In most states, fund assets are clearly identified as belonging to fund policy holders, not to the state. The degree to which these funds are subject to political control varies from state to state. The recent trend, however, has been to move in a direction opposite that favored by the Michigan Insurance Bureau; most states are moving away from political control of the funds and toward independence, although most funds remain part of state government. In Oregon, for example, the state fund was reorganized as a public corporation in 1980, effectively placing it on the same footing as private insurers, although the state retained control of fund assets. In Colorado, the fund was reorganized in 1985 and given further independence; the Colorado state insurance commissioner today has less control over the state fund than over private insurers.

Most of the managers of state-run competitive funds see significant advantages to this option. Among the most frequently mentioned are: