Insurance program faces battle

CARSON CITY -- Gov. Kenny Guinn's announcement that he wants to cut the state ties to the newly rejuvenated workers' compensation insurance program caught many by surprise, but opposition is already emerging.

In his 61-minute "State of the State" message last Monday, Guinn devoted only one sentence to the subject: "I believe it is time to privatize -- completely privatize -- our state industrial insurance system," now called Employers Insurance Company of Nevada.

Employers Insurance has been preparing for nearly two years for competition from private insurance companies starting July 1. But it will keep ties with state government.

Guinn's comment drew a strong ovation from the crowd.

"I almost fell out of my chair when I heard that," said Sen. Ann O'Connell, R-Las Vegas, who headed an interim study committee on the industrial insurance system, which was near financial collapse seven years ago.

"Now we will see if he follows through," said O'Connell, who tried two years ago sever state ties with the workers' compensation group. "This is very refreshing."

The executive director of Employers Insurance already is drawing up a plan to present to Guinn to make the quasi-governmental agency a private company.

Organized labor and the State of Nevada Employees Association have promised to battle Guinn over the issue.

"They tried it in 1993 and 1995, and we blocked it," Danny Thompson, political director for the Nevada State AFL-CIO, said. Such a plan doesn't help employers, the injured worker or the 970 employees in the state system, he said.

"We're going to fight like hell to stop it," Robert Gagnier, executive director of the state employees association, said.

Workers at Employers Insurance are in the state pension program, covered by civil service rules for pay, promotion and discharge and have health insurance from the state system.

That's likely to change with a private company, said Douglas Dirks, executive director of Employers Insurance, who has started work on a plan to switch. "As a private company, we will have our own retirement and health plan, completely separate from the state," he said.

A private company would also have its own salary schedule, approved by a board of directors. And it could include bonus packages, not available to those in the state work force, he said.

"I'm confident we're in a financial condition to permit this to occur," Dirks said. "We're in a position to be a viable competitor."

With its near-monopoly, the agency provides workers' compensation coverage for more than 44,000 employers, as well as medical and rehabilitation services to workers injured on the job. On July 1, the near-monopoly status expires. And Employers Insurance could lose as much as 50 percent of its business.

Dirks feels its will survive financially, even without the protection of the state. It will have more flexibility to act more quickly. If business is down, it will be able to lay off employees without going through extended procedures. If business is good, it can hire without going through the personnel division.

"The size of the operation and the number of employees will be dependent on the marketplace," Dirks said.

Dirks said the workers would be protected in any switch. "One of our most valuable assets is our employees. We will be looking out for their interests," he said.

Once EIC becomes private, its budget would no longer be subject to review by the governor or Legislature. Dirks said he is working on alternatives for the governor to consider, which "could be accomplished by July 1."

"If we get approval, we will have all the rights and privileges of any other private insurance company, and we would be subject to the same regulations," he said.

Thompson said, however, there's no reason for turning the workers' compensation system over to a private company. "I don't believe there will be any cost savings to (EIC)," he said.

He praised Dirks for "doing a good job," taking a system that was more than $2 billion in the red and putting it on firm financial ground. "We think (EIC) can do well in competing with private companies," Thompson said, adding that there were no benefits to a change in status.

One of the past problems of workers' compensation, Thompson said, has been that the Legislature changed the rules every two years. "It never gets an opportunity to run smoothly. You can't do major revamping all the time."

Employers Insurance, Thompson said, "ought to be able to offer a more diversified business range so it can compete with private companies."

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