Guinn plan to privatize state workers' insurance debated

CARSON CITY -- Assembly Democrats Monday questioned whether injured workers and the state would be better off under Gov. Kenny Guinn's proposal to convert the state's workers compensation system into a private company.

Assemblyman David Goldwater, D-Las Vegas, suggested the state might be embarking on a "dangerous" path. The quasi-governmental agency could compete with private insurance carriers once the system is opened to competition July 1, he said.

In addition, complained Assemblywoman Chris Giun-chigliani, D-Las Vegas, benefits were taken from injured workers six years ago to save the crippled industrial insurance system and never restored. But employers have gotten two or three rebates, she said.

Their comments came as the Assembly Commerce and Labor Committee opened hearings on Senate Bill 37, which would change the Employers Insurance Company of Nevada to a private mutual company owned by the policyholders.

Guinn's Chief of Staff Peter Ernaut, the first witness on the bill, told the committee the plan would relieve the state of a $1.6 billion liability and ensure the state will never face a liability for the system again.

"This removes the taxpayers being guarantor for a company that is facing competition for the first time," Ernaut said. The state system has operated for more than 80 years, most of the time as a monopoly.

The $1.6 billion liability covers benefits and medical treatment for workers injured before July 1, 1995. Ernaut said Employers Insurance would pay $775 million to another insurance company to take over the liability.

When competition opens, Employers Insurance is expected to lose 40 percent to 60 percent of its business, Ernaut said.

If Employers Insurance continues as a quasi-state agency and fails, Ernaut said, there would have to be surcharges on the policyholders, a tax on all Nevadans to cover benefits to injured workers and a reduction in future benefits.

Other states have allowed their systems to go private, Goldwater said, and after competition dried up leaving only one or two big companies writing the policies, employers were left without "a state fund to bail them out." Employers in other states, he said, "are begging for the state to come back in, to bring back sanity."

The committee will take further testimony Wednesday and must vote by Friday if SB37 is to go forward.

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