Privatizing Workers’ Compensation

Leonard Gilroy of the Reason Foundation recently highlighted the trend to privatize workers’ compensation. Some of the experimentation occurring in West Virginia, Oklahoma, Colorado, and Arizona began before the economic recession, but states like Pennsylvania now facing financial crises would do well to consider cost-saving privatization on many levels.

West Virginia’s privatized worker’s comp is bolstered by legislatively-created BrickStreet Insurance. In 2006, state-run workers’ compensation was abolished and BrickStreet privately handled all compensation, then opened the door to other private insurance companies. Gilroy details West Virginia’s privatization success: “Since the completion of the process in 2008, workers’ compensation rates have declined an average of 30 percent statewide, translating to over $150 million in annual employer savings.”

A National Academy of Social Insurance (NASI) report published in August 2009 provides Pennsylvania workers’ compensation data for 2003 to 2007. In fiscal year 2007-08 Pennsylvania taxpayers spent $135.2 million on workers’ compensation.

Privatization promotes lower taxpayer burdens, competitive services, choice, and creates jobs. Facing a huge budget deficit, Pennsylvania should consider privatizing workers’ compensation.