The proposal to privatize the Workers Compensation Fund is dead — for now — after Gov. Mike Leavitt told legislative leaders he wanted more time to mull over alternatives to the proposed $50 million deal.
But Leavitt, after meeting Wednesday with a group of lawmakers and fund executives, has agreed to call a special session if necessary should the deal prove workable to everyone at the negotiating table.
"The first interest and concern is properly protecting policyholders," Leavitt's spokeswoman Natalie Gochnour said. "We need more time to review.
The sponsor of the measure, Sen. Curt Bramble, R-Provo, said the governor requested the additional time.
"The governor asked that we continue our due diligence and consider other alternatives," he said.
Those alternatives suggested by Leavitt, an insurance man by profession, include the possible conversion of the fund into a stock company and a whole "spectrum" of other options.
"But he didn't specify what those other alternatives might be," added Bramble.
The Workers Compensation Fund has 30,000 policyholders with equity valued at $235 million and $600 million in reserves. Its mission is to provide workers compensation insurance to high-risk employers and employees, who can't get insurance elsewhere. Because its rates are so low, the fund has grown over the years to dominate more than 60 percent of the market in Utah.
Fund executive director Lane Summerhays was huddling with Bramble late Wednesday after a Senate committee hearing and was obviously disappointed in the Wednesday decision and had little to say.
Bramble, a certified public accountant, was asked by the governor's office to negotiate a legislative proposal that has been in the works since last fall.
The senator ran SB170 this session that proposed having the governor give up his power to appoint members to the quasi-state agency's board. The move would sever the fund's last tie to the state and allow the fund to retain its business in Idaho and expand to other states.
In exchange, fund officials had tentatively agreed to pay the state $50 million for its founding equity in the fund and to guarantee no claim to its assets in the future.
Some legislators wondered if the $50 million selling price was enough. While a New York financial agency said that was a fair price, others worried about the prospect of rushing through a sale and learning later the state could have received $75 million or $100 million for its interest in the fund.
Bramble conceded there was an "undercurrent" of that sentiment in the Wednesday meeting, but he declined to elaborate.
One House leader said Leavitt put the brakes on the deal.
"Workers Comp had a lot of lobbyists up here. This thing really had (political) legs. I don't think any single legislator could have stopped it. But the governor got back into town last week and started asking some questions. Basically, he convinced us that it needs more study, and with five working days left in the session, it wasn't time to ram something through," the representative said.
Gochnour said there was a strong sense from Wednesday's meeting "that we need to wait. We think we have made progress, but we have not reached consensus."
The move to privatization was prompted by a court ruling in Idaho that threatens the fund's ability to continue insuring its policyholders there — business that represents $30 million in premiums.
Because the fund is too closely linked to Utah, an administrative judge ruled the fund's practice of insuring Idaho policyholders violated Idaho's constitutional prohibition against entering into contracts with "foreign nations."
Bramble's proposal also called for an oversight committee that would ensure the fund continued to serve what's called the "residual" market — those employees and employers who are high risk and can't get insurance elsewhere.
Maintaining the obligation to insure that market has been a primary concern in the move to privatization because, otherwise, the state might eventually be back where it was in 1917. That year, the Legislature established what was then known as the State Insurance Fund with an investment of $40,000 to have a "carrier of last resort" and provide workers compensation insurance to all.
In a series of legislative changes, the fund has been allowed to break away from the state for the most part. The fund has better than 60 percent of the market in Utah, where a number private insurance carriers, including the Leavitt Group, would like a bigger share of the business.
But by using its wholly owned-for-profit subsidiaries, the fund has been able to keep rates the second lowest in the country.
Leavitt's brother, coincidentally, has weighed in against the privatization proposal as chief executive officer of the Leavitt Group.
While applauding the management of the fund, Dane Leavitt has repeatedly stressed $50 million is a low-ball number, the interests of policyholders and the state would be ill-served and legal questions abound.
Dane Leavitt wants the fund to convert to a stock company, split half of the proceeds with the state and divvy out that residual market to other carriers.
Dane Leavitt has said his statements are without consultation with his brother, and on Wednesday Bramble said Leavitt said the same thing, while airing the same idea of converting the fund to a publicly traded company.
"(The governor) emphasized it was his decision, and he and his brother might have different opinions," Bramble said.
E-mail: amyjoi@desnews.com