Bunde wants permafund to cover workers comp

Officials say Alaska's program faces a crisis with unpaid claims

Posted: Thursday, February 12, 2004

Sen. Con Bunde proposed the state use the Alaska Permanent Fund to plug a $20 million hole in a program intended to pick up unpaid workers compensation claims.

Though not optimistic the Legislature will go along with him, the Anchorage Republican said Wednesday the fix is more fair than asking businesses to cover the shortfall left by insolvent insurance companies.

State officials say Alaska's workers compensation insurance program faces a crisis as it wrestles with unpaid claims from four insolvencies, the largest of which could leave the state with $60 million in claims.

Fremont Indemnity Co. handled about 27 percent of workers compensation policies in Alaska before a California court found it insolvent in 2003.

The Alaska Insurance Guaranty Association Fund was created to pick up such claims by charging an assessment on the pool of similar carriers.

But the fund generates about $4.2 million a year, not enough to cover unpaid claims this year. It is expected to be $20.2 million short over the next five years.

With no additional money by April, about 598 workers compensation claims could be prorated, leaving employers on the hook for the rest of the money, said Linda Hall, director of the state Division of Insurance.

The Murkowski administration proposed a fix that would increase assessments on insurance companies and allow the Alaska Industrial Development and Export Authority to guarantee a loan.

Since September, the guaranty association has charged a 2 percent fee on all the workers' compensation premiums in the state. Insurance companies can pass those charges on to their policy holders.

That assessment would be doubled for workers compensation insurance carriers under House Bill 403. Other carriers could also pay a 2 percent assessment on unrelated policies such as auto, homeowners or casualty insurance.

The administration sought to spread the cost of the four insolvent companies as broadly as possible, Hall said.

"With that in mind," said Bunde, "I think we should spread it out over as many possible recipients as possible. And that, of course, is the general public."

Bunde wants to amend a similar bill in the state Senate to draw $20 million from the earnings reserve of the Alaska Permanent Fund over five years.

The Legislature has previously used earnings from the fund to pay dividends to eligible Alaskans. A panel created by Gov. Frank Murkowski is considering whether to recommend using a portion of the fund for state government.

But the state also uses about $13 million from the fund to pay public assistance to low income Alaskans who each year temporarily lose welfare eligibility because of the dividend.

It is more fair to turn to the permanent fund to fix the temporary shortfall than to impose higher assessments on insurance carriers and the small businesses that pay premiums, Bunde said.

But such a proposal is likely to be seen as politically toxic to lawmakers who have never spent permanent fund money on other areas of state government.

Trending this week:


© 2018. All Rights Reserved.  | Contact Us