Competitive State Funds

Competitive state funds were established with a number of the same underlying assumptions that applied to exclusive state funds, but with the added assumption that competition with private insurers would result in the best combination of service and price. It was also felt by many that a competitive state fund would serve to enhance competition among private insurers.

In 1970, there were 12 competitive state funds. With the pressure on insurance rates that occurred during the middle to latter portion of the 1980s a number of additional states created competitive state funds for the purpose of stabilizing the workers' comp market. At present, a total of 2l states have statutory provisions creating a competitive state fund. As of the end of 1999, 13 competitive state funds operated as a residual market for employers unable to obtain insurance in the voluntary market or qualify for self-insurance.

Private Insurers

With the exception of the five exclusive state fund states (North Dakota, Ohio, Washington, West Virginia, and Wyoming), private insurers are permitted to underwrite workers' compensation coverage in the remaining states and the District of Columbia.

Individual private insurers are free to reject any applicant they consider an undesirable risk. An employer may be considered an undesirable risk because it has a poor loss record, is engaged in some activity that is unusually hazardous, or is so small that the premium is less than the cost of producing the policy. In states where the residual market is not handled by a competitive state fund, private insurers share in the financial obligations that stem from the residual market. DeCarlo, Donald T.