SIIS may change name to prepare for competition

Thursday, April 16, 1998 | 10:46 a.m.

CARSON CITY -- It has new computers, a new telephone system, a reorganized and better trained staff and sometime later this year the once-beleaguered State Industrial Insurance System may change its name as it gets ready to compete in the private workers' compensation insurance market.

"It's a new era," says SIIS General Manager Douglas Dirks as he kicked off a campaign Wednesday to build a stronger image of a system that in the past was roundly criticized.

First, since 1995 SIIS has accumulated a surplus of $250 million in a system that was near insolvency in the early 1990s.

SIIS now collects premiums from 46,000 businesses to pay for the medical treatment and rehabilitation costs of workers injured on the job. It has held a near monopoly. But by last week there were 64 private companies applying to compete in writing worker compensation policies come July 1, 1999.

When competition arrives, Dirks knows he will lose customers. But he says SIIS will be "extremely successful" if it is able to hold 50 percent of the market. And getting one-third of the market is a "respectable performance," he said.

The recent financial statement filed for fiscal 1997 ending last June 30 showed total assets at $1 billion with liabilities of $883 million and a $198 million surplus. Unaudited figures show the surplus has grown to $250 million as of last month.

The 1997 Legislature authorized SIIS to create a separate fund to pay off the claims before July 1995, which total $1.6 billion. The oldest claim dates back to 1938 with a widow of a worker killed on the job getting $600 a month. To service that debt, there is $650 million set aside in the old fund. The interest earned from that money should be able to pay off the claims, which will be spread over 30-40 years.

In 1992 SIIS was $2.2 billion in debt with money going out faster than it was coming in. Gov. Bob Miller and the Legislature in 1993 and 1995 enacted new laws, clamping down on benefits, requiring managed care organizations to treat injured workers and making over changes that salvaged the system.

Dirks and George Lonas, chief marketing officer, say they welcome the competition. "We had an image to turn around and we have to do it by performing up to standard," Lonas said. "Competition makes our company better."

There will be new marketing techniques that will be used and a new name may be selected.

The advent of competition will bring "lots of confusion," said Dirks. Injured workers may not know which company insures them or where they can go for treatment. "The opportunity for fraud will be greater," he said.

He fears private companies will "raid" his staff.

The major national companies expected to compete are Liberty Mutual, Travelers, AIG and CNA. And there will be a "lot of nitch players" that will write certain types of industrial coverage, Dirks says.

He is preparing the quasi-state agency for a "scalable operation," meaning that as business is lost, he will be able to cut staff. His layoffs will have to follow state personnel rules but "that shouldn't slow us down" in reducing employees who may not be needed.

There are about 945 employees in the agency plus 100 at the Jean Hanna Clark Rehabilitation Center in Las Vegas. These employees will continue to enjoy state pay and benefits.

Dirks and his staff will be meeting with newspapers in the metropolitan areas this week to brief them on the new SIIS. And he obviously wants to polish the image so as many employers in Nevada decide not to switch in July 1999 to a private company.

All rates for the first year of competition will be the same. "We must compete on service," Dirks said.

He said there are so many potential private competitors because of the "soft market." These private firms are engaged in "extremely competitive" situations in other states and they want to increase their premiums by writing a share in Nevada.

Some legislators, Dirks said, are talking about converting SIIS to a private company. That could be considered at the 1999 Legislature. Dirks is appointed by and serves at the pleasure of the governor. And the employees are in the state personnel system.

This week, Dirks has been meeting with his staff and telling them it's in their best interest to give good service to customers. In that way, the employer will remain in the system and there won't have to be staff cutbacks.