Governor privatizes state agency

Sunday, Dec. 19, 1999 | 10:33 a.m.

Friday's proclamation ends the 86-year monopoly the agency held over the administration of workers' compensation benefits to injured workers.

Guinn pushed through legislation that makes the Employers Insurance Co. of Nevada, formerly the State Industrial Insurance System, a private company owned and operated by its employer members.

Nevada has been one of just six states with a monopoly system under which a state agency handled workers' compensation matters.

"This proclamation is the culmination of one of my top priorities of the legislative session, which was privatizing the state workers' compensation system in an effort to provide the highest quality care in the most cost-efficient manner," Guinn said Friday.

In exchange for backing privatization, Assembly Democrats won Guinn's support for benefit increases for injured workers. The state Insurance Division is expected soon to approve a 6.4 percent increase in premium costs to cover the higher benefits.

"I think the company will do well in a competitive market," said Douglas Dirks, general manager of the Employers Insurance Co. "I think this is a great opportunity."

Since July, private insurance companies have been allowed by law to sell workers' compensation policies.

Nonetheless, Dirks said his company has been able to retain about 75 percent of its existing workers' compensation business. The company generally receives more than $450 million a year in premiums.

All Nevada employers are required to carry workers' compensation to provide benefits to employees injured on the job.

Since none of the premiums come from state taxes, the new private company will own all of the agency's buildings, including those in the state Capitol complex in Carson City.

Dirks thinks the company will keep the buildings, but said the number of employees has fallen to 550, about 400 fewer than at its peak.

To run the new Reno-based company, Guinn named an eight-member board of directors that includes Dr. Richard Blakey, Bruce Herzog and Sharon Zadra, all of Reno; Bob Kolesar, Kathy Ong and Michael Rumbolz, all of Las Vegas; Sam Rouston of Winnemucca and Phil Peckman of Henderson.

Earlier this fall, the state sold off to several private insurance companies the ongoing claims due for workers who suffered injuries before 1995. These insurers will continue to pay benefits for these workers.

The new private company coming in January has assets of $1.3 billion and liabilities of $1 billion.