Policy Documents

A Study of issues related to privatization of workers’ compensation in Nevada

Kathryn A. Mack –
December 1, 1999

The key purpose of this study is to examine and evaluate current legislative initiatives for reform of workers’ compensation in Nevada. The examination will focus on issues relating to open competitive markets, market pricing, privatization of a state fund, and cost controls that have affected workers’ compensation in the state.

The methods used in this paper include an in-depth examination of legislative statutes that have been enacted to control spending. Also, included is a review of literature that relates to privatization of state funds, and issues that are inherent in the transition from a state agency to private enterprise.

Key findings of this study indicate that workers’ compensation is an issue that most states are addressing in their respective legislatures. Use of managed care, changes in claims processing, fraud detection, and reductions in benefits are some of the methods being used to control spending. For Nevada, $2.2 billion in unfunded liability prompted immediate legislative action. Consequently, the once monopolistic workers’ compensation program was opened to competition in July, 1999. Ultimately, the state fund will become a private enterprise on January 1, 2000.

Privatization of workers’ compensation in Nevada is important because it sets a precedent for future privatization of other state agencies. Many factors are considered in this type of transition, including employee resistance, acceptance by the unions, withdraw from the state personnel act, and change of culture from a state monopolistic agency to a customer service oriented business. Finally, a strong financial base is necessary to compete in the private sector. While appropriate steps have been taken to address the issues, there are many variables that will come into play as the transition progresses. Apparently, the company is on its way to success during this change. However, the researcher recommends that the issue be re-evaluated in the future to determine if subsequent issues have been resolved and if the state fund can survive in the competitive market.