The Strickland-Fisher Administration will take bold action to implement real reform at the Ohio Bureau of Workers’ Compensation. Our plan will rebuild the trust relationship that must exist between business, labor and the workers’ compensation delivery system and assure that the system operates to serve their interests.
The changes proposed by the Strickland-Fisher Administration will focus the Bureau of Workers’ Compensation on its primary mission: to provide readily accessible, high quality workers’ compensation and benefits to Ohio’s injured workers and at the lowest possible cost to Ohio’s businesses.
With more than $21 billion in assets, BWC is the largest exclusive state-funded workers’ compensation system in the United States and the second largest underwriter of workers’ compensation insurance in the country.
In fiscal year 2003, BWC provided workers’ compensation coverage to more than 283,000 employers, processed more than 230,000 new claims and paid out more than $2.08 billion in benefits. Premiums and assessments from employers was more than $2.2 billion.
The workers’ compensation system is a public trust for the benefit of Ohio’s insured employers and their injured workers. Their interests are paramount in the Strickland-Fisher Administration’s approach:
1. Accountability to the public: Ohio’s Bureau of Workers’ Compensation must operate at a high level of transparency and accountability to Ohio’s businesses and injured workers.
2. Strong fiscal management: The Bureau has recently updated its investment policies. Now that they are in place, they need to be monitored regularly to assure that the highest possible returns accrue to the fund, so that we can assure high rates of return, while keeping premiums as low as possible.
3. Integrity of Operations: The Bureau must implement rate-setting decisions based upon strong actuarial principles, and assure that the fund remains strong enough to put Ohio’s workers back to work as productive citizens.
The current Bureau of Workers Compensation Oversight Commission has only advice and consent powers, allowing the governor and his hand-picked director to oversee the running of the BWC without appropriate checks and balances. The current Commission cannot hire and fire the administrator, outside auditor, actuary or investment consultants, and only 5 of its 11 members have full voting rights.
The Strickland-Fisher Administration will immediately take steps to abolish the current Bureau of Workers’ Compensation Oversight Commission and:
Establish an independent, external Board of Directors. The new Bureau of Workers’ Compensation Board of Directors must be the primary fiduciaries of the fund—and must be held accountable for the results of its operations. No current member of the Oversight Commission will be appointed to the new Board of Directors. Unlike the Oversight Commission, they must also have both the resources and power to exercise that responsibility.
• The Board of Directors will have the authority to hire and fire the Administrator. The Administrator will have hiring authority over the Chief Investment Officer.
• The Board of Directors will be appointed by the Governor, and will be comprised of: 1 representative of industry (fund employers) which is a business over 100 employees, 1 representative of business (fund employers) which is a business with fewer than 100 employees, 1 industry representative that is self-insured, 2 representatives of organized labor, 1 representative of injured workers, 2 experts in investments and securities (with experience in state compensation funds), 1 certified public accountant, 1 licensed actuary and 1 public member. Additionally, two ex-officio legislative representatives should be appointed by the Speaker of the House and the President of the Senate, respectively.
• All members of the Board of Directors should have full voting rights, with the exception of the legislative representatives.
An independent Board, staffed with a strong complement of committees of subject matter experts, will assure the Bureau is run along the lines of the most modern and sophisticated compensation insurance funds in the nation. For this reason, the new Bureau of Workers’ Compensation Board of Directors will be asked to begin by establishing three committees to provide them a source of independent advice and verification of investment performance. Additional committees may be established if they believe it is required to carry out their fiduciary duties.
Audit Committee. To ensure transparency and accountability of operations, the Audit Committee will be charged with:
• Interviewing and selecting the accounting firm performing the annual audit on the fund; present recommendation of auditing firm to Board of Directors.
• Reviewing the results of each annual audit and management review; assessing the appropriate course of action to correct any issues; monitoring implementation of action plans.
• Audit Committee will review and have free access to internal audit reports on a regular basis.
• The Audit Committee will have at least three members drawn from the Board, including the accountant member.
Investment Committee. The Investment Committee will be charged with assuring the proper fiscal management for the $21 billion Bureau of Workers Compensation Fund.
• This committee should develop, set, update and monitor investment policy for the Fund, and should recommend these policies to the Board of Directors for approval.
• Investment policy should be implemented by the Administrator and the Chief Investment Officer. No deviations without express Investment Committee and Board of Directors approval.
• In monitoring adherence to Fund investment policy, this committee will select and engage the outside investment counsel for the Fund to assist it in fulfilling these duties.
• The Investment Committee will review the performance of the Chief Investment Officer and the fund’s investment consultants to assure that fund investments are being made in accordance with the investment policy, and that the best possible return on investment is achieved.
• Members on the investment committee will consist of at least four Board members, including the two investment board members, and might be augmented by pension or state fund managers from other states, labor unions, etc. to lend special expertise as required.
Actuarial Committee. The Actuarial Committee will assure that the Bureau’s rate-setting operations are carried out at the highest level of integrity. In particular, this committee will assure that rates are set based upon sound actuarial principles to ensure they are kept as low as possible, while keeping benefits well supported over the long term.
This committee will:
• Hire and fire the actuarial consultants to the fund.
• Review calculations prepared by actuarial consultants on rate schedules and performance.
• Recommend regular rate revisions to the Board of Directors for approval.
• The Actuarial Committee will have at least three members drawn from the Board of Directors, and will include the actuary member.
This plan signals the Strickland-Fisher Administration’s initial direction in rebuilding the trust relationship between business and labor that will be required for us to make the Ohio Bureau of Workers’ Compensation transparent, accountable and operated continuously at the highest levels of integrity. We look forward to discussing these proposals in detail with Ohio’s labor and business leadership before this proposal is submitted to the Legislature.