The Texas Legislature introduced bills last week that wouldsever the last controls the state has over Texas Mutual InsuranceCo.—its largest workers'-compensation insurer—while authorizing thestate to set up an assigned-risk plan.

Under bills introduced in both the state House and Senate, TMICpolicyholders would be able to elect a majority of the company'sgoverning board of directors and determine the chairman of theboard, therefore making policyholders what TMIC officials said willbe the “ultimate decision-makers” for the company.

The bills are S.B. 850 and H.B. 1833.

TMIC is the largest workers'-comp insurer in the state. During2012, Texas Mutual wrote $935 million in coverage, more than $100million beyond its previous high.

Terry Frakes, TMIC senior vice president of public affairs, saidTMIC has approximately 34 percent of the Texas workers'-compmarket.

Texas Mutual was originally created in 1991 as the TexasWorkers' Compensation Insurance Fund because workers'-comp capacityhad become severely limited in the state because of a financialcrisis created by the collapse of the oil market.

Its goal was to serve as a competitive force in the Texasworkers' compensation insurance market and as the insurer of lastresort. In 2001, the state began loosening its ties with TMIC.

Through various legislative actions, the only control the statenow exercises is through appointment of five of the nine TMIC boardmembers, Frakes said.

The bills would establish a new residual workers'-comp marketand would give the state-insurance department the authority to setup an assigned risk plan, he said. The state would accept bids frominsurers willing to become the market administrator.

Ultimately, oversight would come from the commissioners' office,Frakes said.

The legislation would become effective Jan. 1, 2015, if approvedby the legislature and signed by the governor. Frakes explainedthat TMIC needs 18 months to make the change to privatization anddoes not want to lose tax exemptions on state funds that becomereserves.

Frakes also said that while TMIC that is a workers'-compensationinsurer of last resort, it has no market advantages over theprivate market except that it is exempt from federal income taxes,as are all of the more than 20 state funds that still exist in theU.S.

“TMIC is solvent, and we are regulated like any other carrier inthe state,” Frakes said.

The Texas legislature only meets biennially and adjourns unlesscalled into special session on May 27. The Texas Legislature won'tconvene again until 2015.

Bruce Wood, associate general counsel and director of workers'compensation programs American Insurance Association, said hisgroup “is fully supportive of efforts to privatize TMIC.”

He says that under the proposed legislation, the company wouldachieve privatization “correctly and compete on a level playingfield in the Texas workers' compensation market.

“All statutory preferences that favor a provider of last resortwould be abrogated under the proposal,” Wood said.