The Oklahoma legislature passed legislation Tuesday partiallyprivatizing CompSource, the state's last-resort workers'compensation insurance fund.

But an industry trade group opposes the legislation, saying itis a not a true privatization because the state will maintainsubstantive control over it.

Gov. Mary Fallin is expected to sign the bill soon.

CompSource currently underwrites about one-third of the stateworkers' compensation policies. Under the bill, it would becomeCompSource Mutual Insurance Co. The new company would be organizedunder state law, but independent of the state.

It also would be regulated by the state Department of Insurancelike private workers' compensation insurers and be required to payinsurance-premium taxes.

However, the new law will allow the company to retain itsfederal tax exemption.

It would begin operations as a mutual insurer owned bypolicyholders on Jan. 1, 2015, if Fallin signs the bill asexpected.

The American Insurance Association "does not view this as a truemutualization of CompSource," says Steven Bennett, AIA associategeneral counsel.

He says the law enabling CompSource still exists under the newlegislation; "if it is true mutualization it would not have aseparate-enabling statute."

Bennett adds, "In itself, that shows it is a state-createdentity, rather than a private business."

Bennett also says, "One of the main problems with the latestlegislation is that the majority of the mutual's board will beappointed by the government. Again, you would never have that for aprivate business."

Bennett says another concern is that, under the bill, CompSourceMutual will still be retaining the residual market, which serveshigher-risk employers who cannot get insurance in the privatemarket.

 "The fact that the residual market is being carved outfor CompSource proves that this is not a true privatization,"Bennett contends.

He points to other states he says have truly privatized theirstate funds—Arizona and Texas—and says Oklahoma's plan shouldmirror those states.

On Monday, Fallin signed legislation broadly reforming the state workers'compensation system.