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Part 4: Cracking Ontario's Workplace Insurance Monopoly

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"You can pay me now, or pay me later" was the well-known motto of a particular brand of oil filter. This line worked well because it crystallized the choice facing every car owner: If I don't fix it now, will I pay a fortune to fix it down the road?

When it comes to Ontario's Workplace Safety and Insurance Board (WSIB), it's time to "fix it now." Because there's a much bigger bill in our future. Little wonder it's one of four areas for action detailed in our latest Ontario PC white paper on ideas to create jobs called Paths to Prosperity: Flexible Labour Markets.

The WSIB is the government agency that provides injury and disability benefits to workers. WSIB coverage is compulsory for most businesses and industries in Ontario. Employers fund the WSIB through payroll taxes, in the form of premiums based on the earnings of their employees. The WSIB sets these premium rates, while government sets benefits and coverage through legislation.

WSIB premiums are necessary, but they are also a tax on jobs. The objective should be to keep premiums reasonable while still meeting workers' needs. The WSIB has failed to achieve this goal. But successive governments at Queen's Park have gone the "fix it later" route. And the problem is now out of control.

The WSIB currently has an estimated unfunded liability of $14.5 billion. This means that the assets in its insurance fund are $14.5 billion less than what's needed to meet the estimated lifetime costs of all claims under the WSIB's coverage. But according to one recent analysis by the independent, not-for-profit C.D. Howe Institute, entitled "The Hole in Ontario's Budget: WSIB's Unfunded Liability," on a fair-value accounting approach, the unfunded liability could actually be closer to $20 billion. That's some hole.

Yet, despite an increasing unfunded liability, the Ontario government recently unilaterally increased WSIB benefits, making the problem worse. The WSIB can be expected to increase premiums yet again -- acting as a powerful disincentive for businesses to hire new employees.

The management of the WSIB is not a new concern. Since the early 1980s, every government of every political stripe has tried to "fix" the Board, through legislative reform and all sorts of administrative fiddling. The core problems are still there.

The hard fact is that this system was designed for the Ontario of over a century ago -- when horses delivered bottled milk and they hadn't yet painted the Titanic. It simply no longer meets the modern needs of our workers and employers. The time for thoughtful change and bold action is overdue. And that's where Paths to Prosperity comes in.

One solution to this problem is to allow the private sector to compete for providing insurance coverage for workers in Ontario. Most U.S. states already allow private insurers to compete with state insurance funds for the provision of workers' compensation. I believe that a similar model would work well for Ontario.

Right now, 70 per cent of Ontario's workforce is covered under the WSIB. Imposing a deteriorating WSIB on the 30 per cent left out makes no sense. In spite of that, next year, the Ontario government will do just that for self-employed independent construction contractors under Bill 119, called the Workplace Safety and Insurance Amendment Act. We will start our Paths to Prosperity reforms by repealing this backward step the first chance we get, while still ensuring adequate insurance protection.

Allowing private insurers into the market would provide employers with choices, not just about which company, but on the specific details of coverage. Mandatory coverage at equal or better terms would still be in place. An employer would be required to present proof of membership in an alternate plan before they would be allowed to opt out of the WSIB. Private insurance, like WSIB coverage, would remain a "no-fault" system to maintain the integrity of workplace insurance.

Under this proposal, a streamlined, more accountable WSIB governed by a competent, not political, board of directors, would continue to compete with private sector companies. The WSIB would serve as an insurer of last resort, providing coverage to those businesses that cannot obtain insurance elsewhere.

We recognize that these are bold suggestions that must be carefully and thoughtfully introduced. The unfunded liability is both the catalyst and impediment for needed reform. It's a catalyst because its persistence, over 30 years now, shows the system is often captive to short term political interference. It's an impediment because responsible reform cannot permit employers to abandon the Board's liabilities.

That's why we propose a staged reform process. We would start with the repeal of Bill 119, which forces Ontario's self-employed independent operators to join the WSIB. Instead, we would allow those entrepreneurs to opt for comparable private insurance.

Next, as individual business sectors secure an adequate level of funding, we would allow those employers to obtain suitable private insurance. Insurance choice will be respected. Third, we would immediately revamp the Board, replacing a political board of directors with a skills-based board, charged with proper corporate governance oversight.

These reforms will trigger a modernization of Ontario's workplace insurance system, which was once at the vanguard of public policy. Ontario's needs have changed. The Board hasn't. Now it must.

Our province needs bold action to become more competitive and create more jobs. Paths to Prosperity: Flexible Labour Markets shows us the way past these bureaucratic relics of the last century - and into a brighter future.