Which statement correctly describes the difference between competitive state funds and exclusive state funds?

• A. Competitive state funds: compete with private insurers, may not be last resort
• B. Competitive state funds: do not compete with private insurers, always last resort
• C. Exclusive funds: compete with private insurers
• D. Exclusive funds: are the only source, never a last resort

Answer: (D)

The difference lies in how the state fund interacts with the private insurance market. A competitive state fund operates alongside private insurers, so employers can choose coverage either from the private market or from the state fund and the fund must compete for business. An exclusive state fund, on the other hand, is the only source of workers’ compensation coverage within that state; private insurers are not allowed to write these policies there, so employers obtain coverage solely from the state fund. Because the exclusive fund is the sole provider, it is not viewed as a fallback option or last resort—the state fund is the only option available. That makes the statement describing exclusive funds as the only source and never a last resort the best description.