A compelling example of why we don't trust government to use its authority wisely has been unfolding in the General Assembly. It is a cautionary tale about a small insurance company, bad decisions and legislators who ignore startling facts

Municipal Interlocal Risk Management Agency, also known as MIRMA, was established by some small towns in 2002 "to develop and administer insurance to member public entities throughout Connecticut." According to its website, more than 65 public entities belong to the organization, which concentrates on providing workers' compensation coverage

It has straightforward mission, and it's a failure. If MIRMA were a private insurance company, it would have been shuttered long ago. MIRMA, however, enjoys friends and advocates in the legislature, so it careens on toward an expensive abyss. Its financial health has never been robust

Several years ago, the legislature took away the state Department of Insurance's authority to regulate MIRMA, according to frustrated officials in that agency. It has power to review the condition of MIRMA but it cannot act when it sees trouble, and there's plenty. The department raised the prospect of MIRMA shutting down five years ago. Instead, the legislature passed a bill exempting it from prudent financial standards that require reserves to pay expenses — the medical bills of injured workers

MIRMA's deficit has grown from $2.2 million in 2004 to nearly $10 million at the end of last year. The latest independent audit declares that its losses and deficits "raise substantial doubts about MIRMA's ability to continue as a growing concern." These bare facts ought to be enough to prompt the legislature to authorize state regulators to intervene

Instead, a bill extending MIRMA's exemption from sound business practices sails through the legislature. Swaddled in isolation, the legislature's Insurance and Real Estate Committee ignored terse February testimony from the Insurance Department describing MIRMA's troubles

On April 7, it took only a trice for state Rep. Steven Fontana, D-North Haven, to describe the MIRMA bill and then for the House to vote for it by a 147-2 margin. No one mentioned that, the day before the vote, the chairman of the Workers' Compensation Commission, John Mastropietro, sent a searing letter to MIRMA chairman David Denvir of Killingworth telling him MIRMA must pay the medical bills for the injured workers it insures

Mastropietro, no alarmist, explained what the consequences of MIRMA's mess could be for thousands of workers. "If doctors and hospitals were to opt out of treating injured employees due to your failure to compensate them in a timely manner, our Workers' Compensation System would be severely compromised

This came as a surprise to one of the co-sponsors of the MIRMA bill, state Rep. Marilyn Giuliano, R- Old Saybrook. She sang the praises of MIRMA and its mission to provide affordable insurance coverage to small towns, when I spoke to her last week. She appeared not to have a clue that the reason it's affordable is that the premiums it collects don't cover the cost of paying claims, and haven't for years

When asked why she co-sponsored the bill to exempt from state regulators a company that isn't paying medical bills incurred for the care of injured workers, she went wobbly. "I don't know where this [bill] might have come from," she claimed. Perhaps in my research I might ask, she suggested

Hey, lady. Your name appears on the bill as one of six co-sponsors. You're supposed to have a clue. There's a reason MIRMA needs the legislature to protect it from the requirement to have sufficient cash reserves on hand to pay claims. It's a shambles, and the legislature is an accomplice in making it worse. More medical bills go unpaid and MIRMA has not responded to Mastropietro's letter. The Senate passed the bill Wednesday

The MIRMA mess serves as a warning for what's ahead. An army is forming to expand the role of state government in health care. These advocates have begun to hint that they, too, will want exemptions from traditional, prudent business practices imposed on insurers. Granting those would be a monumental mistake.