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Proponents say workers comp opt-out could make a comeback

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MIAMI — Oklahoma’s brief experiment in allowing employers to opt-out of the state’s workers compensation program proved that these alternatives could be effective in both lowering costs and providing benefits to injured workers, according to proponents, who suggested a recent Oklahoma Supreme Court ruling does not spell the end for these programs.

Tyler Laughlin, Deputy Commissioner of the Oklahoma Insurance Department in Edmond, Oklahoma, blamed “activist judges in Oklahoma” for the September decision in which the state Supreme Court ruled that the Oklahoma Employee Injury Benefit Act was unconstitutional because it allows injured workers under the “opt-out act” to be treated differently than workers covered by traditional workers comp plans.

“We knew that the risk of an adverse ruling from the Supreme Court was high when an option was first discussed in 2011 in Oklahoma,” Bill Minick, president of PartnerSource, a unit of Arthur J. Gallagher Risk Management Services Inc. in Dallas, told attendees of the National Association of Insurance Commissioners fall meeting in Miami on Monday. “The good news is that there was two full years to prove that a lightly regulated, competitive market for occupational injury works.”

Both employers opting out of the comp traditional system and those that chose to remain in “benefited from a competitive dynamic” that led to lower quotes at renewal, he said.

The National Council on Compensation Insurance Inc. had forecast a 37.4% decline in workers comp claim costs following the 2013 reforms, but a review of the historical claims data for 40 out of 55 opt-out employers found that they achieved an additional 70% average claims cost savings, Mr. Minick said. In addition, there were fewer employee disputes under the opt-out alternative, with only 3.7% of claims disputed compared to 15% under the state program.

“If we do better for the injured worker, the cost savings take care of themselves,” he said, adding that employees working for employers who opted out also benefited from no waiting period, a higher wage replacement percentage and no weekly cap on benefits.

The ruling meant that employers who opted out must wind down those plans before Jan. 17, 2017, Mr. Laughlin said.

“It’s our understanding and our experience that those plans are making a nice transition to the original workers comp system,” he said, adding all the employers are expected to transition back ahead of the deadline.

“All of us were concerned that there might be gaps in coverage… during the transition process,” Mr. Minick said. “The carriers have stepped up to the plate.”

“Without exception, our clients have indicated that they were pleased with the results (of opt-out) and that their associates were pleased with the results and it was disappointing to go back into a system where the disability benefits will be lower and the anticipated outcomes are not as favorable,” he added.

A.J. Donelson, public and government affairs officer, Association for Responsible Alternatives to Workers Compensation in Richmond, Virginia, said employer members and state legislators remain interested in opting out of state programs.

“My crystal ball gets a little bit murky… but I wouldn’t be surprised to see other states consider various forms of an option next year,” he said.

However, Tennessee Department of Commerce and Insurance Deputy Commissioner Chlora Lindley-Myers said the department is “willing to battle” against an opt-out bill that will likely resurface in the state.

“This issue has been sort of plaguing us in Tennessee for the last couple of legislative sessions and we anticipate it will ignite again,” she said.

Eric Goldberg, vice president of state affairs for the Mid-Atlantic region for the American Insurance Association, said the organization remains concerned that opt-out programs create two classes of injured employees: those covered under the guaranteed benefits provisions of workers compensation laws and those that are not.

“Our belief is that the benefits that the worker receives should not be determined by the fortuity of the employer that that worker happens to work for,” he said. “The benefits ought to be established uniformly by state law.”

Mr. Goldberg said the association is committed to fixing whatever problems exist in the state programs, “but the solution is certainly not to throw out workers compensation,” he said.