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Conversation continues around alternative comp models

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Work injury claim

Alternative workers compensation models continue to be a hot topic across the country, with at least one state contemplating legislation that would allow employers to opt out of the state-mandated comp system and a new report out of Texas last week predicting the spread of alternative injury benefit models to other markets.

Arkansas Senate Bill 653, which has been pending in the Insurance & Commerce Committee since early March, proposes an alternative benefit system under the state’s workers comp act. Fred C. Bosse, southwest region vice president for the Washington-based American Insurance Association, said the shell bill appears to be an attempt to keep the workers comp opt-out conversation going. He said AIA takes all such bills seriously and engages with legislators to dissuade the progress of legislation that the organization believes could create an unequal system of benefits for employees.

That Arkansas bill is the only alternative workers comp model legislation currently under consideration, according to Mr. Bosse and Ron Jackson, southeast vice president for AIA. Florida state Rep. Cord Byrd, a Republican from Jacksonville Beach, Florida, promoted legislation late last year that would have created an alternative comp system in Florida but never filed it, Mr. Jackson said.

In South Carolina and Tennessee, where similar legislation has been considered during the past two years, no current opt-out legislation is pending, Mr. Jackson said.

The situation in Oklahoma, which passed an opt-out workers comp model in 2013 that was ruled unconstitutional by the state Supreme Court last year, could have a chilling effect on attempts to introduce alternative models in other states, Mr. Bosse said.

However, the Association for Responsible Alternatives To Workers’ Compensation, based in Reston, Virginia, said in a statement emailed to Business Insurance that these bills are beginning to pop up organically in order to model benefits that companies have seen from Texas’ nonsubscription model.

“Outcomes and benefits for injured workers have improved, employers are more competitive when costs are contained and taxpayers are well served by market-driven solutions,” the ARAWC statement said. “We recognize that each state is different and that the discussions at the state level will involve varied opinions. “

The notion that Texas’ system could serve as a model for other states considering alternative comp models was outlined in a report issued last week by the Texas Public Policy Foundation, which favors workers comp opt-out models. Bill Minick, president of Dallas-based PartnerSource, which helps employers set up alternative injury benefit programs in Texas, praised the report and said competition has driven down insurance premium rates and improved benefits for injured workers in Texas.

ARAWC pointed to several benefits it says responsible alternative comp laws could provide, including better wage replacement benefits and reduced overall employer costs. The association said faster return to work, fewer claims disputes, lower employer costs and faster claim payouts and closure have been demonstrated with alternative models. 

However, AIA was critical of the report, saying that the Texas workers comp model is better described as an opt-in model, rather than an opt-out model. AIA said reforms passed in 2005 appear to be encouraging more employers to opt in to the Texas workers comp system because the percentage of employers who are nonsubscribers has declined since that time.

“AIA believes that two of the major reasons for this development derive directly from House Bill 7 in 2005, which allows employers who opt in to the system to establish medical networks to administer workplace injuries and the creation of the closed formulary for administering prescription drugs,” said Mr. Bosse. “This has resulted in a remarkable decrease in the rates for workers comp, which makes the coverage more affordable and thus more attractive to employers. The report indicates that since 2003, the rates for workers’ comp coverage in Texas have been reduced 56 percent. This is why AIA is perplexed that the report concludes that the success of the Texas system can be ascribed to the nonsubscription option.”

The Texas model has been in place for a century and is not analogous to current attempts in other states to create true opt-out models, Mr. Bosse said.

One hundred “years ago, Texas decided you could opt in to the workers comp system, and everybody else moved in a different direction,” Mr. Bosse said. “To now say we’re going to allow employers to adopt a separate, but unequal system of employee benefits, in our view, is unworkable. It treats employers and employees differently, imposes unequal burdens, subjects employees to being treated or not depending on what an employer has decided to do, and unavoidably shift costs somewhere else.”