Large employers show interest in ERISA-governed worker benefit plansPosted On: Jan. 13, 2013 12:00 AM CST
Some large employers want to establish injured worker benefit plans that are governed by the Employee Retirement Income Security Act as an alternative to state workers compensation systems.
But insurers and organized labor oppose the idea, saying employers who favor the strategy want to lower costs by unfairly eliminating state-mandated benefits due injured workers (see related story).
ERISA is not as well known among workers compensation managers as it is among their corporate counterparts overseeing employee health benefit and retirement plans, experts say.
But there is growing interest among large, nationwide employers in exiting state workers comp systems and setting up alternative injured worker benefit plans to reduce costs.
Texas is the only state that allows employers, known as nonsubscribers, to opt out of its workers comp system.
Large employers, such as Costco Wholesale Corp., have opted out of the Texas system and set up alternative injured worker plans governed by ERISA for their employees in Texas and would like to do the same elsewhere.
“Costco in general feels like the opt-out process can be a really good thing for both injured workers and employers,” said Katrina Zitnik, director of workers comp at Issaquah, Wash.-based Costco.
ERISA sets minimum standards for most voluntarily established employee pension and group health plans to protect plan participants, according to the U.S. Labor Department, which enforces ERISA.
For instance, ERISA requires employers to provide workers with information on their plans' benefit offerings, lays out employer fiduciary responsibilities, and requires establishing grievance and appeals processes.
Employers that would like to make greater use of ERISA-governed benefit plans as an alternative to state workers comp systems say the federal law ensures that injured employees are taken care of in a fair manner.
ERISA provides a “safety net” for injured workers by ensuring their needs are met, Ms. Zitnik said.
For employers, ERISA pre-empts state regulation, allowing them to design worker injury plans free from unpredictable state regulations, sources say.
In Texas, for example, employers can include rules for resolving disputes and direct employees to care provided by “outcome-based” doctors in their ERISA-based alternative plans.
“A lot of it has to do with the control they have over the medical piece that makes it so attractive” for employers in Texas, said Kim Corcoran, Richardson, Texas-based vice president of operations responsible for nonsubscriber services provided by Sedgwick Claims Management Services Inc.
Establishing an ERISA-governed plan is not required for employers opting out of Texas' work comp system, but doing so is a “standard best practice” among Texas' nonsubscribers, concluded a recent report, “Workers' Compensation Opt-Out: Can Privatization Work?”
The Sedgwick-funded analysis completed by Philadelphia-based communications firm New Street Group found that nonsubscribers in Texas reported that their work-related injury costs were 20% to 90% lower than if they participated in the state's workers comp system.
Interest in opting out of workers comp systems in other states has grown recently. Last year, the Oklahoma Senate voted in favor of a bill that would have allowed employers to opt of the state's workers comp system by creating an alternative benefits package.
Oklahoma's House of Representatives voted down the measure, but a similar bill is expected to be introduced this year with businesses across the country watching the outcome to determine whether to introduce similar legislation in other states, sources said.
Some employers and their supporters have contributed financially to the Oklahoma Injury Benefit Coalition, an organization pushing for the legislation, because they see passage of legislation in Oklahoma as providing a potential platform to expand the idea to other states, said Becky Robinson, assistant vice president of risk management at Hobby Lobby Stores Inc. in Oklahoma City.
The issue “has national attention” because large employers see the potential “for tremendously reducing their liabilities for on-the-job injures,” said Trey Gillespie, senior workers comp director in Austin, Texas, for the Property Casualty Insurers Association of America, which opposed the Oklahoma measure.