Workers compensation reform legislation debated by lawmakers in Oklahoma continues to contain a provision opposed by insurance trade groups.
The state House on April 4 unveiled legislation that would roll back cuts in compensation for injured workers, which was proposed by the Oklahoma Senate in February.
However, the proposed law still contains provisions that would allow companies in the state to opt-out of the system.
“AIA opposes legislation that will allow for an opt-out system in Oklahoma and we will continue to work against its passage for the remainder of the session,” says Willem Rijksen, a spokesman for the American Insurance Association (AIA).
Bruce Wood, AIA associate general counsel and director of workers’ compensation programs, says the opt-out is a proposal that has been around in Oklahoma for a few years and is being promoted by “non-subscriber interests in Texas,” as well as certain employers, particularly in the oi-and-gas and retail industries.
Wood says, “There is no substitute plan, no opt-out plan, which can provide the protection that workers compensation does.”
He said workers compensation benefits provided by insurance are backed by a state guaranty fund. If an insurer goes insolvent, the fund—which is financed by all carriers participating in that state—will ensure the payment of claims.
“That guarantee is 100 percent; it is unlike any other,” Wood said. “That cannot be replicated.”
Under the current Oklahoma proposal, Wood says, employers who opted out would have to buy an ERISA-qualified plan of benefit to provide a substitute benefit to workers. But, because the opt-out is not backed by the guaranty fund, the AIA opposes it.
The lengthy proposal submitted last week is meant to scrap Oklahoma's judicial compensation system and replace it with an administrative system run by three governor-appointed commissioners. The latest version of the bill aims to phase out the current court-run system by 2017.
The new version of the bill, among other things, restores benefits for widows and amputees to current levels; extends the amount of time an injured worker can file a claim from three days back to 30; and reinstates compensation rights for volunteer firefighters and members of the Oklahoma National Guard.
It also streamlines the transition from the current court-based compensation system to an administrative one, allowing current court judges to continue to work existing claims until their terms expire.
But the new bill would balance a decrease in cost savings anticipated by these reinstatements with even further cuts to the most common claim filed in the system — permanent partial disability.
Oklahoma is one of the last three states that settle the resolution of claim disputes to the courts. Tennessee and Alabama are the other states, and they are also considering a transition to an administrative system.
Paul T. Martin, the National Association of Mutual Insurance Companies’ state affairs manager for the Southwestern Region, says the bill is “a step toward making workers' compensation insurance in Oklahoma more affordable for businesses. It’s a complex issue, as evidenced by the differences between the various versions of the bill.
“We’re confident the Legislature will find common ground in an effort to help make workers' compensa
Mike Seney, senior vice president of policy analysis and strategic planning for the Chamber of Commerce of Oklahoma, rejects use of the term “opt-out” to describe what the legislation would allow Oklahoma companies to do.
“We prefer to call the ‘Oklahoma option’ what it really is: alternative coverage rather than opt-out,” Seney says. He adds that in Texas, an employer can opt out and “go bare” with no coverage for their workers.
“The ‘Oklahoma option’ requires that any employer choosing to remove themselves from the Oklahoma workers compensation system must still provide equivalent benefits to their workers,” he explains.