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By Nancy Grover

Legislation would make Oklahoma the second state to allow employers to opt out of the workers' comp system.

Texas' system. Texas law allows companies to subscribe or non-subscribe to the workers' comp system. Reports indicate approximately 30 percent of Texas companies are non-subscribers, especially larger, more sophisticated companies with the resources to develop their own plans.

"We went non-subscriber in October 2004," said Becky Robinson, assistant vice president for Hobby Lobby and a strong proponent of Oklahoma's legislation. "We don't opt out. We have an [Employment Retirement Income Security Act] program."

Like many Texas non-subscribers, Hobby Lobby developed a plan under the regulatory authority of ERISA, which mandates certain rules such as coverage limits.

As Robinson explained, opting out is not the same as non-subscribing. The legislation pending in Oklahoma would require employers to adhere to ERISA regulations, she said.

"The term opt out construes a whole other meaning, and there is no protection for the employee if [a company] chooses to do nothing," Robinson said. "When you have an alternative system, through ERISA, it holds your feet to the fire to protect the employee."

Prior to Hobby Lobby's move to non-subscribe, Robinson projected cost savings of 20 percent, but her projection was wrong.

"After a year, we realized a 50 percent savings," Robinson said. And the company was not the only beneficiary of the new system. "We have a 90 percent satisfaction rate with employees who file a claim."

Robinson believes one of the reasons for the dramatic savings and the high rating from injured worker is the expedited medical care that is not typical of the state-based system.

"In the workers' comp system, claims would drag out, leaving the employee waiting for medical care or other benefits," Robinson said. "With ERISA, the employer is subject to timelines so benefits are provided to employees quicker."

Involving employees more in the process is also key, Robinson said. They are given a simple summary of the plan.

"They know up front what they are entitled to," she said. "If any part of a claim is denied, they have a right to appeal. If the appeal is denied, the employee has a remedy at the federal level through what ERISA offers. So there is a lot of opportunity where employees have a say in the claims process."

Another large company hoping to achieve similar results is Wal-Mart. The retailer joined the growing number of Texas non-subscribers in March.

"We've watched the non-subscriber industry grow significantly over 20 years," said Wal-Mart spokesman Daniel Morales. "This growth really has resulted in a mature marketplace."

Morales said the company also believes it is doing the best thing for its employees.

"The change provides the opportunity to provide better care for our associates while at the same time better managing our costs," Morales said. "If you look at this new benefit plan, it helps reduce red tape and paperwork, improve medical management, and at the end of the day, our associates receive more timely and more appropriate treatment of their injuries."

Opposition. However, the move by Wal-Mart to become a non-subscriber was not good news to some. Among the concerns is that it privatizes the workers' comp system at the expense of the injured worker.

"The public workers' comp system ... is a balance of power, a trade-off where the employers give and the employees give. There are established concepts of due process in workers' comp," said Rick Levy, legal director for the Texas AFL-CIO. "What opting out does is puts the entire system in the control of the employer."

For example, Levy said the Wal-Mart plan takes away the worker's right to select a physician or have access to a neutral dispute adjudication process in the courts. He said the company selects the appeals panel that would review decisions.

"They've set themselves up as judge, jury, and unfortunately executioner when it comes to being the administrator of this system," Levy said. "I don't think that's a good thing for workers."

Levy disputes claims that the non-subscriber system benefits injured workers.

"Wal-Mart says [its plan] provides much better service with no waiting period," he said. "But there are a whole host of other provisions that make that kind of pale."

Levy points to the requirement for injured workers to report their injuries within 24 hours. He also says the $300,000 maximum benefit level is inadequate.

Proponents of the non-subscription plans believe that done correctly, they benefit everyone. Employers have the opportunity to offer better and speedier medical care, are not required to follow many of the bureaucratic requirements of the state-based systems, and have more flexibility to structure claims management and return-to-work programs.

Robinson says the state-based systems could be more effective by being more responsive to injured workers "if we treated our employees with respect and allow them to know what's going on in the claims process," she said. "That's never been the case in workers' comp. Some of the statutes are 1,000 pages long. There is a limited understanding at the employee level. If given the information up front and they understand and have buy-in, everything just works better."

Read more at the WorkersComp Forum homepage.

April 30, 2012

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