The Oklahoma Option: Part 4

Examining the benefit levels and extent of liability under the proposed program.

By Bill Minick

This is the fourth of four articles on the Oklahoma Option, an alternative to the state's workers' compensation act, which is under consideration in the 2013 Oklahoma legislature.

Workers' compensation systems in the United States have been designed to reflect a "grand bargain" in which injured employees are entitled to a substantial level of injury benefits. These programs typically include various forms of wage replacement, amputation or loss of use, death and medical benefits. Those benefits vary from state-to-state and employers are entitled to "exclusive remedy" protection. In other words, injured employees are automatically eligible for workers' compensation benefits without showing any fault by the employer in causing the injury; and such benefits are the employee's exclusive remedy against the employer. The employee cannot pursue negligence or other tort claims against the employer.

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Agency's failure to return worker to work justifies increased benefits (04/29/13)

However, under Texas nonsubscription, there is no benefit mandate. Nonsubscribing employers in Texas have discretion over whether and how to set benefit levels in an injury benefit plan. The price of that discretion is unlimited negligence liability exposure to claims by injured workers. Furthermore, Texas law takes away the employer's common law defenses. This prevents nonsubscribing employers from defending such negligence claims based on the injury resulting from the negligence of a fellow employee, the injured employee's assumption of risk, or any contributory negligence of the injured employee. No obligation to pay benefits results in full employer exposure to tort liability.

The Oklahoma Option requires any employer to pay the same forms of benefits included in the Oklahoma Workers' Compensation Act (temporary total disability, temporary partial disability, permanent partial disability, vocational rehabilitation, permanent total disability, disfigurement, amputation or permanent total loss of use of a scheduled member, death and medical benefits) as a result of an occupational injury, on a no-fault basis, with dollar, percentage and duration limits that are at least equal to or greater than the dollar, percentage and duration limits contained in key sections of the newly reformed Workers' Compensation Act. If employers are mandated under the Oklahoma Option legislation to provide such a high level of injury benefits and are exposed to full tort liability, they will chose to remain in the current workers' comp system to receive tort liability protection.

The Oklahoma Option would become meaningless. As reflected in the core design of all workers' compensation systems across the United States (and Texas nonsubscription), it is not fair to require employers to pay a high level of statutorily mandated injury benefits and have exposure to legal liability damage claims regarding the cause of injury.

This is a public policy that reflects an inverse relationship between the level of benefit entitlements and the extent of exposure to employer liability for negligence:

Lower Benefits means More Liability

Higher Benefits means Less Liability

Thus, in developing the Oklahoma Option, two fundamental system design options were considered:

* Low (or no) minimum benefit levels required by statute, coupled with negligence liability exposure (like the model for Texas nonsubscription); or

* High, mandated benefit levels (like Oklahoma workers' compensation), coupled with Exclusive Remedy protection.

Of course, there's a "middle ground" between these two ends of the benefits/liability spectrum. The Oklahoma Option could have mandated a limited schedule of benefits. For example, medical care and temporary total disability coverage for 104 weeks, plus a small death and dismemberment benefit could be mandated; and the employer could be exposed to some tort liability, subject to various defenses that are recognized by statute.

However, for the Oklahoma Option, strong consideration was given to dramatic differences between the Texas and Oklahoma litigation cultures, including attorney and judicial activity and stronger tort reform laws in Texas. These factors led to a decision that the best approach would be to mandate a very high level of injury benefits in the Oklahoma Option (the same forms of benefits and dollar/duration/percentage limits as provided under workers' compensation), coupled with the exclusive remedy. The only exceptions to this exclusive remedy protection are for employees to sue for any wrongfully denied injury benefits or for any intentional act by an employer to injure an employee.

This approach is consistent with the Oklahoma legislature's recognition in other areas that public policy requires reasonable limitations on employer liability in order to encourage Oklahoma job creation and economic development. For example, even an unsafe employer is protected by Oklahoma tort reform legislation passed in 2011 that caps damage for pain and suffering and eliminates joint and several liability.

Opponents of this balance between benefit entitlements and liability exposure must realize that any imposition of negligence liability on Oklahoma Option employers must correspondingly result in a substantial reduction in the mandated level of injury benefits. And the Oklahoma Option is clearly not an attempt to reduce benefits to injured workers. Companies supporting the Oklahoma Option strive to be the "best places to work" and they would not be pursuing the adoption of this legislation if they did not believe it was the right thing to do for their employees. These employers are not hiding from a large benefit commitment to injured employees. They are advocating for it. (See Part 1 of this series about1 how free-market competition supports employers and insurance carriers in paying higher injury benefits to injured employees.) Many (if not most) Option employers will even increase certain benefits above what workers' comp requires. Look at the Texas example, with no obligation to pay ANY benefits, yet nonsubscribing employers routinely pay better disability benefits and pay death benefits faster than required under workers' compensation law.

For those concerned that exclusive remedy protection will eliminate employer motivation to provide a safe workplace, consider these facts: This is not the Industrial Age. Employers recognize that their most important asset is their employees. They are also motivated to provide a safe workplace in order to avoid insurance premium rate hikes and other injury claim costs. Of course, OSHA enforcement rules also apply to all employers without regard to whether they carry workers' compensation insurance.

Lastly, consider the fact that it would be patently unfair to injured employees to deny them the right to sue an employer for negligence (under the exclusive remedy rule), but still permit the employer (or insurance carrier) to deny injury benefits to an employee who is hurt as the result of a safety rule violation. This is the reason why workers' compensation systems pay benefits on a "no fault" basis. Benefits are payable to the injured employee without regard to whether the employer or the employee caused the injury.

Likewise, the Oklahoma Option specifically states, "the benefit plan shall pay benefits without regard to whether the covered employee, the qualified employer, or a third party caused the occupational injury".

Bill Minick is president of PartnerSource, an employee benefits and risk management consulting firm. Next week, parts of this series will address why Option employers are entitled to exclusive remedy protection. Click here for more information on the Oklahoma Option.

March 18, 2013

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