Thursday, July 5, 2012

OK, Costs and Reform

Oklahoma continues to intrigue me with its workers' compensation issues.

While proponents of an attempt to create a non-subscription feature in the state lost in the state House on a narrow margin due to Senate amendments that expanded the number of employers potentially eligible to offer the alternative plans, they are encouraged that the House did pass the original proposal. They have promised to return in 2013 with a new attempt.

In the meantime ten Oklahoma state senators have asked for an interim study, before the Legislature convenes again on Jan. 8, to consider implementation of an administrative system for workers’ compensation in the state.

Oklahoma is one of the few states left where workers' compensation disputes are dealt with in the civil court system. Most states have in place an administrative adjudication system which generally deal with disputes in a much more efficient and expeditious manner.

Senators asking for the study of converting to an administrative system include Mark Allen, Spiro; Josh Brecheen, Coalgate; Rick Brinkley, Owasso; Kim David, Porter; Eddie Fields, Wynona; David Holt, Ralph Shortey and Greg Treat, Oklahoma City; Rob Johnson, Kingfisher, and Frank Simpson, Springer.

The study would be conducted through the Senate Judiciary Committee, which is chaired by Sen. Anthony Sykes, R-Moore.

Allen owns an oil well drilling business with operations in both Oklahoma and neighboring Arkansas. Like most business owners dealing with workers' compensation, the big focus is the premium.

Allen told WorkCompCentral that his premium in Arkansas is 30% lower than in Oklahoma. He thinks that the reason is related to the fact that Oklahoma's dispute resolution system is handled through the civil courts.

I am of the belief that workers' compensation disputes are better dealt with in an administrative system due to the specialized nature of workers' compensation.

I am not convinced that this would lower the employer's premium 30%, and that Allen is not seeing everything that goes into the work comp premium.

In work comp the legislative debate is always about "costs". But "costs" don't inure to the detriment or benefit of employers necessarily. They are the burden of the insurance company.

Whether insurance passes those costs down to the employer through premiums is a convoluted and mysterious process for most employers. Employers know one thing - the annual bill they get for their insurance coverage. How that bill is assembled is not understood leading the employer community to grasp onto simplistic theories on how to reduce "costs".

Costs to the employer means how much the premium is - distinctly different than costs to the carrier.

Very, very few workers' compensation claims end up in litigation. Litigated claims do account for an outsized proportion of overall costs - but not to the extent that converting to an administrative system will save employers 30% on their bills.

Maybe carriers will see cost savings of 30%, but that likely will not translate down to employers.

Still, any program that creates a more efficient system without detracting from the core mission of providing benefits to injured workers should be examined closely.

No comments:

Post a Comment