Thursday, November 29, 2012

Eight Steps to Oklahoma Reform

Oklahoma Labor Commissioner Mark Costello (R) is pushing again to change from the current civil based dispute resolution system for workers' compensation claims to an administrative system.

The major goal is to remove attorney involvement as much as possible. Costello says that “If the lawyers are happy, I won’t be.”

Costello's dream is an administrative claim adjudication system modeled on that used by Arkansas – and possibly with elements also borrowed from Texas.

Lt. Gov. Todd Lamb (R) and Insurance Commissioner John Doak also are calling for change.

Lamb says he believes moving to an administrative model for workers' compensation would be an improvement over the current system, which he said pits employers against injured workers. An administrative system could eliminate that "adversarial nature," Lamb said.

I don't agree with Lamb - an administrative system will do nothing to eliminate the friction between employer and employee. That's an entirely different psychology and an entirely different set of problems.

The Oklahoma State Chamber is also critical of the current court-based system, but additionally supported the opt-out proposal in this year’s session (which likely will also surface on the legislative agenda for 2013).

Senate President Pro Tempore Brian Bingman, R-Sapulpa, carried the “opt-out” legislation in this year’s session. Bingman said last week that workers’ comp will be “a top issue” for him and Senate Republicans in 2013 but did not give details.

Costello also supports giving employers the opportunity to “opt out” of the workers’ compensation system and to offer alternative coverage to employees – an adaptation of the Texas “nonsubscriber” system.

He has commented, however, that he does not believe offering an "opt out" provision would be sufficient to eliminate lawyer involvement.

He's right, of course, because very few employers will actually qualify, or want to, "opt out."

Likewise, as we have seen in many states, just moving to an administrative system of adjudication will not eliminate the lawyers either.

If Costello wants to remove lawyers from the system, the way to accomplish that is much more simple than moving to an administrative system - take the money out of work comp.

Obviously one can not remove indemnity from the work comp equation. Labor won't let that happen, nor should that happen. Indemnity has a very important role in the grand scheme of work comp.

But how that money is derived, and how payment of indemnity is enforced, are where the litigable sticking points are in any work comp system.

This simple fact has been clearly demonstrated by what has happened in Florida, a phenomenon that I commented on just a few days ago.

Florida already had an administrative adjudication system, but this did not eliminate lawyer participation, and in fact more than likely exacerbated it, since administrative systems are typically much more loose in procedural requirements than civil courts thus making the "practice" of law quite a bit easier.

Until, of course, that administrative system goes through several series of "reform" that institute many more rules and layers of complexity. When that happens lawyers are nearly invited to participate because injured workers, who are not skilled or trained in the law, can't navigate such systems without professional help.

I think that this is essentially what has happened in California, perennially cited by outside observers as a system that is much too lawyered up. Since I started in California work comp in 1984 I have seen several waves of reform, and each one creates even more complexity, creates more confusion for injured workers (and claims adjusters by the way), and drives litigation even more. California work comp is insanely complex.

After SB 899, which on its face severely constricted permanent disability indemnity - the source by which claimant (applicant in California) attorneys derive their income - litigation plummeted and many lawyers that represented injured workers changed their practices and moved into other fields of law.

When the brightest of the applicant attorneys, dedicated to representing injured workers through thick and thin, challenged the law, courts agreed and permanent disability indemnity increased dramatically, and so too did lawyer participation in claims.

Florida capped fees except in the most egregious of situations. Lawyer participation is, comparatively, virtually non-existent (there's still plenty of litigation, but less than half of what it was prior to the state's 2003 reform).

I've said before that workers' compensation is the poor man's dispute resolution system. And in fact there is much scientific evidence supporting this claim - the single biggest factor driving workers' compensation litigation according to studies is job dissatisfaction.

My advice to Mr. Costello - if you're truly interested in really cleaning up the Oklahoma system, several things need to happen simultaneously in a cohesively planned reform:
  1. Yes, move to an administrative system of claim adjudication with its own "court" and its own "board" upon which the first level of appeal goes;
  2. Make the system as dead-on simple as possible - I'm talking "Forrest Gump" simple;
  3. Remove medical disputes out of the court system and into its own review system (i.e. borrow from California's latest reform - yes, it is untested but I think the writing on the wall is very clear and I believe that this single element of California's latest reform will greatly reduce litigation);
  4. Make sure that every single piece of paper and communication that is required to go to the injured worker is plain, simple, non-threatening and filled with easy to understand information;
  5. Along the same lines as simple forms and notices, procedural hurdles should not be thrown in the way of claimants - doing so makes them get lawyers. Give unrepresented claimants great latitude with their cases so that procedure is not in the way of them getting their day in court (remember the poor man's dispute resolution system qualities of work comp!);
  6. Provide free of charge to injured workers ombudsmen who are authorized to assist injured workers navigate the system and educate them about what can be expected (and more importantly what can NOT be expected) from a work comp claim;
  7. Remove the financial incentive for lawyers to participate - Florida used caps on fees, California altered the permanent disability indemnity system, other states have used other tactics - if lawyers can't make a living practicing workers' compensation law they will move to other areas.
  8. Go ahead and create an "opt-out" option - large employers will love that. But it is not a panacea for the whole state and in fact a very small percentage of employers will actually benefit. At least, though, the workers' compensation system will have competition, which is good for the system as a whole.

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