The Federal Independent Worker

All the talk in workers' compensation about alternative systems has been about opt-out.

Now, a couple of professors, and Congress, is thinking about creating an "opt-in" system.

Alan Kreuger, a Princeton University professor and Seth Harris, professor of industrial and labor relations from Cornell University, published a paper, A Proposal for Modernizing Labor for 21st Century Work: The “Independent Worker,” through Washington, D.C.-based Brookings Institution's Hamilton Project Wednesday.

The next day a symposium, "The Future of Work," was hosted by U.S. Secretary of Labor Tom Perez on Thursday in the capitol.

In the workers' compensation industry we argue about efficiencies, costs, and details of coverage.

But, we also know, when we "look at the moon," that the administrative nature of modern workers' compensation systems is an important component of the economy and society, and that it is fundamentally a very good concept.

And we also know that there is growing discontent with the disparity between state systems, the inequity of benefit levels and how systems are administered, with some calling for federal oversight and standards.

Kreuger and Harris posit that while the tort system may be the best solution in some cases, overall, workers' compensation can be more efficient than civil litigation.

This had Harris and Kreuger arguing that the federal government should take the lead in establishing an opt-in workers' compensation system to cover Independent Workers - that new class of worker (some call them Dependent Workers...) of the Shared Economy exemplified by Uber, Lyft, AirBnb, DoorDash, GrubHub and others.

“Congress may have to act if the courts all across this country reach varying and confusing decisions,” Kreuger said during a roundtable discussion following the publication of the report. “It’s quite possible, in some jurisdictions, courts will say, under the same law, that they're employees and others are independent contractors. And that’s not a healthy environment for the economy."

Harris, said during the same discussion, “God forbid judges get involved. Then we’re going to end up maybe even worse off, because it’ll be decisions in particular cases with respect to particular sets of facts about particular issues,” adding it might take an act of Congress to get a comprehensive solution.

“We therefore propose that intermediaries be permitted to opt to provide expansive workers’ compensation insurance policies to the independent workers with which they work without transforming these relationships into employment," the authors conclude.

Intermediaries would receive limited liability and protection from tort suits in exchange for this no-fault insurance coverage. And while states would provide the legal framework within which the policies would operate, they would not operate the systems themselves.

States could also require that the policies provide the same level or a higher level of protection to independent workers than their workers’ compensation systems.

“While opt-in and voluntary systems of insurance can create adverse selection and moral hazard problems," because of the potential that only those businesses whose independent workers are more likely to be injured opting to buy the policies, "experience with these policies could inform design changes that might reduce these risks over time.”

Parenthetically, in our industry, we have referred to those changes as "reform," with its own set of problems and concerns.

Intermediaries would also have the right to opt out of the system and be subject to tort actions if workers’ compensation policies are prohibitively expensive say Kreuger and Harris.

I had assumed with enough political noise that eventually Congress might rattle cages with a sword and threaten some sort of oversight or program to rectify disparate system differences in state programs, but this is an all new twist that could provoke the same sort of change.

Cost Shifting Nonsense

The Workers' Compensation Research Institute hosted a webinar yesterday about cost shifting to workers' compensation from general health. The premise was that due to the Affordable Care Act, there would be an increase in moving health claims into the workers' compensation system.

Richard Victor, who is retiring as president of WCRI, made the case that this shift trend is underway, based on research that looked at "capitated" health plans, namely from Health Maintenance Organizations.

A capitated plan is defined as a health plan that pays a flat fee for servicing patients; as opposed to a fee for service plan that pays per procedure. It was theorized by WCRI that capitated health plans would grow under the ACA so health carriers could control costs better, and consequently there would be an increase in shifting care to work comp.

A study (not by WCRI) back in 1996 had looked at federal ship yards, and the correlation between HMOs and workers' compensation - what that study found was a strong correlation between them: ship yards with an HMO, which were presumed to be capitated plans, were highly correlated with shifting care to workers' compensation.

But that's not the end of it - the type of "injury" being shifted was more responsible than simply providing care under capitated plans.

Look at the moon...

WCRI's research shows that if the injury claimed is a soft tissue injury that there was a greater likelihood that it would be treated under a work comp system than general health.

Victor said this was because the initial treating physician has the first, and consequently, disproportionately large role, in determining causation of an injury or complaint.

Specific trauma cases provide much less discretion in determining causation because an event was much easier to identify - thus lacerations and fractures aren't so easily recategorized than those requiring a more subjective analysis.

An inference was made by Victor, though there wasn't any hard data to support it, that workers' compensation's mostly fee for service reimbursement schedules influenced subjective determinations towards work comp - assuming that physicians and their teams were more motivated by money than health outcomes.

But blogger and principal of Health Strategy Associates pointed out that about 1/3d of HMOs don't use capitation for groups or individuals, or at least not for all services, so basing the research on HMO experience was not an apples to apples comparison, in his opinion.

Paduda also said that capitation has NOT grown under ACA, and presented some data to support that conclusion.

And in fact, Paduda challenged that physicians would be so motivated to move claims from general health to work comp because of the extra paper work, stating, "documentation that is perceived by physicians as irrelevant to patient care is the discontent of doctors - seems to me that's the definition of workers' comp."

Paduda also challenged the status quo view, and said he's not sure that any reverse shift DOESN'T occur (i.e. likely that there is cost shifting or case shifting going both ways).

Frankly, though, this is all academic.

It really doesn't matter and is a discussion that is relevant only to insurance companies seeking to eek out a better profit from their programs, because at the end of the day the employer is still paying for insurance, and employee is still trying to get treatment, and if one belongs in a certain silo or another is of relevance to the injured worker only in terms of deductibles, co-pays and indemnity (and even then, there may be an indemnity option under a state disability program such as in California or New York).

Cost shifting is pointing at the moon, and the dogs (us) looking at the finger instead of the moon.

There are only two real issues: is there an employer paying for medical care? is the employee getting medical care?

Whether that care is paid for via one system or another is irrelevant to the big picture.

Which brings me to another point - and that is whether universal care, or 24-hour care, or whatever you want to call it, will ever become available.

Both Victor and Paduda said "no" because powerful entrenched interests will never let go of their fiefdoms.

But this ignores the single most compelling prospect of the opt-out movement: consolidation of care.

Opt out can operate outside of the silos because it is not constricted by workers' compensation laws; it is governed by ERISA, a much broader system of governing employee benefits. I see the opt out movement as having an advantage to both employers, AND their workers, by providing medical care via a single platform.

Let the guys with white collars and ties in the back room argue about who's going to pay for what. The injured or unhealthy worker should not be concerned with who's going to pay for what - if the care is delivered quickly, timely, effectively - the vast majority of care recipients are going to be just fine with that.

Opt out has been the brunt of criticism the past couple of years with all sorts of legal challenges in Oklahoma, all sorts of anti-opt out lobbying in Tennessee and South Carolina, and public media reports that the promises of injured worker care are illusory.

I suspect proponents are actually listening and learning, and that modern offerings will refocus the discussion towards the bigger picture: an employer paying for the care of its workers regardless of causation.

Sure, universal care as a national, or even a state, program may not ever be realized because of the pesky, well positioned and entrenched special interests.

But when opt out comes to your state you can bet that plans will be a universal care model.

THAT's how single payer/universal/24-hour care (or whatever label you want to use) will creep into the modern economy.

That's my opinion. Ought to be yours!

WTF of Work

You knew it was going to happen.

A group of technology executives, financiers, labor union leaders and public policy experts sent a letter, also published on the website, "Medium," posit to congressional lawmakers asking, "WTF?", or What's The Future of work.


Because workers are much more portable, and temporary, that in the past, the traditional two tiered analysis of employee and independent contractor no longer meet the needs of the economy or society, the letter argues, and it is now necessary to start discussions on a way to provide protections to the workers who are Dependent Contractors, the letter posits.


The earliest use of the term Dependent Contractor that I have found occurred all the way back in 2005 in a Berkeley Journal of Employment and Labor Law article by Elizabeth Kennedy.


In that article, "Freedom from Independence: Collective Bargaining Rights for Dependednt (sic) Contractors," Kennedy examines the history of collective bargaining, and goes back to the early 1930s and an attempt by newsboys in Los Angeles to organize.


That backdrop case, NLRB v. Hearst Publ'ns, Inc., 322 U.S. 111 (1944), recognized that there were marginal classes of workers that did not have sufficient bargaining power themselves to negotiate fair labor standards and benefits.


"The Court recognized that economic forces themselves may create conflict between employers and workers, who by strict definition do not have a proximate employment relationship," Kennedy summarizes. "In those instances, the economic realities of the relationship may more closely reflect the evils sought to be remedied by the NLRA [National Labor Relations Act] and justify the inclusion of independent contractors under the Act. The drafters of the Act had this imbalance in bargaining power in mind. This was the 'mischief' the NLRA sought to correct."


Business didn't like it, so Congress was petitioned, and did, exclude independent contractors from the NLRA when it passed the Taft-Hartley amendments to the Act in 1947.


Kennedy argues that the twin silo distinction between employee and independent contractor harkens back to medieval concepts that were no longer adequate to define the modern work force.


And the problem is that a large population of the modern work force is left without a voice, without representation and, most importantly, left in the vast void between the two silos in the world of work protections.


Kennedy posits that a Dependent Contractor Labor Board should be established to provide a mechanism for these workers to access the rights and privileges of employment while ensuring the benefits of independence that both those workers, and their employers, seek to preserve.


The model is already in place, Kennedy notes, in California with the Agricultural Labor Relations Board.


Kennedy was examining collective bargaining by disparate groups of workers who were classified as independent contractors but were singularly reliant upon an employment relationship.


Come full circle ten years later, and seeing the risk to their business models that eliminate the friction of "employment" in the "gig economy," big business is seeking what Kennedy posits - a new, third, classification of workers.


The tech giants and their financiers say, "Everyone, regardless of employment classification, should have access to the option of an affordable safety net that supports them when they’re injured, sick, in need of professional growth, or when it’s time to retire."


The group's tenets: flexible workers are good for the economy and should have protections from unforeseen maladies and calamities; the Affordable Care Act is a stepping stone towards providing an avenue to protections to this third class; and it's time to open the conversation.


But the group doesn't say how all of this is going to be paid for. Presumably, for now, the necessary first step is business' willingness to open the discussion towards a solution that won't destroy the investments behind Uber, Lyft, AirBnB, etc., and this letter is that step.


I can't help but think that the workers' compensation industry is uniquely poised with the long term experience and knowledge on how to make the concept of Dependent Contractor a reality, and provide mechanisms for the financing and administration of such a system.


Indeed, this has already started to happen - the Opt Out movement has drawn criticism from skeptical Labor and Insurance because of lack of transparency, mis or non understanding of ERISA, and mistrust.


But what Opt Out fans are saying is that independence is what the modern economy dictates - independence from the traditional two silo version of work.


Dependent Contractor relations is, essentially, workers opting out, but still having a back-up in case something bad happens.


Now is the time for workers' compensation industry leaders to help shape this emerging public policy change. It is THIS industry that has the knowledge, the know how, the intelligence, and the experience, that can direct how a new classification will be defined, how a system can be constructed to administer and regulate the relationships, and ultimately, how it's all going to be paid for.


The Dependent Contractor status is creating huge new opportunities for the business world and the economy. It is also a new huge opportunity for insurance and related industries to introduce new products and services to meet the needs of business and workers as this all evolves.


Dependent Contractors will, ultimately, be legally recognized. I have no doubt about that. We can help define it, and consequently benefit by doing so.

Marketing Value

My blog post, Poisoned Kool-Aid generated polarized, partisan sentiments.

There were two camps - those who were offended by the alleged behavior of the opt-out employer, ResCare, and opt-out fans who derided Bob Burke (Rachel Jenkins' attorney and Oklahoma state constitutional challenger) and/or said that the "facts aren't as alleged."

I even had a broker/consultant offer to sponsor me for a couple of days to talk to Texas and Oklahoma employers, and in particular their employees, about their opt-out experiences.

I said that there likely was another side to the story.

Everyone missed the point, though, and that is the case is a public relations mess, even if the facts as alleged are not accurate, because the rally cry of opt-out proponents has always been that its better for the injured worker.

Maybe it is, maybe it isn't. I don't have the data and the facts to either substantiate that claim or challenge it. Opt-out employers are notoriously secret about their programs, and since opt-out can not succinctly claim the exemption from the Health Insurance Portability and Privacy Act that workers' compensation enjoys, privacy is a concern to those employers notwithstanding any need to prove themselves.

I waffle on whether opt-out is good or bad. It grows out of business' desire to have more control over the money spent for work injury protection. But it also clearly divides Business and Labor because of that desire for control.

And the opt-out movement is spreading in the South, as forecast, with attempts in Tennessee (on the legislative back-burner now until next session) and South Carolina, in sights for 2016.

According to WorkCompCentral correspondent, Mike Whiteley, the Association for Responsible Alternatives to Workers' Compensation met in March with a group of South Carolina employers, Workers' Compensation Commission Chairman Scott Beck and commission Executive Director Gary Cannon to discuss opt-out legislation.

ARAWC is well funded, with sponsors such as Wal-Mart Stores, Nordstrom, Safeway, Lowe's, Macy's, Kohl's, Sysco Food Services and several insurance companies. The group has the connections to move rather aggressively in the Southern states.

ARAWC Communications Director Brent Buchanan told WorkCompCentral that a bill in South Carolina should be filed before lawmakers adjourn the 2015 session to be ready for 2016.

A big argument of opt-out opponents is that the bills that get proposed lack "transparency," apparently referring to an inability for state regulators to monitor and measure these systems.

Trey Gillespie, senior workers' compensation director for the Property Casualty Insurers Association of America, told WorkCompCentral that the organization opposes the Tennessee and other bills because they lack transparency and don't provide levels of worker protection provided by workers' compensation laws.

"These proposals follow the Texas model, which lacks the transparency," Gillespie said.

We can all go back and forth as to the relative merits of an opt-out system versus traditional workers' compensation, but that is all irrelevant.

The issue is not whether opt-out should or shouldn't be offered. The issue is that traditional workers' compensation is under attack, for many reasons, and this industry should be concerned.

Traditional workers' compensation is under attack for two very basic reasons, all of this own industry's making: it costs more than employers think it should, and those who are to be benefited by such systems don't get the protections needed.

Lest anyone think differently, that simply the message that the ProPublica series, the OSHA report, and several other major newspapers have been postulating.

In other words, workers' compensation has a tough time convincing its stakeholders, employers and their workers, that it has any value.

Value is a perception call - to the consumer value means that the service or product is worth the cost or expense.

To the bottom line consumers of workers' compensation, the cost of providing what the law says must be provided doesn't match expectations.

Opt-out has a big chance to change that equation, to prove value, to show that it can take care of injured workers much better than traditional systems at a lower cost to employers.

But sending a denial letter to an injured worker based on a timeliness technicality greatly challenges the credibility of opt-out in a very big way.

To win over Labor only two promises need to be kept: that timely, effective medical treatment be provided without delay or interference; and that sufficient money flow to the injured worker to meet bills while mending, and to provide some offset for loss of earnings where full recovery failed.

I don't think that those who represent working people really care that much about WHO directs medical care, so long as it is provided quickly, and the treatment is effective. The managed care model can work very well, but Payers need to get out of the way when a treatment plan doesn't meet their desires.

Work Injury Protection, my euphemism for anything that provides medical coverage and indemnity to those injured while working, can be provided in many different forms. Opt-out is not necessarily a bad thing; it is an option.

But to prove that it is not a bad option, it needs to show that it IS good, which means data, anecdotes, testimonials (and not just from employers and their brokers).

The mission is very simple - take care of the worker. Do that without the interference of every snake-oil salesperson that shows up along the benefit delivery trail with a "solution" for a problem that doesn't exist.

In work comp parlance, those "solutions" are called "friction points."

Want to reduce disputes? Stop disputing. Want to reduce indemnity severity? Provide more treatment faster. Want to reduce medical costs? Treat the doctors fairly without micro-management.

And close the claim without leaving unnecessarily high reserves on the books for treatment that will never be requested...

Sure, this is a Polly-Anna, simplistic view. There are many challenges and exceptions. But we don't use common sense anymore.

Opt-out will continue to be a threat to the traditional workers' compensation model. And the opt-out industry will expand, aggressively, to other states, particularly if it consents to inspection, measurement and management.

Don't think for a moment that proponents haven't learned a valuable marketing message in the ResCare/Jenkins debacle.

NJ Carve Outs - Another Evolutionary Step

There are many who doubt that alternatives to workers' compensation can or should be permitted to exist, for various reasons. The evidence grows every legislative season, however, that discontent with business as usual is growing and that more states are looking to offer other ways to administer benefits more efficiently.

"Carve-outs" have been in existence now in California for about 20 years. Slow to be accepted at first, as of 2010, the California Division of Workers' Compensation reported that 24 carve-out programs were operating in the state, primarily in the construction industry. The programs included 1,177 employers with a combined payroll of $1.98 billion and 32,350 full-time employees. 

There are other carve-outs too covering public safety unions and more recent legislation has expanded carve-outs for other industries.

Of course you are familiar with Texas Work Injury Insurance Programs (WIIPs), more commonly referred to as non-subscription plans, the context of which are the subject of exportation to Oklahoma and Tennessee presently and which have been the topic of study by recent publications.

Now New Jersey is looking at alternative workers' compensation in the form of carve-outs.

New Jersey Assembly Labor Committee Chairman Joseph Egan, a New Brunswick Democrat and business manager for the International Brotherhood of Electrical Workers Local 456, filed Assembly 3423 on Nov. 19.

Senate Labor Committee Chairman Fred Madden, D-Turnersville, filed identical legislation in the form of Senate 2201 on Oct. 1.

The bills would allow employers and unions to establish alternative dispute-resolution procedures for injury claims through collective bargaining. The systems would operate outside of the New Jersey Division of Workers' Compensation and be governed by a board with an equal number of employers and union representatives.

• Unions and employers or groups of employers would have to agree as part of the union contract that all injury claims be submitted to binding arbitration. Decisions by arbitrators could be appealed to the New Jersey Superior Court. Treating physicians would also be selected from a list agreed upon by the union and employers.
• Employers would be required to create light-duty, return-to-work programs.
• Both the unions and employers would be required to create occupational safety and health committees.
• Employers with group health plans would be allowed to integrate group health care with treatment for injured workers.
• Injured workers would receive the same level of benefits guaranteed them under the state workers' compensation system.

As commented in the WorkCompCentral story covering this development, some programs are good, some are bad - the devil is in the details, or more particularly, how many good physicians will participate in the program.

Both California and Minnesota have experienced similar issues with their carve-out programs and commentators for both have said that they work well when physician lists include treaters who will actually participate. Carve-outs, of course, fail like traditional work comp when there is a dearth of participating physicians because failure to treat delays the claim which thus delays recovery begetting increased claim cost.

The New Jersey proposal though, as noted above, would permit the integration of group health care to treat injured workers. How well this works would depend upon the carve-out plan and presentation, reimbursement between group plan and carve-out plan, etc. But at least participants would have the option to deal with the potential of health care integration, which may become more of an issue as the Affordable Care Act comes more into effect over the next two years.

Regardless I believe the evidence is clear that a trend towards offering business and labor an alternative to traditional workers' compensation is growing and spreading across the nation. Carve-outs, WIIPs, and other creative ways of more efficiently providing benefits to injured workers and still giving employers exclusive remedy protection are simply an evolution of work injury protection philosophies.

We'll see more states following suit.

Alternatives to Work Comp and Long Term Issues

I had a couple of interesting conversations last week at the NCCI Annual Issues Symposium about alternative risk management in workers' compensation, instigated by discussions on what I thought would be disruptions to the marketplace should Oklahoma non-subscription take hold.

As you likely are aware, it is my opinion that non-subscription represents a real threat to the workers' compensation insurance market and will constitute significant competition for the risk management dollar should the idea spread to other states. Indeed, Stephen Klingel in his State of the Line address acknowledged that many states were watching Oklahoma to see what happens and that this could represent a challenge for the industry to compete against.

One issue with non-subscription that I presume would need to be dealt with if this option were to be a viable alternative to traditional workers' compensation insurance and stay within the Oklahoma mandate that it provide the same or better benefits to injured workers is the life time medical provision - under ERISA plans there are no guarantees of continuing medical beyond the employment period.

In workers' compensation, medical treatment for the condition deemed to have arisen out of and in the course of employment is covered for the life of the injured worker unless compromised by a settlement agreement. I am unclear how ERISA plans would provide for this requirement but I suspect that those who put together such systems have this worked out.

One aspect of non-subscription that plays well to the work force though is the tendency of non-subscribers to become completely obsessive with safety.

In conversations I had at NCCI with people that have been studying the option, employers that do non-subscribe in Texas with ERISA plans are vigilantly safety-conscious because a failure of safety by the employer exposes the employer to big civil damages.

As for the impact on the industry - that is a big unknown. I talked with several actuaries at NCCI. They expressed that the concern over reduction of insured base upon which to spread risk was voiced when large deductible programs were introduced, but the experience was just the opposite.

However, non-subscription is different. Non-subscription takes an employer completely out of the risk pool, while large deductibles keep an employer in the risk pool, albeit at a different loss level.

Another matter of concern should be financial fundamentals of the entire risk management scene - i.e. what happens when a non-subscriber folds, becomes insolvent or otherwise is unable to take care of its obligations.

The one beauty of the workers' compensation system is that an intermediary, i.e. insurance company, takes the financial risk and pays fees and taxes into state systems that guarantee performance if the insurance company can no longer function. Self insureds likewise make payments into guarantee systems to protect injured workers over the long term.

This backstop was beautifully played out in the late 1990s when so many insurance companies fell victim to the intoxication of Unicover brew and laid so many claims into the hands of state insurance guarantee associations.

The risk is playing out now with self insurance groups (SIGs) finding all sorts of financial issues with their programs.

For instance the Healthcare Industry Self Insurance Program of California is encouraging former members to rejoin to help secure the long-term solvency of the self-insured group by offering them the option of paying their liabilities in installments after seeing membership decline in 2009 and 2010 making funding the long-term liabilities of the group a challenge.

One of the oldest self-insured groups in Nevada, the Nevada Restaurant Self-Insured Group, was winding down at the end of 2011after deciding it is no longer financially practical to continue taking on risks, forcing more than 1,700 employers to find a new source for workers' compensation insurance, some who have been covered by the group since it was founded in 1995.

And all of us have seen the mess that has been created by the failure of Compensation Risk Managers and the ongoing litigation and financial aftermath of those programs.

This is all brought home by the recent announcement that the Orange County Board of Supervisors in California adopted a resolution that its self-funded workers' compensation program is to be brought back up to 80% funding of estimated losses over the course of the next five years, moving $2 to $3 million in departmental budgets into the work comp fund.

So where does all this lead us?

Every employer that is part of a SIG, a captive, a Retro Plan, a High Deduct, or has coverage with an A- carrier needs to take a look at the financial underpinnings. We assume that smart people know what they're doing when entering into alternative risk propositions to cover the mandated obligation towards those in the employ of the company.

But we made bad assumptions about those people in many past instances of failed pension plans. Workers' compensation, when one gets down to the basics, is nothing different - it's all about conservative and robust financial planning.

I'm still intrigued by Oklahoma style non-subscription. I think it brings significant market competition to the workers' compensation insurance industry. But these long term issues need to be addressed.

And my guess is that if such optional plans take off in the future, some smart insurance people will put together new specialized products that put all the elements together and address the long term risk issues.

OK Demonstrates Disruption Will Occur

By now you have likely heard that the Oklahoma non-subscription option bill, HB 2155, failed to pass out of the state House, ostensibly because of some amendments that occurred to the proposed legislation while it was in the Senate.

Bill Minick, president of non-subscription brokerage PartnerSource and fellow Pepperdine Law School alumnus, said in a press release:

At the end of the day, Oklahoma House Bill 2155 was defeated for many reasons: some political, some philosophical, some strategic…but most ALL about money. Our primary opponents were a few workers’ compensation insurance carriers and a large group of trial attorneys, all of whom wrongly consider themselves “stakeholders” in the Oklahoma workers’ compensation system. They focused substantial resources on blatantly misrepresenting the adequacy and administrative process for Option benefits. They also worked hard to generate fear among small business owners, medical providers, and insurance agents, without pursuing either research or dialogue that would have led to greater understanding and advancement of a further-improved system. What this odd carrier/attorney alliance most feared was losing tens of millions of dollars annually in their own profits from one of the most highly contentious, expensive and economically-debilitating workers’ compensation systems in the United States. 

Did the Oklahoma non-subscription option bill really fail?

Or, as Minick contends, did it succeed by breaking new ground and starting a new dialogue?

I'm going with the second option.

First, Bill is right when he alleges that industry forces "consider themselves 'stakeholders'" - there are only two: employer and employee. All others are vendors. The job of workers' compensation is to enable employers to provide employees with reasonable protections in the event of a work injury/disease in an economical fashion. That equation has room for only two variables: employer and employee. All others are add-ons. They have nothing at stake other than profit.

I don't know for a fact that the insurance industry and the trial attorneys worked together to defeat HB 2155, or what their fears were, but I suspect that Minick is correct that the issues were all about money.

Employers pay the bills. Employees get protection. That's The Deal. Everything else enables this situation and they do so in anticipation of profit.

There is no question in my mind that non-subscription is a huge threat to the insurance industry that makes its money in the workers' compensation industry. Non-subscription is hugely threatening because it is true market competition. If an employer with a sizable workforce, representing an equally sizable premium, elects to take on the obligations of The Deal itself via non-subscription, that removes that employer, and its premium, from the market. Non-subscription in Oklahoma (and in Texas) targets very large employers with big premiums - the large juicy ones that generate the biggest commissions, the largest cash flows.

This is a big threat.

Lawyers are also hugely threatened because non-subscription uses arbitration to resolve disputes. Very, very rarely does a non-subscription case get to the courts. The litigation rate of non-subscribers is virtually nil. There's not a lot of room for lawyers in such systems.

All of the ancillary services that tend to add friction and costs to the workers' compensation system are virtually eliminated in non-subscription because of the control the employer has over the entire process. This is why, in Texas, non-subscribers are reporting savings of over 40% compared to their workers' compensation programs, reporting much higher return to work rates and much higher employee satisfaction.

If we were to have said five years ago that non-subscription outside of Texas could be viable we would have had a good laugh together. At that time it did not seem like there was any appetite for such service nor the political fortitude to bring it about.

But Oklahoma came very close to changing the landscape. And Oklahoma certainly DID change the conversation.

Right now there is a nationally recognized, very well respected and impartial journalist exploring the Texas non-subscription model. He wrote me the other day and said, "Overall, what I called the modernized Texas non sub program -- the one with ERISA plans, for instance -- comes across as quite impressive."

Indeed, the last time I went to Texas to talk to folks involved in non-subscription I too was impressed. These are folks that genuinely care for their work force, and have genuine fear of outsiders intermeddling with their business by taking control over a process that they hold very close - employee management.

Responsible Texas non-subscribers have perfected the employer/employee relationship. Non-subscription goes far beyond just providing protection in an economical fashion. It is a culture change that brings about tight cooperation between employer and employee, increasing trust, production, profits and social responsibility in a private fashion free from governmental mandates that may make no sense to either the business or the culture of the company.

Let's look at it this way - in the current environment there is plenty of talk about "reform", particularly in California.

In California the Brown Administration has made it publicly known that it wants to increase indemnity for injured workers but control costs, which means one part of the workers' compensation equation has to lose.

What if California went radical and contemplated permitting Oklahoma style non-subscription allowing employers to opt out while meeting the minimums of workers' compensation? Don't think this can't happen. What part of the equation loses then? More than just one part; a whole number of vendors lose and THAT is real reform because the cost of reform is spread out against ALL vendors, not just one segment.

The state is partially there by permitting opt outs where there are collective bargaining agreements in place and from what I can see these are, for the most part, very successful.

But these opt-outs have two big problems: 1) only employers governed by collective bargaining agreements can opt out and 2) there is a lack of consolidation between health care and workers' compensation, or what the non-subscribers cover with their ERISA plans.

My opinion has been very clear from the beginning, we can not talk about reforming only the benefit delivery system and that the only way to conduct true reform is to include the risk allocation system too.

As I've opined before, workers' compensation is not a free market. It is an involuntary market and it requires a heavy dose of regulation to keep people playing fair. However people will always seek an advantage. Sometimes this can be controlled, sometimes it can't be controlled, and sometimes we think it is controlled but we're just getting shoveled bovine excrement scented with multi-syllabic words which we don't understand.

This is the risk allocation system. Lots of big words, complex sounding formulas, intimidating numbers that all serve a singular purpose - to keep the uninformed public from understanding what is really going on.

In a future post or two I will try and explain to the best of my limited ability the concepts that allow insurance companies with combined ratios of 126% (or whatever) to still make money and come to California. Suffice to say that without the magic of modern day finance companies that appear to be losing money are in fact making good money over the long term. Don't think this constituency, along with the lawyers, the doctors, the other vendors, feel threatened by the prospect of non-subscription.

Could an Oklahoma style non-subscription system prove fruitful to California? I think it could. Non-subscribers would not be complaining about liens, would not be complaining about the high cost of medical, and would have a more engaged work force. I am convinced of these outcomes based on what I have seen in Texas.

Non-subscription in this manner is HUGELY DISRUPTIVE.

And we know that disruptive technology can not be stopped. It is most apparent in the electronics field where the speed of computing innovation constantly disrupts entire industries - retail (Amazon), computers (Apple), social interaction (Facebook) - the list is endless. Industry disruption isn't isolated to electronics or computing either - service industries can also be hugely disrupted and they have been in the past.

What the Oklahoma non-subscription failure shows is that there is unrest, and that this unrest is very threatening to entrenched interests who fear this model will spread.

But guess what, this model will spread. It can not be stopped. The proverbial cat is out of the bag.

No, Oklahoma non-subscription is not dead - not even close. It came out very powerfully, very swiftly, with adroit speed and momentum to be stopped only by some political missteps.

There is no doubt in my mind that Oklahoma non-subscription will be back in the legislative debate in 2013 and the proponents will be smarter, more tactical, and likely successful.

The revolution has begun. The Oklahoma non-subscription attempt has started a conversation that is changing the landscape.

You've been forewarned.

Two Parts of the Promise; The Conversation of Reform

I've had an ongoing (online) discussion with a colleague whom I consider to be very astute.

He said this the other day (paraphrased): The reason for workers' compensation has always been so that the employer could provide for injured workers in an economical way.

That is such a beautifully clear and true statement and its simplicity cuts to the very core of the existence of this system.

And so it should be guiding light to those who seek to "reform" workers' compensation, which leads to another, related, truism of his: "Work comp works exactly as it was designed to work, it does not work as it was intended to work."

Each of us in the workers' compensation industry deal with only two constituents, and have only one goal. 

The constituents: employer and injured worker. 

The goal: to permit the employer to provide for the injured worker in an economical fashion.

There's a lot of power packed into that sentence, and that sentence defines the two basic elements of workers' compensation: for the worker it's the benefit delivery system; for the employer it is the allocation of risk system.

There are providers to these two constituents who have decided to make it a business and living out of getting to one or both groups the services and products necessary to meet the goal. Some providers have conflicting interests, others are much more singularly focused. All providers serve only these two constituents.

Is workers' compensation broken? I'd say for most people most of the time it is not broken. For most workers who come into the system the benefits are delivered appropriately and in accordance with the law. For most employers the allocation of risk is done in an affordable, economic fashion.

But for those who end up on the back side of the power curve (aviators will know what I'm talking about) it can be a very disruptive, very destructive place to be in life, whether one is an employer or an injured worker. These are the stories that drive "reform".

When the system does not work, it fails in a miserable way.

Is it because there are not enough checks and balances? Is it because there isn't enough regulation? Is it because certain elements take advantage of workers' compensation's complex nature and low profile for unfair advantage and profiteering?

California regulators are going around the state accumulating ideas and getting input on how to "fix" the system.

Oklahoma politicians are batting around a non-subscription option (defeated by that state's House yesterday with proponents regrouping for another assault on the beach head).

New York has spent the last couple of years trying to get it's "reform" moving out of the starter blocks, and Illinois is still struggling with the cultural overtones that have hampered its system.

Several months ago I had lunch with a former California regulator who is as passionate about workers' compensation as anyone I know. Deep in her heart she truly felt that workers' compensation is a good, and necessary, component to social order and economic vitality. She worked tirelessly from the regulator aspect to put into place policies and enforcement mechanisms to meet the requirements of the law with unwavering optimism.

Even she admitted that sometimes she feels that the current workers' compensation system in California should just be scraped and that we should just start over.

No matter how you slice it, workers' compensation is as pure of a service industry as one can define. I love that insurance companies call their policies a "product". It is no more a product than my pledge and a handshake on a promise. Insurance is just a promise that some service will be provided in the future. Just a promise.

A promise requires trust. There must be trust that each will perform as expected and that each will employ what is necessary to make that promise good.

In all states other than Texas, workers' compensation is not a free market (and I could argue that even in Texas it is not a free market if a business wishes to take on the risk of an injured worker).

Workers' compensation is a mandatory market. Employers must have workers' compensation insurance (or legally be without) and employees must go through the workers' compensation system if hurt (or claim to be) at work. There are exceptions and ways around this, of course, but the bottom line is that the system is mandatory to both constituents and if one is caught trying to get around its mandatory nature then one gets penalized.

When legislators and regulators debate how to "fix" workers' compensation they need to step back and get to the heart of the system. It is mandatory. Free market principles don't apply. They don't work.

Even in Oklahoma, non-subscription there (if it comes to pass) would need to meet the minimums of the workers' compensation laws - so even this radical approach to the ultimate goal is rooted in mandatory terms.

So when any administration, whether it is California, the Federal government with FECA, or Oklahoma, thinks about some workers' compensation reform, the basic premise of the system needs to be kept front and center. One can not "reform" the benefit delivery system without also "reforming" the allocation of risk system. They go hand in hand because there are only two constituents and each has their unique reliance on the promise.

It's a Prairie Fire

"We may be looking at a prairie fire," Tulsa, Oklahoma attorney Steve Edwards, legislative consultant for the Oklahoma Injury Benefit Coalition on the alternative benefit measure that was passed by the Senate, told WorkCompCentral on Thursday.

He's talking about the sudden and explosive interest by business to take to other states the non-subscription model that may get approved by the Oklahoma House of Representatives as soon as Monday.

States that are reportedly now very interested and for which proposals may be filed as soon as this legislative session were identified as Colorado, Kansas, Louisiana and Tennessee.

Wal-Mart, a huge influence of workers' compensation operations nationwide as one of the nations biggest employers and certainly the nation's largest retailer, announced earlier this year it was opting out of the Texas work comp system to implement its own ERISA based non-subscription model. We can expect it to do so in Oklahoma as well.

Wal-Mart's decision runs counter to the trend in Texas which makes it even more notable.

Workers’ compensation law changes over the last few years have helped lower costs for employers, leading many companies to return to the state's workers' compensation system, according to Margaret Greenshield, chair of the Texas Alliance of Nonsubscribers.

Greenshield told WorkCompCentral that, "This migration back into the system is reflected in a 2010 (Texas Department of Insurance) survey that shows the number of Texas workers employed by nonsubscribers dropped from 25% in 2008 to 17% in 2010".

The same survey showed that the number of nonsubscribers among the state’s largest employers fell from 26% in 2008 to 15% in 2010.

Daniel Morales, spokesman for Wal-Mart, told WorkCompCentral that Wal-Mart’s ERISA plan will allow it to increase the pool of doctors available to treat injured workers (because they don't have to be qualified through the Texas work comp system) and allow those workers to receive treatment more quickly, and to receive indemnity benefits faster – and at a higher rate – than they would under workers’ compensation:

• There would be no waiting period under the Wal-Mart plan as opposed to Texas' seven-day waiting period; 
• Indemnity would cap at 90% of the employee's pay rather than the current $787 per week under Texas work comp; 
• Indemnity would be processed through Wal-Mart's payroll system, which makes it much more efficient than through a carrier/third party administrator.

Those are pretty compelling non-subscription benefits.

Rick Levy, legal director of the Texas AFL-CIO, has always been adamantly opposed to Texas non-subscription because in Texas there is no requirement that non-subscription meet the same or better standards as the work comp system. His tune changes though relative to Oklahoma's plan law.

Levy seemed to indicate he might be okay with the concept of non-subscription if there are safeguards that ensure that benefits under non-subscription at a minimum match what a state's work comp laws guarantee.

He noted, however, in the past Texas non-subscription proponents have argued against such minimum guarantees.

“They have told us that doing that would make the program nonviable,” he told WorkCompCentral when discussing non-subscription in Texas versus Oklahoma.

“My question to them,” Levy said, “is ‘are you ready to accept the same requirements in Texas?’”

It seems to me that Labor might get behind non-subscription Oklahoma style if such minimum guarantees are a part of the legislative deal making and Wal-Mart demonstrates leadership by ensuring that its non-subscription plan runs smoothly and provides benefits quickly, with less bureaucratic intervention and returns people back to work without stigma or discrimination.

In the end, that could spell the demise of workers' compensation as we know it - and that, in my opinion, may be a good thing as the raison d'être of work injury protection systems would return to its original mission: protecting employees and employers.

OK's ERISA Option Movement Underlies Broader Discontent

Oklahoma's experiment with an ERISA option to workers' compensation moves forward remarkably fast, with a hearing today before the state House Judiciary Committee.

Two bills, House Bill 2155 and Senate Bill 1378, began as identical measures but the Senate bill was amended to include a provision to require that any alternative plan offered by an employer must provide benefits at least equal to those provided under the workers’ compensation system.

In my opinion this amendment would be a minimum requirement for success of a voluntary option.

House Bill 2155 by Speaker of the House Kris Steele, R-Shawnee, passed March 13 with bipartisan support on a 70-22 vote in the House and was sent to the Senate.

Senate Bill 1378, by Senate President Pro Tempore Brian Bingman, R-Sapulpa, passed by a 27-17 margin in the Senate on March 14 and moved to the House where it is before committee today.

Nathan Atkins, communications director for Bingman, told WorkCompCentral Monday that last week there was discussion of expanding the pool of employers who could qualify under the proposed program, but did not elaborate on any specifics on possible changes.

Currently, the bills would apply to employers that:

• Have employed at least 50 workers during the preceding calendar year.
• Have a workers’ compensation experience modifier, as reported by the National Council of Compensation Insurance (NCCI), "greater than one (1.00) for the preceding Oklahoma workers’ policy year."
• Have total annual incurred claims, "as reflected in an NCCI experience modifier worksheet or their workers’ compensation carrier loss runs," greater than $50,000 in at least one of the three preceding Oklahoma workers’ compensation insurance policy years. 

Qualifying employers, who adopt alternative plans, would have the same exclusive remedy protection as employers under the workers’ compensation law.

Though the concept of a voluntary option was introduced last year, it was brought before state legislators too late for any action. Supporters knew that, but introduced bill regardless to pave the way for smoother sailing in 2012.

The strategy seems to be working. While there is some opposition to an optional system, it does not appear to be very robust or vehement, and progress towards the option is moving surprisingly swift.

Some of the provisions seem counter-intuitive, such as the requirement that an employer have an ex-mod of greater that 1.00 since that would seem to reward employers with poor safety records. And the requirement of greater than $50,000 in loss runs likewise seems contrary to good public policy as well as being rather arbitrary.

But these are not what I would call deal breakers in the grand scheme - the fact that this proposal is getting good legislative response with minimal resistance speaks to an overall frustration with the status quo - that workers' compensation isn't doing what people want it to do in the State of Oklahoma.

Presently there are nearly a dozen states that have some workers' compensation "reform" agenda either in process or brewing, indicating a broader discontent with existing systems. How Oklahoma deals with the voluntary option is going to give reformists more alternatives in the coming years.

I think that we are in the middle of a revolution - the confluence of a national health care reformation (regardless of how the Supreme Court deals with the issue), multiple state systems engaged in substantial workers' compensation changes, the drag of a very slow recessionary recovery, changes in the very fabric of this country's underlying economy ... social protection systems such as workers' compensation are going to look very different 10 years from now.

When I got into work comp in 1985 it seemed to me a sleepy little industry that wasn't very exciting. Those outside the industry may not see work comp as exciting, but that's only because they aren't trying to keep up with all the changes!

For additional information and the text of HB 2155 go here.

Withdrawn Utah Bill Makes Case for Single Source

Yesterday I posted about Oklahoma taking the risk of exploring (again) a single source medical payment system.

Today in WorkCompCentral is a news story about why a single source system makes sense.

Utah State Sen. Karen Mayne, D-West Valley City, withdrew Senate Bill 130, which would have required a private health insurer to pay hospital and doctor bills when a workers' compensation carrier is disputing a claim and has not made payments within 46 days of an employee reporting a work injury. The bill would require the health insurer to reimburse services at the rate set in the Utah Medical Fee Guidelines and seek reimbursement from the workers' compensation carrier if the claim is determined to be work-related.

Mayne dropped the bill from consideration after it met stiff opposition from Republican lawmakers, but is assembling a working group to draft a similar bill for 2013.

Mayne testified before the Senate Workforce Services and Community and Economic Development Committee that some health insurers refuse to pay for medical treatment when there is a potential workers' compensation claim. Insurers continue to deny payment during the appeal process, forcing injured workers to pay for treatment out of their own pockets.

"There are all kinds of issues with bill paying," she said. "These injured workers, for no fault of their own, are losing everything because there's no money coming in."

Maine and Oregon are two states that already have similar laws.

In Maine a health insurer is required to pay medical bills when the denial of a workers' compensation claim is being appealed.

In Oregon, a claim that is denied and on appeal must be processed by a health insurance company if a claimant has coverage. If there is a balance remaining, the health care provider can bill the workers' compensation carrier, which must pay up to the fee schedule.

Casey Hill, director of government relations for the Utah Medical Association, testified in support of the bill, saying doctors are now in an uncomfortable position of having to tell injured workers that they can't provide service because they don't know if they'll get paid.

Richard Burke, an attorney with the Utah Association for Justice, testified before the committee that, "The real issue here is where there are two policies and one will pay eventually, who should bear the brunt of the delay? Should it be the injured worker who has to wait years for the claim to be adjudicated, or should one (carrier) pay and then get reimbursed if it wasn't their responsibility?"

Kelly Atkinson, executive director of the Utah Health Insurance Association, said in testimony opposed to the proposition that health insurers would have to recalculate premiums to factor in possible payment for workers' compensation claims.

If that's the only argument against Mayne's proposal, it's a weak one. It seems to me, with all the computing power available to Big Insurance, that recalculating premiums is not that big of a deal.

Mayne was granted permission from the committee to form a working group of stakeholders that would report back to the committee twice during the interim and try to reach a consensus on legislation that would be introduced in the 2013 legislative session.

Meanwhile, in another publication, Dr. Rob Stone makes a compelling argument for a single source medical payment system, stating, "the insurance industry is the single greatest barrier to achieving an efficient and affordable system to cover all Americans".

Mayne's legislation (and the laws in Maine and Oregon) would be unnecessary if a single source system were in place, but there are huge obstacles in the way of such a system. Dr. Stone says the biggest obstacle is the health insurance industry itself.

I've heard all the arguments in the past about why Americans can't have a single source system. Perhaps from a present day practical standpoint those arguments have merit. Dismantling the present private health insurance system would disrupt tens of billions of dollars.

But, as Dr. Stone puts it, "There is no business case, no health care case, no moral case to support their ongoing existence. They make their profits by avoiding taking care of sick people — by refusing to issue policies, canceling policies, or denying payment."workers compensation, work comp, injured worker 

OK Explores Single Payer - Is Non-Subscription the Key to Success?

It's been a while since we heard anything on the single source for medical payment front - the last being a nascent effort in New Jersey to fold medical treatment under the general health umbrella.

But Oklahoma, not a state one would generally associate with progressivism, is taking the lead in social experimentation. Not only is the state exploring an optional work comp plan for employers with 50 or more workers, but legislation has been introduced to authorize a three-year pilot program to provide "24-hour health care coverage" for employees by combining group health care with workers’ compensation.

Senate Bill 1510 by Sen. Eddie Fields, R-Wynona, would allow an employer who provides health insurance coverage to employees to contract with a licensed health care service plan as “the exclusive medical, surgical and hospital treatment for occupational and non-occupational injuries and illnesses” incurred by employees.

The plan would have to provide all job-related medical treatment without any deductibles, co-payments or share of premium being paid by employees. Employees of an employer participating in the pilot program would be restricted to choosing a doctor in the health care service plan.

The legislation has many opponents and this is Field's third attempt at moving forward with a single payer plan.

Jim Curry, president and secretary-treasurer of the Oklahoma AFL-CIO, told WorkCompCentral he doesn’t expect the latest proposal to create a 24-hour care program to have any more success than previous attempts.

Jennifer Monies, communications director for the Oklahoma State Chamber, reported to WorkCompCentral that the Chamber was reviewing the legislation but had not taken any position on it yet.

Among the issues inhibiting a single payer concept are that health care and workers' compensation plans involve different types of health care providers, that workers' compensation is intended to cover only occupational injuries and diseases, and that medical treatment under workers' compensation continues until the injury or illness is resolved.

Vermont last year passed legislation to examine combining comp with general health care. New Jersey legislation to explore the issue never moved very far. In the past California, Florida, and Georgia have also attempted to move forward with some single payer proposals, but none have found favor in the state legislatures.

I honestly don't give Oklahoma much more of a chance except that in conjunction with Field's proposal is the state's review of an optional system where larger employers can opt out of workers' compensation by offering comprehensive medical and disability plans under ERISA.

Probably the single biggest obstacle to implementing a single payer system are the requirements in ERISA - negotiating around this Federal law with state legislation ultimately kills these state attempts.

But if Oklahoma employers can opt out of workers' compensation, this may provide the incentive to create an optional single payer system as well. "Obama-Care" contains provisions for states to get ERISA exemptions if a single payer system is adopted.

Perhaps Oklahoma won't get a single source medical payment plan this legislative session, but I think the trend towards attempting such plans is picking up pace. I've opined before that moving towards a single source system in any state is a 10 to 20 year process - it's complex and there are many conflicting issues to resolve - but the perceived benefits of lower costs and higher quality care are very intoxicating.workers compensation, work comp, injured worker 

OK's Grand Experiment - A New Era?

Oklahoma is moving forward with is most likely one of the biggest social experiments since the invention of workers' compensation 100 years ago, with some very powerful political backing.

Senate President Pro Tempore Brian Bingman, R-Sapulpa, and Speaker of the House of Representatives Kris Steele, R-Shawnee, will take the lead on Senate Bill 1378, the “Oklahoma Employee Injury Benefit Act.”

The act would give employers the option of establishing and managing a benefit plan that complies with the federal Employee Retirement Income Security Act (ERISA) instead of purchasing workers’ compensation insurance.

Not all employers would be able to participate in this optional plan.

SB 1378 would allow an employer to choose to be exempt from the Workers’ Compensation Code only if the employer has 50 or more employees, had claims greater than $50,000 in at least one of three preceding years, and establishes an alternative benefit plan that qualifies under the legislation. The bill also states only employers with an experience modification greater than 1.0 would be allowed to participate, but there is a question as to whether this was a drafting error.

A qualified benefit plan must provide for 100% of medical expenses and pay 80% of pre-injury income for temporary inability to work -- for up 156 weeks -- and 80% of pre-injury income for permanent inability to work for the later of 15 years or eligibility for 100% of Social Security retirement benefits.

Under the proposed legislation, an employer would be required to have an ERISA plan with specified benefits to become a “qualified employer.”

A qualified employer’s liability under the benefit plan would be exclusive for occupational injuries “in all cases except death,” the bill states.

Presently Texas is the only state that permits employers to not participate in workers' compensation, but there are no minimum requirements for an employer to do so - that's why in Texas "non-subscription" (i.e. not subscribing to the workers' compensation system) is sometimes also referred to as "going bare" - referring to the lack of legal and insurance protection should an employer choose not to participate in workers' compensation.

According to the WorkCompCentral News this morning the bill has the support of the Oklahoma State Chamber but labor as yet has not weighed in whether it supports or opposes the bill.

The Oklahoma Legislature will convene Feb. 6.

Will this experiment provide benefits to both employers and employees? Time will only tell obviously, but I believe that if Oklahoma's alternative plan fulfills its author's goals of providing “a fair and balanced alternative” to workers’ compensation, one that both employers and employees can embrace, a new era in socially responsible employment protection systems will blossom.

If the experiment fails - if either employers don't see savings or employees see a denigration of work place safety and injury protections - then this alternative will go no further than the state borders of Texas.workers compensation, work comp, injured worker 

OK ERISA Option Gets Big Boost

The reality that Oklahoma may be the first state in the nation with an alternative work injury program option besides Texas just picked up tremendous steam when Senate President Pro Tempore Brian Bingman, R-Sapulpa, asked that legislation dealing with workers’ compensation be drafted this past week.

According to the WorkCompCentral News report this morning, Bingman's office said they could confirm that Bingham had asked that legislation dealing with workers’ compensation be drafted, but could not confirm any details regarding the proposal -- including who might carry the bill.

But Becky Robinson, chairwoman of the Oklahoma Injury Benefit Coalition (OIBC), told WorkCompCentral that Bingman has asked the Senate staff to draft a proposal for an alternative plan. She said the coalition is “excited to have (Bingman) involved and championing these efforts on behalf of employers in the state of Oklahoma.”

Mike Seney, senior vice president of operations, for the Oklahoma State Chamber, told WorkCompCentral on Monday that the chamber and coalition representatives met last week to discuss "how to do this."

The organizations have talked with Bingman on the proposal, and a bill is "definitely in the hopper," Seney said -- although there are no final decisions yet on the legislation. The language of the bill will need to be finalized and reviewed, Seney said.

Under the OIBC plan employers would be allowed to opt out of the state workers' compensation system only if their plans provide benefits that meet or exceed those that employees would receive under work comp.

OIBC was organized this spring by businesses which contend Oklahoma’s workers’ compensation system is too expensive, too litigious and too difficult to navigate for employers and injured workers. Oregon's biennial work comp cost survey had Oklahoma fourth most expensive in the nation.

Many OIBC members also operate as "non-subscribers" in Texas with ERISA plans, and their enthusiasm is driving the ERISA option in Oklahoma.

The OIBC option improves upon the Texas model by requiring an employer to participate in the current state system or to have a qualifying alternative in place, according to OIBC members.

Friday was the deadline for Senate and House of Representatives members to request bills, which must be introduced by Jan. 19. The 2012 legislative session starts on Feb. 6.workers compensation, work comp, injured worker 

OK Non-Subscription - Start of A Trend?

Oklahoma may be the start of a new trend in work injury protection with a proposed law to permit employers to provide an option to mandatory workers' compensation through alternative ERISA plans.

The proposed “Oklahoma Injury Benefit Option” would give employers the option of establishing and managing a benefit plan that complies with the federal Employee Retirement Income Security Act (ERISA) instead of participating in the state system. Employers would be allowed to opt out of the state workers' compensation system only if their benefit plans provide benefits that meet or exceed those employees would receive under workers’ compensation.

Texas is the only state in the nation that has a voluntary work comp system. Those who don't participate in the state's work comp system are called "non-subscribers". Those who have no alternative risk mitigation system in place whatsoever for work injuries are known to "go bare".

Neighboring Oklahoma's proposed plan would not have any "bare" employers, but would allow "non-subscribers."

Becky Robinson, who chairs the Oklahoma Injury Benefit Coalition (OIBC), told WorkCompCentral Wednesday that the group also is selecting sponsors for the legislation. The bill should be ready by Dec. 9, and the sponsors should be in place by then, Robinson said.

According to Robinson many companies in the coalition also operate in Texas, and “have witnessed firsthand” how the option can provide better health outcomes for workers and reduced costs to businesses. The option “is a game-changer for Oklahoma,” she said.

Indeed, I believe that if the Oklahoma experiment is successful that other states will move along the same lines. Constructed properly, non-subscription ERISA plans in Texas have saved those employers millions of dollars over the course of the past 10 years and have much better outcomes for injured workers - namely because these ERISA systems remove the non-functional, procedure-based, trappings of mandatory work comp systems.

In addition, I believe that a competing system will actually improve workers' compensation system performance as vendors (insurance companies, brokers, medical providers, AND the state, etc.) will no longer have a captive audience - a true competitive marketplace can be established to provide employers and employees with a modern benefit system not subject to the lobbying of special interest groups bent on profiting off a compulsory program.

A key to success in Oklahoma will be more complete data gathering and analysis. Texas mandates some reporting for its non-subscribers, but it is insufficient to provide an apples to apples comparison via the normal state data analysis channels.

It will be interesting to watch how OIBC's efforts meet the political machine in Oklahoma and to see what objections are raised as the coalition's plans move through the legislature. If the proposal does make it to the governor's desk though I anticipate many more states taking a long, serious look at non-subscription ERISA models as a viable option over the next few years.workers compensation, work comp, injured worker