The REAL Objection to Opt Out

I have never really understood why the Property Casualty Insurers Association of America has been so vehemently against opt out.

While it seems that opt out returned to the back burner for this year with constitutional defeats in Oklahoma (also beguiling traditional OK comp) and political stalemate in other states, PCI has reignited the debate with an inflammatory paper.

The basic arguments, which PCI supports with some data, is that opt out results in costs shifting to other systems, and that a lack of standards and transparency is detrimental to consumers (i.e. injured workers).

PCI also argues that opt out is all about saving employers money to the detriment of consumers by denying more claims earlier and paying less with capitations and restrictions not found in traditional comp.

I get that alternative work injury systems need to meet certain standards and need to be more transparent to consumers - to me that’s a no brainer.

But the objections that PCI in particular raises are exactly the same complaints made against traditional work comp: inadequate benefits, unnecessary delays, cost shifting, etc.

Each statistic cited by PCI against opt out can be asserted against traditional work comp - just use another study or data source.

For instance, just a couple of years ago, Paul Leigh of University of California at Davis, and lead author of the study, Workers' Compensation Benefits and Shifting Costs for Occupational Injury and Illness, told WorkCompCentral, "We're all paying higher Medicare and income taxes to help cover (the costs not paid by workers' compensation.)"

That study, published in the April 2012 edition of the Journal of Occupational and Environmental Medicine, found almost 80% of workers' compensation costs are being covered outside of workers' compensation claims systems. That amounts to roughly $198 billion of the estimated $250 billion in annual costs for work-related injuries and illnesses in 2007. Just $51.7 billion, or 21%, of those costs were covered by workers' compensation, the study said.

Of the $250 billion price tag for work-related injury costs, the Leigh study found $67.09 billion of that came from medical care costs, while $182.54 billion was related to lost productivity.

In terms of the medical costs, $29.86 billion was paid by workers' compensation, $14.22 billion was picked up by other health insurance, $10.38 billion was covered by the injured workers and their families and Medicare and Medicaid picked up $7.16 billion and $5.47 billion of the tab, respectively.

The study drew criticism from the work comp crowd defending its practices, challenging the data, and anecdotally attempts to counter argue, with limited success.

PCI does the same thing with its study. If one digs deep enough and studies the study I'm sure one would find fault with the data and the reporting on cost shifting - because the truth is that absolutely no one has a fix on that topic. It is basically impossible to study cost shifting since the point of first medical contact determines occupational characteristics and that determination follows the claim nearly without question most of the time.

My good friend, Trey Gillespie, PCI assistant vice president of workers’ compensation, told WorkCompCentral that, "it really goes back to the fundamental tenets of workers’ compensation: protecting injured workers and their families and protecting taxpayers. The general consensus is that the way programs should work is to protect injured workers and taxpayers and avoid cost-shifting.”

Of course! All work injury protection systems should do that.

But they don't.

That's what the ProPublica and Reveal series of critical articles about workers' compensation programs across the country tell us, both anecdotally and statistically: injured workers aren't protected, costs are shifted onto other programs, and taxpayers are paying an unfair portion of what work comp should be paying.

Indeed, in October, 10 federal lawmakers asked the U.S. Department of Labor for greater oversight of the state-run workers’ compensation system, citing “a pattern of detrimental changes to state workers’ compensation laws and the resulting cost shift to public programs” as proof the oversight was needed.

Then I started thinking about the one truism that governs human behavior nearly universally until someone is about 90 years old (and even then!): every single person protects their own interests first.

And I thought of PCI’s name: Property and Casualty Insurers Association of America; “property and casualty”. Aye! There's the rub!!

There’s no room for P&C in opt out! ERISA based opt out uses only health insurance and disability insurance.

Work comp is the mainstay of the P&C industry, the single biggest commercial line, and the gateway to a whole host of much more profitable lines.

If opt out spreads beyond Texas it is hugely threatening to the interests of the PCI members because they stand to lose considerable business, particularly if opt out migrates to the bigger P&C states.

PCI is protecting its own interests (or those of its members) by objecting to opt out.

And I don't blame them. Their impression of this threat is real.

Michael Duff, a professor of workers’ compensation law at the University of Wyoming, told WorkCompCentral, “These are interested observers. They’re going to have an agenda. They represent insurers who are in the workers’ comp business.”

Bingo.

“Every commercial actor that participates in traditional workers’ compensation has an interest in seeing traditional workers’ compensation continue," Duff went on. “But,” he added, “that traditional workers’ compensation imposes costs on employers. There is now a group of employers who would like to pay less, and Bill Minick has developed a commercial product that is in competition with this other conceptual approach to handling things.”

Here's THE fact: traditional workers' compensation and ANY alternative work injury protection plan require vendors pitching wares and services to make the systems work.

Insurance companies are as much a vendor in either scenario as physicians, bill review companies, utilization review companies, attorneys, vocational counselors, etc.

Each and every single one makes a buck off work comp, and each and every one has an interest in maintaining the status quo.

All vendors have a business interest to promote and protect, otherwise they would not be in business. For property/casualty insurers, money comes in via premium, and they hope only a little goes out in claims so that shareholders get some return.

The spigot on outgoing dollars is tightly controlled by regulation (and many argue not tightly enough), and if it weren't then the interests of the insurance company would be even more weighted against those of the customer (i.e. premium paying employer) and consumer (i.e. injured worker).

That's the bottom line. Arguing that one system is better than the other without admitting one's own special interest is simply hypocrisy.

Workers' compensation is going through some pretty traumatic soul searching right now. Employers leading the debate are asking, "why stay in a system that facilitates vendors' interests ahead of employers or workers?"

THAT's the question that BOTH the P&C industry and the opt out movement need to answer. Further debate about the merits of one over the other is simply sophistry.

The Natural State

The relevancy of workers' compensation is in question, so that is bringing industry professionals, and injured workers, together in various forums to open dialogues about what a modern work injury protection system should do, how it should function and what it would look like, including the 2016 Workers' Compensation Summit in Dallas TX that starts today (I will miss the first day due to travels).

Work comp escapes general insurance/risk management definitions. Most lines of insurance/risk management are monopolistic - there is only one element to worry about, only one principle to manage.

For instance health insurance only deals with medical, life insurance only deals with (curiously) death. Even auto or home insurance, which could have a "medical" provision, is really monopolistic because the medical component is just reimbursed, not managed.

Workers' compensation, however, is a triad: disability and medical lines are directly controlled and managed in the work comp setting, and so is liability (because of the exclusive remedy portion).

There's a lot of ideas floating around, and a lot of concepts being discussed. Some of that conversation is fairly basic, working within the existing framework of work comp. Some of it is more radical suggesting strategies that dismember the triad.

Regardless of what the "ideal" system is (and I don't think there are any, just compromises), there are plenty of outside forces which the laws of physics and mathematics say will impact whatever is implemented.

Economist Daniel Kaheneman, in his book, Thinking, Fast and Slow, argues that most decision-making, even at the highest level, is impacted by swarms of intuitive biases, misinterpretations of data, illusions and misconceptions of which those making decisions are blindly unconscious and thus no one decision-maker (and thus, over time, no one decision) is consistently superior to another.

The theory of entropy also comes into play; that is, the natural state of all things is chaos, i.e. without order. Regardless of how much we implement rules, constrictions, fortifications, etc., eventually all order returns to its natural state of chaos.

Think about computers for instance. Computers essentially manage electricity to create the illusion that there is order and stability, so I can type this blog. It seems reasonably reliable and I can predict that when I hit the "R" key an R will appear on the screen.

But we know that computers eventually all crash and cease function. That's because the natural state of electricity is chaos - electricity is nothing more than the harnessing of electrons zipping around space into some short form utility until that energy is release and the electrons return to a disordered state.

Light bulbs exemplify this - light is temporary and transient. It is "on" only when the electricity is ordered to vibrate a filament, and when the electricity to the filament is terminated the light ceases.

If we take the theory of entropy, and apply Kahenaneman's argument about decision bias, then it would seem that no matter what we do with workers' compensation, or any work injury protection system, there will be, in mathematical terms, a return to the mean, a natural state of chaos, in part because of bias in the decisions that produce the design.

Which is to say there will always be winners and losers, there will always be a vast majority for which the system will work, and there will be outliers that fall between the cracks or get more than what they're supposed to.

The purpose of this dialogue that is occurring around the country is to propose work injury protection schema that serves the modern, information age, economy.

Trauma incidents for the most part are limited to a very small subset of occupations, for instance, so perhaps the triad of work comp isn't the best way to manage most exposures. Health care remains the biggest exposure for most of the populations, so perhaps that is a component that needs to be available to all working people, not just those who can afford it.

Disability is an even smaller subset than medical care. The vast majority of the working population won't ever be disabled, not even temporarily, at least not to the extent that work productivity is compromised.

Even liability - one of the most sacrosanct features of work comp is exclusive remedy, but perhaps that's not relevant to most employers in the 21st century as it was 100 years ago because of safety laws, oversight and simply the fact that we're not so industrial any longer.

100 years of work comp, 100 years of order, and we're seeing entropy creep in.

Court rulings, unconstitutional provisions, uncompensated workers, increasing costs, profiteering, and downright bad behavior; it simply is a return to the mean, a return to the natural state of things.

If we believe, as most do I think, that the vast majority of people are essentially "good", then the mean will function quite well no matter what the natural state is. The examination of entropy that is now ongoing is a product of the outliers; functions, actions, people and things that don't concern the vast majority of the population.

So while it may be time for a rebuild, a time to return order and a new architecture drawn, the reality is that theses discussions are about re-ordering the outliers and broadening the bell curve that got castrated over time as a consequence of entropy.

How all this plays out is anyone's guess. I'm just saying that no matter what is done, eventually it too will return to a state of entropy because decisions are not rational no matter how rational we believe the decision-maker to be and we can't control nature.

That's not to say that what is work comp now can't be better or that there is a better model for work injury protections.

But what replaces the work comp that we have known the past 100 years will also, eventually, regress to the mean, have outliers on the curve, and entropy returns.

But that may take another 100 years.

Exceeding the Expectation

My new MacBook Air arrived yesterday to my surprise.

It wasn't supposed to be here until this afternoon.

Recall that on Thursday I decided to speed up my old computer with some coffee. Seeing that afternoon that recovery was futile I ordered up a "new" refurbished MacBook Air. Free delivery was estimated to occur March 22, but I could pay an extra $22 for "next day" delivery on 3/21.

I was already upset about frying the old box and having to purchase a replacement (let alone the hassle in moving all of my data over), and spending the extra money to guarantee a delivery date didn't sit well.

And it wasn't necessary: Apple made a reasonable promise and then exceeded my expectations based on that promise.

Getting the new MacBook Air yesterday meant I wasn't quite ready to set it up - I left my back up drive at home, our senior IT guy was working from home and meetings all day would not allow me to get up and running that day.

I just KNEW that moving to the new computer would be a long, painful process.

I opened up the machine, turned it on, went through a couple of steps to set up language and location, then used Apple's Migration Assistant to move from the old computer to the new one in about an hour and a half, without the necessity of monitoring...

All that anxiety wasn't necessary:  Apple made a reasonable promise and then exceeded my expectations based on that promise.

And the new computer is noticeably faster than the old one. The old box had a battery that was dying, using up valuable system resources to try and monitor the warn down lithium-ion. In addition the new machine has a slightly faster processor and more memory - I'm sure that contributes as well to the noticeable performance increase.

But not THAT much: Apple made a reasonable promise and then exceeded my expectations based on that promise.

In case you haven't noticed, there's a theme this morning: exceeding expectations.

How often can you look at workers' compensation and say we, as an industry (or even a company) exceed the expectations of employers and their covered workers?

We defend workers' compensation as a sacrosanct institution because its been around over 100 years and is a linchpin to a modern economy: spreading the risk of financial disaster and providing medical care to those in need.

But the industry is routinely chided, particularly of late, for failing to meet those basic expectations.

And, hypocritically enough, when alternatives are proposed the industry uses the same arguments that critics throw at work comp against those alternatives: non-covered injury types, exclusion of pre-existing conditions, limitations on physician choice, restrictions on medical care, inadequate indemnity, etc.

Indeed, if you ask nearly anyone that hasn't yet gone through the work comp gauntlet you'll find that expectations are exceedingly low. Mistrust, pervasive fraud, denied benefits - those are, unfortunately, the expectations that we've come to understand.

Expectations are actually easy to establish because the ones providing the service or product get to define what they are from the outset.

For instance, Apple told me to expect the computer on Tuesday, and I felt that was reasonable so I accepted it. Heck, if they told me I would get the box on Thursday I would have been happy.

In workers' compensation we don't often enough do a good job of setting expectations. Some of those expectations are dictated by law such as waiting periods, or timeliness of indemnity checks, or types of conditions covered.

Other expectations are of our own doing: initial contact, communications, delivery of service; we have control over setting those expectations.

And we have control over meeting or exceeding them too.

It's easy to pontificate about setting and exceeding expectations, but it's another thing to actually performing to those standards, and that takes discipline.

In the computing industry, discipline is dictated by competition. The Digital Age bar of expectation is now set so high because of competition that the customers of these products and services expect nearly instant gratification, even with hardware. In my case, Apple was able to do it by delivering a machine ahead of time and making the transition unbelievably simple and quick.

Stanford law professor Alison Morantz has studied Texas non-subscription for years. She just released a new paper, still undergoing the editorial process, which shows that, at least with her cohort, companies save a significant amount of money over Texas subscribers (and Texas is already a reasonably priced work comp state), and that these company workers seem to be better off (though she admits that more study is needed on outcomes).

The study is divisive of course. The old guard hasn't yet attacked the study per se - it's too fresh - but the same old arguments are used to deride opt-out in general. And opt-out proponents say, "I told you so."

Maybe it's all about expectations. Maybe those that participate in work comp have been so lax, so lacking in discipline, for so long, that work comp has deteriorated to meet those low levels of expectation, and when something comes along that exceeds that low bar we can't help but be critical and attack it.

Because someone else is doing something fresh, exciting, and perhaps way better than the stalwart.

Before you think I'm an opt-out proponent, I'm not. I frankly don't care how benefits are delivered, what mechanism is used for work injury protection, or why.

I only care that there is some system in place that is a reasonable cost to business, and provides some adequate measure of protection to workers.

It can't be all things to all people all the time. But a good work injury protection scheme can be most things to most people most of the time. It's a low expectation bar.

We just need to exceed it, whether by traditional comp, or an alternative protection system.

Irrational Argument

The first day of the Workers Compensation Research Institute's annual conference was chock full of data, statistics and information about cost shifting, medical fee-based incentives, and independent medical review.

But to me, the most interesting of day one of the conference was the two separate sessions dedicated to debating "opt out," the latest pet phrase for alternative work injury protection systems.

The first debate was between Bill Minick of PartnerSource, and Trey Gillespie of the Property Casualty Insurers Association of America.

Minick is one of the major proponents and drivers of opt out. He and his firm are, consequently, lightning rods for opt out criticism, including loud denunciation in the general media such as the ProPublica story on the issue.

Gillespie is a Senior Workers Compensation Director for PCI, and has been strongly critical of the opt out movement.

Their debate was predictable. Gillespie interposed doubt about opt out's intent, and the threat it posed to the Grand Bargain, saying it would destroy people, companies and communities. Minick, of course rebuked those allegations, citing facts, statistics and anecdotes about how opt out can be a sensible, reasonable alternative to traditional work comp for both employers and their workers.

At the end, though, Gillespie pointed out a number of attributes that "a responsible alternative" to work comp would look like, stating for the first time I recall publicly that PCI is not opposed to alternatives if those objectives were met.

Frankly, I thought that was a huge capitulation on the part of Gillespie and PCI.

The bigger debate, though, came in Round Two where a panel comprised of James Mills from the Oklahoma Department of Insurance, attorney Alan Pierce, president of the Workers' Injury Law and Advocacy Group, Elizabeth Bailey,VP Workers' Compensation & Safety of restaurant chainWaffle House Inc., and Bruce Wood, VP & Associate General Counsel with the American Insurance Association. 

The arguments were heated, and in my opinion, curiously hypocritical.

And this is why - all of the arguments against opt out are largely based on just a couple of basic points: there are unreasonable potential restrictions that cause cost shifting and the injured worker gets shafted.

Frankly, those are the same arguments that the general media, and other critics, have been saying about traditional workers' compensation.

Think about it - work comp has been under fire the past few years on the argument that reform measures in various states have eroded benefits and protections for injured workers to such an extent that several states are facing constitutional challenges to their systems.

The opponents to opt out are making the same arguments against the movement that everyone else has been making against traditional work comp!

Limitations on temporary disability duration and the number of chiropractic or physical therapy visits, devaluation of permanent disabilities, restrictions on medical care, fee schedules, utilization guides, constrictions on causation liability, comorbidities, disputes, litigation, etc....

And in the end there is the injured worker, left without much remedy to overcome the financial consequences of a work place injury or illness while, in the meantime, vendors siphon money away for utilization review, bill review, pharmacy review and pretty much any other kind of review you can think of...

Bailey was, perhaps, the most rational and level voice of the entire debate. The Waffle House operates in 23 states where it is either self insured or has a high deductible program. The company employs 40,000 "associates" (see my post of yesterday, "The Culture") 2,000 of whom are in Texas.

In Texas, the Waffle House opted out in 2002 because costs were out of control and they saw no viable way to curtail their costs. Bailey said that the company's costs were driven by very high medical charges but that no one was ever getting better. 

They have stayed with opt out in the state because they saw huge improvement in communications with their "associates" because it was forced - they had to do it under ERISA law, and found that in fact it returned huge benefits and trust with employees. As a consequence the company experience a big reduction in indemnity because of the change in CULTURE.

In other words, opt out in Texas forced trust between the company and its workers.

Trust - oh yeah, a concept that seems to have escaped traditional workers' compensation.

By the way, Bailey also said that they are not opting out in Oklahoma, at least not yet. That environment is too unsettled at the time and the company is waiting to see how both systems turn out.

So, here's the message - it doesn't matter how you provide work injury protection. Employers that are good people will ensure that their workers are taken care of because they understand that human assets are the most important part of a business, and those that don't ... won't.

This basic truth transcends through the insured market. There are insurance companies that will do the right thing, and of course there are those that won't (e.g., how many carriers do you know that will voluntarily pay temporary disability beyond the statutory cap, or don't dispute statutory presumptions in order to curtail long tail liability on cancer claims?).

What I learned - it really doesn't matter if work injury protection is based on traditional work comp or opt out or some other program. It all comes down to whether the employer and/or carrier is going to do the right thing, and that comes down to how workers are valued, and the culture of the company, its insurer and the system within which it all operates.

 Trust operates in mysterious ways.

Spotlight Oklahoma

Oklahoma is probably the least likely state one would imagine to be the epicenter of workers' compensation controversy, but since the state did a "reform" which drastically altered some qualification for benefits as well as introducing an opt-out program, the state has been embroiled in dispute.

Last week, of course, the state's Workers' Compensation Commission declared opt-out to be unconstitutional, failing the state's guarantee of equal protection.

The commission said in Vasquez v. Dillard's that the state's opt-out program failed constitutional muster because it subjects workers to differential treatment depending on whether their employers are subject to the Oklahoma Employee Injury Benefit Act or the Administrative Workers' Compensation Act.

Yesterday the state's Supreme Court issued a 50 page ruling striking a provision of the 2013 reform that bars cumulative injury claims filed within the first 180 days of employment.

The Court in Torres v. Seaboard Foods said the cumulative trauma restriction groups together employees who legitimately incur a CT injury in their first 180 days of employment with workers who file fraudulent claims, “lumping together the innocent with the guilty.”

“On the other hand, if one of the purposes of workers’ compensation is to provide statutory compensation for employees actually suffering an injury arising out of the course and scope of employment, then the statute is under-inclusive because it fails to include employees actually injured during the first 180 days of employment,” the opinion states.

There were two concurring opinions that were more inflammatory - essentially calling into question The Grand Bargain and declaring Oklahoma's workers' compensation laws now critically out of balance, favoring business too much, and giving workers too little.

Justice Colbert, joined by Justice Watt, in a concurring opinion said, "the balance [in the Grand Bargain] is now off kilter and has become one-sided to the benefit of the employer", and that "The Administrative Act abrogates an injured employee's bargained remedies, and at times, leaves the employee bereft of any legally cognizable recourse."

In another concurrence, Justice Combs wrote, "By cutting off all recovery for an injured worker, excluding them from both workers' compensation coverage and from filing a tort claim, the Legislature has violated the grand bargain and betrayed the fundamental principles of justice that gave rise to it in the first place."

The state Chamber of Commerce is dismayed, telling WorkCompCentral they are "disappointed" though reviewing options.

The lead attorney in all of the constitutional challenges, Bob Burke, has been prolific in filing appeals and communicating with community, sending email status updates and blogging regularly about Oklahoma workers' compensation nearly since the day after Senate Bill 1062 was passed.

He says the state Supreme Court "spoke volumes" about the 2013 reform.

I think Burke is right.

We certainly don't know what the Court will do with the Commission's opt-out opinion.

Though the Commission went through details to explain how it gained jurisdiction over a constitutional issue, generally administrative agencies don't have such power - but regardless, the case is now before the Supreme Court by the Commission's own action.

And it seems to me the Court is anxious to take the case on, if the Vasquez case is any indication.

Oklahoma isn't just a test of opt-out. It's really a test of just how far "reform" can go without offending The People. 100 years of Grand Bargain culture is difficult to erase with a governor's signature...

The Supremacy Clause

The Supremacy Clause in the United States Constitution dictates that federal law takes precedence over state law.

Article VI of the U.S. Constitution which dictates that federal law is the "supreme law of the land," which has been interpreted to mean that the courts in every state must follow the Constitution, laws, and treatises of the federal government in matters which are directly or indirectly within the government's control.

Under the doctrine of preemption, which is based on the Supremacy Clause, federal law preempts state law, and a federal court may require a state to stop certain behavior it believes interferes with, or is in conflict with, federal law.

The federal Employee Retirement Income Security Act sets standards for private-sector “employee welfare benefit plans.” It defines an “employee welfare benefit plan” as any program established by an employer to provide employees with medical care or benefits in the event of sickness, accident, disability, death or unemployment.

ERISA is at the heart of opt-out.

ERISA provides plan participants with a civil cause of action to enforce or clarify their right to benefits, and allows an employer to remove such disputes from state court tribunals to the federal trial court system.

In Texas, which as we know does not compel workers' compensation participation, this has never been a big issue - the argument was settled long ago that non-subscribers with alternative work injury protection plans go to federal court for those matters that ERISA says can not be the subject of arbitration.

But in Oklahoma, which compels employers to provide some form of work injury protection, either via participation in the state work comp program or via an approved opt-out scheme, the matter is not settled.

The Oklahoma Employee Injury Benefit Act requires employers who opt out of work comp to create plans for their employees that provide the same form of benefits as those included in the Oklahoma Administrative Workers’ Compensation Act.

One of those benefits is access to the dispute resolution process created for work injuries, and the 2013 law also created a new system (which, by the way, was opposed by the state's trial lawyers - interesting how things turn around...) to hear those disputes creating an administrative review process followed by appeals into the civil courts.

That obviously conflicts with ERISA.

Dillard's department store chain, one of the first to opt out of Oklahoma workers' compensation when it became available, tested preemption but lost the argument that work injury disputes under its plan belong in federal court last September.

In that ruling, U.S. District Court Judge Stephen Friot said that such appeals have to go to the Oklahoma Workers' Compensation Commission because ERISA contains an exclusion of its coverage for any employee benefit plan maintained solely for the purpose of complying with a state's comp laws.

Friot remanded the matter back to the commission.

Dillard's is asking the commission to send the case back into the federal judicial system, filing a motion asserting that it doesn't have jurisdiction due to federal preemption, because its plan is not SOLELY for the purpose of workers' compensation but covers non-industrial benefits too.

The case won't end at the commission. Representatives for the parties on both sides have indicated commitment to see the issue through to the state supreme court.

Workers' compensation is a creature of the legislature. As we all know, what the legislature giveth, the legislature can taketh away, and in most states, legislatures can do pretty much whatever they want to do with work comp because of its statutory nature.

Can a state legislature buck the feds? Even if not sanctioned by the federal government, many states just go about their business regardless of federal law - the marijuana movement is recent evidence.

It may be that these cases end up before the United States Supreme Court at some point down the road. Or maybe not - that's many years, and a lot of money, to get there. But if there was any test case for the Supremacy Clause, the Oklahoma dispute is a prime example.

Oral argument before commission is scheduled for Friday, Feb. 19, at 9 a.m.

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.

The Wrong Focus

The recent $2.2 million jury award against non-subscriber Tyson Foods in Texas for a back injury had WorkCompCentral legal reporter, Sherri Okamoto, ask whether that, and other recent awards, has caused the opt out community to take pause.

Some of the examples cited by Okamoto:

In 2014, a McLennan County jury handed down a $12.1 million verdict against the Tractor Supply Co. of Texas – which was one of the largest awards ever made to a single individual in the jurisdiction.

In January, the state's 7th District Court of Appeals affirmed a $5.3 million liability judgment against West Star Transportation for a driver's brain injury from falling headfirst from an unevenly loaded flatbed trailer.

Then in July, the 14th DCA upheld a $1,016,809 judgment in favor of a meat cutter who lost three fingers in an industrial accident.

And in September, the 14th DCA approved of an award of $769,627.02 to a worker for his injuries from a mishap while operating a machine that was reeling in a piece of large-gauge wire.

So do these eye popping awards cause Texas non-subscribers to rethink the decision not to buy into the workers' compensation system?

The basic answer she got was "no."

The underlying reason is that the employee in a Texas non-subscriber case has the initial burden of proof to show negligence on the part of the employer - and that just doesn't happen very often because safety protections and awareness has been elevated to the best performance levels ever.

In addition, those employers opting out of Texas' system and subject to those kind of awards have the resources, management and experience to calculate the risks and do a cost comparison and have determined that the benefit of controlling their own processes outweighs the risk of those big awards.

The fact that Texas is not compulsory for workers' compensation has always been a hot topic of debate in the state.

Non-subscribers enjoy their freedoms. And they say that doing so places competitive pressure on the workers' compensation system to stay efficient and affordable.

The state's history over the past couple of decades would seem to bear that out - when Texas workers' compensation insurance is relatively expensive the rate of non-subscription (although not necessarily the rate of alternative benefit plans) increases, and when the cost of insurance is relatively inexpensive non-subscription wanes.

I have had a tough time understanding why insurance groups would be opposed to non-subscription though. The Property Casualty Insurance Association has been a vocal opponent of opt-out for years. I thought they would, at the least, be neutral on the topic, because in my mind insurance is insurance - and if you can't sell one kind of policy, then you sell another kind of policy.

But the opposition remains. Trey Gillespie, whom I've known for some time, is the senior workers' compensation director for PCI. He states that PCI's objection to non-subscription is that it's bad public policy because it upsets the competitive market for the industry the non-subscriber participates in and that "they're not really providing the protections envisioned by workers' compensation."

That argument is also made by labor. Rick Levy, the secretary-treasurer of the Texas AFL/CIO and formerly its general counsel, has been a vociferous proponent of making workers' compensation compulsory in Texas for as long as I've known him.

Levy's argument against non-subscription mirrors Gillespie's, but with more of a Labor twist - Levy can cite many cases where an irresponsible employer left injured workers high and dry, upsetting the balance of the employer-employee relationship, particularly since most employees are not fully aware of the consequences of inadequate work injury protection systems.

Another argument against non-subscription is that costs are unfairly shifted onto other public benefit systems.

That argument is made against workers' compensation too, and curiously also gets inverted ... I don't think anyone accurately can state whether one system shift actually occurs over another system shift. I've never seen a convincing study that tracks real dollars attached to a claimant (or a cohort of claimants) from one system to another.

Non-subscription has always been a part of the Texas work-injury protection culture. Things are just different in that state. When the concept migrates across state lines it takes on a different character because it butts up against compulsory obligations - in Oklahoma, as you are likely well aware, that obligation requires that opt-out have the same minimal protections that workers' compensation provides.

There's quite a bit of argument over what that exactly means, and the opt-out movement has been on the defensive for the past year as plans become public and critics challenge whether those plans in fact meet that minimal standard.

That minimal standard, though, has shifted over the years and after many reforms in many states. The ProPublica series about work injury protection systems points that out quite clearly - the original promises made to Labor have been compromised over time and that's what the anecdotes (and frankly the data) suggest.

Whether workers' compensation is compulsory, whether an employer opts-in or opts-out - these are red herring arguments and mean nothing at the end of the day for the injured worker trying to get medical care and figure out how to pay his or her bills.

The test is whether the employer is sufficiently vested in its work force to ensure employees are sufficiently protected against the risks of earning a living at the direction and control of another.

The more I hear the arguments, the more both sides seem to be saying the same thing, and both of them are focused on exactly the WRONG thing: saving money.

When the focus is on costs, only costs matter, and that means that the assets (employees) get short shrift.

Cost centric employers count the trees in the forest. The problem is that they don't count all of the forests. Work injury protection is not just about avoiding a bad jury verdict, or controlling medical treatment, or limiting exposure to some mandated annuity.

The bigger picture is missed - when a worker is hurt on the job and doesn't return that job will either be restaffed at considerable expense, or the work doesn't get done ... at considerable expense.

And a job that doesn't get done means one less dollar going back into the consumer spend stream, which ultimately means one less dollar to support the business at which that worker got hurt.

The arguments can't be about costs, can't be about control, can't be about shifting obligations - the argument at the end of the day is whether the injured worker is adequately protected against bad things at the work place.

It is up to Business/Industry to figure out how to best provide that protection. And its up to government to say whether or not the solution provided is adequate.

What it really comes down to is does the public trust government to do the right thing? Opt-out folks don't.

There are a lot of work comp folks that don't either.

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.

Not Our Obituary

John Coll's bronze of Brendan Behan

The negative image of workers' compensation and it's opt-out partner painted by the general media in the past couple of years is catching the eyes of some federal lawmakers.

Though opinion as to whether there is political will for the federal government to wallow into such a sacred state issue is mottled.

10 Democratic lawmakers sent a letter Tuesday to U.S. Labor Secretary Thomas Perez asking the Department of Labor to report on how it will reinstitute oversight of state workers’ compensation programs, what areas it intends to address and whether added authorities are needed to protect the interests of injured workers and taxpayers.

The letter was signed by presidential candidate Sen. Bernie Sanders, Senators Sherrod Brown, Patty Murray, Al Franken, Ron Wyden and U.S. Reps. Frederica Wilson, Chris Van Hollen, Bobby Scott, Sander Levin and Xavier Becerra.

DOL spokeswoman Laura McGinnis said the department is reviewing the letter and looks forward to working with stakeholders on solutions.

“We share their concerns,” McGinnis said in an email to WorkCompCentral. “Every year injured workers and their families are bearing more and more of the cost of workplace injuries and illnesses. Many states have passed workers' comp laws that reduce benefits or make it harder for injured workers to qualify for benefits.”

Back in 1972, during the Nixon Administration, the National Commission on State Workmen’s Compensation Laws was formed and made 84 recommendations for improving states’ workers’ compensation programs — including 19 recommendations it deemed essential.

Federal oversight was never instituted, but the states woke up, and a wave of benefit increases for injured workers progressed throughout the nation in the seventies and eighties.

Will that happen today?

Some don't think there's the political will, particularly as we head into an election year.

Others think that looming cash shortages in the Social Security and Medicare programs will incite some action, even feigned action, that will put the threat of Big Daddy into the states.

One thing is for sure, the relatively recent trend of negative general media reports about workers' compensation has heightened awareness of workers' compensation, and I think this is a good thing.

The vast majority of people, whether they're small business owners, big business executives, blue collar or white collar workers, have absolutely no understanding of work comp, and at least the media is providing some education to them about the system and our industry.

We industry insiders might not like the conversations that are being carried on, and we might take offense at some of the mud-slinging and negative anecdotes to support the stories, but so what? What do you really care?

These articles are providing workers' compensation with some much needed attention.

Workers' compensation and its off-shoots are commendable public service industries. We don't do everything great all of the time, but our jobs are to apply the law as evenly and fairly as we can to instances of work injury within the budgets provided, and most of the time that job is done admirably albeit without much recognition (which is why Comp Laude was created).

People make money off the system - of course they do; nobody works for free.

People scam the system - of course they do; a subset of humans will always seek an unfair advantage.

Some discount surveys of quality, others cite damning statistics.

And some point to quality outcomes, good vendors, people that overcome huge obstacles and get repositioned in life, eventually carrying on.

Media attention is good. That some federal lawmakers have taken notice is good. The conversations are spilling outside the borders of our industry and that is good.

Don't take offense that some might like to see a federal review of state work comp or that there might be some heavy handed federal position taken. I don't really see that happening any time soon. The feds can't even control their own work comp systems...

But if reviews and discussions lead to better balance, more efficiency, greater understanding, then we're the beneficiaries. No other industry has people with the skills, knowledge and talent to navigate the quixotic mix of injury, disability, medical care and budgetary constriction as workers' compensation.

We're given the rules and in the vast majority of cases those of us in the industry execute that mission on a daily basis, go home, and return the next day to do the same, serving millions of people every year in the process with nary any recognition or commendation.

So bully for the feds if they want to take a look as a result of media pressure. And bully to us that we're getting some attention.

Irish writer Brendan Behan said, "There is no such thing as bad publicity except your own obituary."

I don't think we'll be reading our own obituary.

Opt Out and ProPublica

It's easy to vilify Bill Minick and Mellisa Tonn.

The latest ProPublica story on work place injury systems, "Inside Corporate America’s Campaign to Ditch Workers’ Comp", paints Minick as a singular vigilante intent on destroying workers' compensation by taking Texas-style non-subscription to other states; plans that are crafted singularly by employers with the intent of sticking it to the injured worker to send more dollars to the corporate bottom line.

And Tonn, Minick's wife, represents a conflict of interest because she is the medical director overwhelmingly selected by PartnerSource clients to manage medical networks and doctor selections.

But like most everything in life, not only is there another side to the story, there are many complex permutations that need to be considered, and there's a big lesson too.

I've know Minick and Tonn for many years now. It's no secret that I'm a Pepperdine School of Law alumni (1984), and so is Minick (1985). We met about a year after I started WorkCompCentral. He had started PartnerSource a few years earlier. And I've known Tonn through various professional medical organizations, namely the American Academy of Orthopedic Surgeons (of which I'm a faculty member) and the American Academy of Disability Evaluating Physicians.

I've dined with both. I've attended social events with them. I've met their children.

They are good people. They believe that what they do is the right thing for America. Both believe that workers' compensation can be improved upon, and both believe that an employer option is the way to accomplish that goal.

“All you can do is pray that the Lord gives you a calling where you can really do good for society,” Minick is quoted at the end of the ProPublica piece. “That’s what gets me up every day, knowing that I’m getting better employee satisfaction and generating economic development. That’s as good as it gets.”

Minick is not bullshitting - he truly believes what he says, and that opt-out is, overall, better than workers' compensation for both employers and workers; and also for workers' compensation by providing competition.

Remember? This is America, a capitalistic economy where, in general, competition fosters better everything for everyone, at least academically.

Fundamentally, Minick and Tonn are of a Libertarian bend (I don't know their actual political affiliations); freedom of choice and relief from regulatory burden is a paramount belief. Less government, they believe, in both business and personal lives, is better and everyone should have greater responsibility for themselves. That's what drives their business philosophy, and opt-out itself.

The ProPublica article highlights a few vignettes of injured workers getting the raw end of the opt-out deal: denials based on unreasonable time limits for reporting, failure to provide sufficient medical care to remediate long term effects of injury, inadequate indemnity to stave off pauperism.

Certainly, though, these anecdotes are no different than what is experienced in full-fledged state workers' compensation systems. The earlier series by ProPublica highlighted the great disparity in benefits between states, and the hardships experienced by injured workers facing significant changes to their lives under the controls of workers' compensation systems. That series also used vignettes that the work comp industry labeled as unfair and unrepresentative.

But no one in workers' compensation denied that those case stories were real. Nor that they represented a problem. In fact, those honest with themselves acknowledged that these negative cases are all too common, and are a big problem. That series even led to an investigation of Traveler's by California officials.

Critics of the opt-out movement point to lack of transparency - information and data about what injured workers actually experience and receive in benefits is not easily obtained from opt-out employers.

Anecdotes indicate that the reality is different than Minick's ideal that such plans aren't better for the workers.

Both are fair criticisms. Frankly, there's nothing wrong with those realities being told either. Opt-out proponents need to know those stories. They need to "experience" life as an opt-out employee who's life is shattered because the plan doesn't take care of them, regardless of whether it's better or worse than standard work comp.

Remember my rant on experiential adjusting? Same holds true for anyone involved in the medical/disability management industry, whether it's work comp, opt-out, general health, private disability - whatever. If you don't know the result on a personal basis, you aren't learning and the perception is a callous disregard for the welfare of others.

In sort of a paternalistic way, opt-out plans heavy-handedly encourage return to work. The penalties to an employee for not getting back to work as early as possible can be significant.

This is by philosophical design - the overwhelming evidence is that work is good for people, and that being off of work for prolonged periods dramatically, and exponentially, increases the likelihood of long term disability.

But this heavy-handed approach doesn't work all the time, and unfairly penalizes those unable to overcome the additional obstacles that a work injury throws in the way of, perhaps, an already difficult life. When a work injury protection plan throws up additional obstacles, such as denial of care or refusal to accept based on timing, the penalty is amplified.

Just like work comp itself.

Employers tout great savings, and these are good for the board room and SEC reports to investors. Heartless corporate America is the perception though: At what cost to society? To individuals? To vendors? To employees? To shareholders?

The opt-out employer mindset is a less-is-best viewpoint. Get the government out of the equation; take more control over who provides what, and when; put incentives (positive and negative) in place to drive behavior towards the corporate ideal; eliminate waste, fraud and dependency.

There's a lot of appeal to the concept of the opt-out movement. I'm no fan of government and bureaucracy. I'd just as soon not have others tell me what to do, and how to do it (which is why I've never worked at a big company I guess).

But this Libertarianism assumes a high level of personal responsibility. The more freedom one is provided, the greater the requirement of accountability. Some are mature enough to accept this. Others are not. And this is on a both personal and corporate level; just how greedy can one get before society is offended?

The public's perception of corporate greed is particularly acute when times are tough, or when the media makes examples of outsized executive compensation compared to the toiling working class. Class stratification has become a big source of public discontent. This is a reality that can't be ignored.

The opt-out movement needs to come to terms with this reality. Indeed, ALL of the work injury protection industry needs to.

Oklahoma's 2-year old reform, that introduced opt-out to the state, says that employers' plans must meet the same minimum benefit requirements that the state work comp system provides.

What it doesn't require is that plans meet the same procedural protections - and that is a fault that the opt-out movement took advantage of, and which has provided many of the negative anecdotes the media has reported.

Having an employer appointed doctor determine medical and indemnity fate, only to be reviewed by an employer appointed binding arbitrator, is perceptually bad. There is no check and balance in that type of a system. There is no perceived fairness. It's stacked against the employee. The working class gets stiffed again...

I believe that opt-out can work. But ONLY if it is a fair, and BARGAINED-FOR exchange.

Remember the Grand Bargain? There WAS a bargain 100 years ago. First there was fighting, name calling, shouting, discord... and eventually compromise was reached. That compromise has been challenged over and over again and the first set of the ProPublica series simply pointed out that perhaps the bargaining in today's environment isn't balanced or fair.

What the ProPublica opt-out story really shows is that government not only got out of the way, but completely failed to protect the public; government assumed that plan promoters would do so.

That's unrealistic, myopic thinking. Everyone, and I really mean EVERYONE, at the end of the day given any set of circumstances, will first act in their own self interest. All others take a back seat until the individual's self interests are satisfied. In Oklahoma, government has failed to protect the public.

What is missing in the creation of opt-out plans is simply the lack of a bargain. There is no employee representation negotiating these plans. Government (at least in Oklahoma) is tasked with looking out for the workers' interests, but they don't BARGAIN for the deal - they only approve what is presented: an employer-centric system designed by employers for employers.

“We’re talking about reengineering one of the pillars of social justice that has not seen significant innovation in 100 years,” Minick said.

That's not a bad thing. Nearly everyone that I have come across in the past few years criticizes workers' compensation as too complex, and too costly for too little - i.e. not delivering the value that we expect. So opt-out should provide the remedy.

Should...

"But as Minick’s opt-out movement marches across the country," the ProPublica story reads, "there has been little scrutiny of what it means for workers." This is a nicely written sentence that is wrong on several fronts.

First, opt-out isn't marching across the country. Texas originated it. Oklahoma adopted it after several years of legislative wrangling. Tennessee and the Carolinas are targeted - this is not a movement that is marching. However, trust me, that all of the states are watching and learning to see what is good, and what is bad. Opt-out is disruptive, experimental. But it is not marching.

Second, while there has been little scrutiny of what it means for workers, whose responsibility is that? Current opt-out plans have the fox guarding the hen-house. And as I mentioned, all of those plans were unilaterally created with no worker representation at the deal table.

Government has failed miserably at providing scrutiny. But part of the failure is also Labor's fault. Unions are at an all time low with their constituencies - they are just as out of touch with the working class as the executives on the 99th floor.

The disintermediation of labor has been accelerated with the digital age - Labor has been greatly disrupted and can no longer advocate for the working class.

So who's going to do that? Government won't and Labor can't. 

The story behind the ProPublica opt-out article is that business is running amok, but this will, indeed, eventually back fire. History has taught us that.

ProPublica states, "And it’s Minick’s handiwork that allows Costco to pay only $15,000 to workers who lose a finger while its rival Walmart pays $25,000."

That's bullshit. Minick didn't do that, his clients did it. Minick facilitated the process, certainly, but he doesn't control Costco nor Walmart. What REALLY happened is that neither Costco's nor Walmart's risk management executives made any attempt to include their workforce into the development of their plans, and that's why they are so lopsided.

Business has taken advantage of Labor's weakness and has run amok.

Don't get the idea that I'm anti-ProPublica. In my mind they have done an outstanding job of bringing to America's attention the lack of real protection that people have when they get hurt on the job.

What the ProPublica articles on work comp, and now opt-out, are saying is, the Grand Bargain isn't grand anymore because there's no bargaining.

I firmly believe that this country's strong economic engine is due in part to the work injury protection systems that are in place. When done right the employer is protected, the employee is taken care of, the economy is stable, society benefits.

When it is singularly focused, though, such systems create mistrust. Business can not run on mistrust, and eventually a revolution will be fostered that will work against the near-sighted.

Here's the lesson - ANY work injury protection plan or system MUST be an employee benefit, like health care, a 401K, time off, dogs at the office and a well stocked break room.

But they're not. The laws have ensured that workers' compensation be regarded as a compulsory expense, not as an employee benefit.

Opt-out plans have taken the same approach because their singular focus is reducing expense. This does not tell employees they are valued - rather it tells them they are a cost, and worse, an expendable cost.

And this is where the opt-out movement, if it really wants to grow and prosper and, as Minick says, reengineer one of the pillars of social justice, can work, can make a difference, and can lead changes in the way we think of work injury protection systems.

Opt-out needs to start with the mindset that it is an employee benefit just as valuable to employees as any other employment benefit.

Work comp likely will never get to that level of beneficence because the laws have put a tourniquet on both business and labor. 

But opt-out can be an employment benefit, and should be.

Fundamentally, there's nothing wrong with opt-out. But how it's executed is another matter.

No Advantages

An Oklahoma appellate court decision put a chink in the armor of one of opt out proponents' major advantage over traditional workers' compensation was the mitigation of litigation.

A big source of employer costs in Oklahoma workers' compensation - indeed in many states - is disputes and the expense of navigating through the dispute resolution system and the involvement of legal professionals.

Opt out employers use ERISA compliant agreements with their employees to steer disputes into arbitration. Many advocates for injured workers claim foul on those provisions because they claim arbitration is "rigged" in favor of the employer since the employer selects and pays the arbitrator.

Jonnie Vasquez claimed an injury last year while working as a sales associate in the women’s shoe department of a Dillard’s store in Shawnee, Oklahoma. After she was unable to obtain compensation through the Dillard’s Injury Benefit Plan for Oklahoma Employees, Vasquez filed an appeal with the Workers' Compensation Commission.

Dillard's removed the case to the District Court for the Western District of Oklahoma arguing its plan was an “employee welfare benefit plan” governed by ERISA and thus not subject to the workers' compensation system's review process.

Attorney Bob Burke, who is very active in Oklahoma arguing against that state's reform measure, SB 1062 on several grounds, took on representation of Vasquez and moved to have the matter remanded to the commission.

Dillard's objected, arguing the case belonged in the federal courts because Vasquez's claim for benefits did not arise under the workers' compensation laws of Oklahoma, and that Vasquez's challenge of the plan administrator's denial of her application for benefits was "an ERISA enforcement action claim."

Since federal trial courts have original jurisdiction over ERISA enforcement action claims, Dillard's said Vasquez's appeal of its benefits decision could be heard in the federal court.

But ERISA exempts any plan “maintained solely for the purpose of complying with applicable workmen’s compensation laws" from its coverage, and Burke argued that the plain language of SB 1062, which provides that any opt out plan must provide the same form of benefits as those included in the Oklahoma Administrative Workers’ Compensation Act, compels review by the commission once an employee exhausts that review processes provided by a plan.

U.S. District Court Judge Stephen Friot agreed.

He reasoned that the Oklahoma Employee Injury Benefit Act "is part of Oklahoma’s statutory scheme governing occupational injuries and workplace liability," and as such, "the OIEBA is part of Oklahoma’s statutory scheme governing workmen’s compensation."

Under federal law, a claim that arises under the workers' compensation laws of any state cannot be removed to the federal court system, Friot explained. Even if the Dillard's plan also qualified as an ERISA benefits plan, Friot said, the federal court system still could not take jurisdiction over Vasquez's claim.

The court's result isn't surprising. The statute is pretty clear. And opt out still has advantages to employers in that there is greater control over the provision of benefits.

The trick for employers is not to get cocky and abuse those privileges, like what happened earlier this year in Jenkins versus ResCare, Inc., where the employer denied a witnessed accident because the claim was reported 3 hours past the 24 hour notice requirement in the company's plan.

I remain on the fence about opt out. I think it can work, but I also think it can be abused, and frankly that's no different than traditional workers' compensation.

Employers demand stability and consistency. Employees demand expediency and fairness. These are reasonable demands, and aren't hard to deliver if everyone just does their job in the first place instead of trying to get an advantage over the other.