Workers' compensation State laws

Workers' comp 'option' under fire

Oklahoma’s controversial law on opt-out plans is ruled unconstitutional, but the final word is yet to come

workers' comp
Photos (left to right): TommL/iStockphoto; State of Oklahoma, via Wikimedia Commons; YinYang/iStockphoto

The law that allows Oklahoma employers to opt out of traditional workers’ compensation is unconstitutional, the state’s workers’ compensation commission said in a new ruling that deals a blow to proponents of so-called “option” legislation.

In its Feb. 26 decision, the commission ruled that the Oklahoma Employee Injury Benefit Act is a non-permissible law because it creates “unequal, special treatment of a select group of the class of injured workers.” The ruling stems from a case in which a shoe department store employee claimed an injury from lifting various shoe boxes. The worker was treated for the injury, which was determined to be pre-existing and aggravated by her current job duties, and then filed a benefits claim for additional treatment.

The worker’s employer had opted out of traditional workers’ comp by developing an Employee Benefit Plan – an option that proponents say saves employers money while providing the same level of care as traditional workers’ comp systems. To date, only Oklahoma and Texas have option laws on the books. (At press time, workers’ comp opt-out legislation was being pursued in South Carolina and Tennessee.)

In the Oklahoma case, the employer’s plan denied coverage for additional treatment, which included an MRI. The employee’s injuries were considered pre-existing and thus not an “injury” as defined by the plan.

However, the commission stated in its decision that the plan’s definition of injury is more restrictive than the definition used in the state’s traditional workers’ comp law. At present, employer opt-out plans approved under the Oklahoma Employee Injury Benefit Act are not required to have the same provisions as the state’s traditional workers’ comp law, including definitions of covered injuries.

“Although at first blush it appears that the Opt-Out Act requires that injured workers under an authorized benefit plan must be afforded benefits equal to or better to those under the Administrative Workers’ Act, this is decidedly not so,” the commission stated. “A closer look at the statutorily authorized plan requirements reveals that the benefit plans permitted to be used to opt-out establish a dual system under which injured workers are not treated equally.”

Because workers covered by employer plans under the opt-out law can be treated differently than workers covered by the state’s traditional workers’ comp law, the opt-out legislation violates equal protection rights under the Oklahoma constitution, the commission concluded.

Fight far from over

The commission’s ruling is “not the final word” and is likely to be appealed, claims the Association for Responsible Alternatives to Workers’ Compensation, a Washington-based membership organization pushing for option legislation among states. The group, as well as other supporters of the option, say Oklahoma’s opt-out law has allowed for better medical outcomes for injured workers and, in general, has resulted in fewer claim disputes and greater employer cost savings.

“The vast majority of Oklahoma option employees are eligible for greater wage replacement opportunities,” said Bill Minick, president of PartnerSource, a Dallas-based consulting firm supporting workers’ comp alternatives. “When you get better medical outcomes, you can afford to pay better medical benefits and afford to pay the best medical providers.”

Minick asserts that the option allows for competitive alternatives while still providing for all reasonable and necessary medical expenses based on state-established minimum requirements.

Oklahoma attorney Bob Burke disagrees. Burke represents the department store worker in the recently decided commission case, as well as workers in 18 other pending cases. He claims that the only reason employers are able to save money under the option is because they cut back on what the plans cover. “Under the Oklahoma option, the 62 employers who opted out were allowed carte blanche to write their own plans,” Burke said. “They get to decide. The employer gets to decide even what an injury is.”

At press time, the commission’s ruling had not yet been appealed to the Oklahoma Supreme Court. The battle there likely will settle the debate – federal judges already have ruled that their courts do not have jurisdiction over these cases.

The challenges facing the option – including the commission’s decision and the expected Supreme Court case – are a “natural part of the process” and were expected, said Minick, who claims the commission’s ruling was not based on the merits of the case.

Should the Oklahoma Supreme Court uphold the commission’s decision, Minick said, additional alternatives would be reviewed because of the broad support opt-out has from various stakeholders. “Building a better workers’ compensation system is critically important,” he said. “And we will continue to work with the private and public sector to find effective solutions.”

Burke, however, envisions a Supreme Court ruling in his client’s favor that offers a different future – one in which the option in Oklahoma will be dead because the financial incentives for an alternative will be eliminated. He believes such a decision would have far-reaching effects.

“Hopefully it will put a cold, wet rag on the opt-out movement throughout the South,” Burke said.

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