The Opt-Out War Heats Up

Monday, March 2, 2015 | 0

In the past few weeks, events 680 miles apart sharpened the debate over the merits of workers’ compensation opt-out.

In Nashville, state senator Mark Green submitted a bill, SB 721, to create an opt-out system in Tennessee. He had advice and support from ARAWC, the Association for Responsible Alternatives to Workers’ Compensation (“A-Rock”). 

According to Chris Mandel, a senior executive at Sedgwick, this national body “assisted in drafting legislation ... secured a highly respected bill sponsor, gained the endorsing support of major employer players in the state and began the formal process of socializing and educating key stakeholders instrumental to passing new legislation in the state.” Can the state he refers to be other than Tennessee?

A national campaign with multi-state ambitions has thus allied itself with SB 721. In contrast, Oklahoma’s SB 1062 was enacted in 2013 on the strength of a strictly regional campaign waged by Oklahoma employers, some of which had opt-out experience in neighboring Texas.  

Not surprisingly, the Tennessee proposal comes across as more refined, less idiosyncratic and more replicable for other states than does the Oklahoma law. True, any opt-out bill will reflect political and constitutional issues peculiar to the state. Oklahoma’s law is written expressly to exclude any reference to ERISA, the federal employee benefit law, because that smacked of what opponents called ObamaComp. 

A dense, otherwise inexplicable passage in SB 1062 was included to permit an employer to opt out without creating an ERISA plan. Yet, every one of the 33 employers with approval for opting out elected to create an ERISA plan.

Also in February, in Oklahoma City, attorney Bob Burke and colleagues asked the state supreme court to rule SB 1062 was violating the state’s constitution. Burke contends that the law, which went into effect in early 2014, has harmed two workers. Judy Pilkington was injured in September, 2014, while working in retail. Kim Lee was injured, also in September, while working at a transportation company. See the case here.

Burke’s rather short written submission includes two assertions that bear close watching, because they likely will figure in opposition to opt-out in Tennessee and elsewhere.

First, Burke says that law denies injured workers due process, which to him requires an “agency or court or unbiased tribunal to look at the merits of an injured worker’s case. Opt-out employers are allowed to replace a judge with a committee chosen by the employer. That flies in the face of the federal and state constitutions.” 

Per Burke, work injuries are a misfortune that need access to a court to resolve disputes. A federally authorized non-judicial dispute resolution process, embedded in ERISA, will not cut the mustard. That would not be “fair and unbiased” or “fair and proper,” though Burke does not explicitly refer to ERISA.

Burke’s second complaint of note involves a mandate in the Oklahoma law that opt-out plan benefits be at least equal to those available under the conventional workers’ comp system.

Tennessee’s SB 721 will not explicitly guarantee equal benefits. However, the bill’s language suggests that its drafters wanted to give the impression that injured workers under opt-out will be well-protected. And how would an alternative system’s benefit design be seen as adequate except by at least first comparing its benefits to those of the conventional system?

It’s hard to imagine any opt-out law surviving a constitutional challenge where benefits were shown to be distinctly worse, given the very long history of state interest in recovery from work injury.

But what is a benefit? Surely, ready access to and payment for medical care is a benefit. So are wage-replacement checks, and long-term financial support plans for the seriously and permanently disabled.

But what about an employee’s discretion to wait for a few weeks, even a few months, before deciding that her misfortune was caused by work rather than off the job? Opt-out plans in Texas and Oklahoma typically require employees to report injuries within 24 hours or lose their access to benefits.

Further, is the employee’s discretion to select her own doctor a benefit per the Oklahoma law? Opt-out plans typically severely restrict provider choice for injured workers.

Reputable research on work injury treatment shows very strong linkages between the doctor you see and the outcome you get, measured in disability days and medical costs. The evidence shows that a claims payer can make doctor selection choices that lead to better chances of recovery.

Assume that it is a “benefit” for the injured worker to pick her own doctor. Is that a benefit that the government puts above the societal value in better recovery outcomes?

The opposition to opt-out has not been interested in these trade-offs. In an article written by Nancy Grover for the NCCI, Rick Levy, legal director for the Texas AFL-CIO, was quoted as saying, “Once you cede complete control [of medical care] to the employer, the worker has no foothold to guarantee fair treatment.”

Advocates for opt-out assert that treatment outcomes are better in opt-out. This is a researchable issue. Yet, they have not presented any credible evidence of that being the case. Perhaps they will remedy this lapse in their response to the Pilkington suit.