Bob Burke, author of the following editorial on Oklahoma’s opt-out or “Option” system, is a former Oklahoma Secretary of Commerce and Secretary of Industrial Development, served as Chairman of the Legal Committee of the Fallin Commission on Workers’ Compensation Reform and has spent 16 years as a member of the Oklahoma Advisory Council on Workers’ Compensation. Burke also rewrote the entire Oklahoma workers’ compensation statute in 2011 and has represented injured workers for 35 years.
Burke: There is a growing threat that American employers will replace traditional workers’ compensation insurance policies in the future with stripped-down opt-out plans. This trend should be of great concern to both workers and employers. Opt-out plans that drastically reduce statutes of limitations, benefits, and rights for workers also contain major pitfalls for employers.
I am not opposed to opt-out – per se. If these plans provided similar benefits and appeal rights as traditional courts and administrative agencies, opt-out could be a viable alternative – but that is where the rubber does not meet the road.
The current debate about opt-out harkens back to the discussion 30 years ago in Oklahoma of allowing larger employers to become self-insured (i.e. dropping their regular comp insurance policy and posting a bond or letter of credit to guarantee payment of benefits for injured workers). I angered some of my claimant lawyer brethren when I endorsed the idea overall, but I also insisted during that process that the legislature require self-insured employers to pay exactly the same benefits as other employers, and that claims be adjudicated by the Workers’ Compensation Court in the same manner, with the same appeal rights.
The self-insured program has worked well, backed up by a viable guaranty fund. To date, not one injured worker has been denied benefits just because their employer chose to self-insure. Some promoters believe that opt-out is like self-insurance – just another way to satisfy an employer’s obligation. The Oklahoma “Option,” the marketing label of Oklahoma opt-out, has fallen short of that goal.
Opt-out has been around for decades in Texas. But Texas is unique. It is the only state that does not require an employer to be responsible for reasonable indemnity and medical benefits for injuries to his or her workers. Every other state has a statutory workers’ compensation system that provides scheduled benefits in exchange for the worker giving up the right to sue for common law tort damages – the Grand Bargain.
In 2013, Oklahoma became the second state to pass opt-out, officially the Oklahoma Employee Injury Benefit Act (OIBA). The statute allowed employers to become a “Qualified Employer” and develop their own benefit plan. On paper, the statute also required the Insurance Commissioner to scrutinize opt-out plans to make certain that they provide the same type of benefits and the same statute of limitations as regular comp.
Unfortunately, none of the first 45 opt-out plans approved by the Oklahoma Insurance Commissioner have the same statute of limitations as regular claims, and the reduction in benefits and appeals rights is alarming. A lawsuit has been filed to request the Insurance Commissioner be enjoined from approving further opt-out plans until the constitutionality of the entire scheme is decided by the Oklahoma Supreme Court.
Some Oklahoma opt-out plans provide for benefits only if the injured worker reports the accident and files a written report by the end of the shift on which the injury occurs. If an injury occurs an hour before the end of the shift, the practical statute of limitations is less than one hour. I represent one health care worker who was injured in plain sight of her supervisor, filled out a report, was sent to the doctor by the employer, but her claim was denied by the home office because she did not call a certain toll-free number within 24 hours. When she sought representation, and the local company management was enraged by the denial, the employer accepted the claim and is now providing benefits.
Additionally, some opt-out plans create excessive limitations. One plan does not pay for blood used in blood transfusions for critically injured workers. Another plan does not cover injuries suffered in tornados in Oklahoma’s “Tornado Alley,” where the movie Twister was filmed. This is an example of where the stripped-down coverage can hurt an employer. If a worker’s injury or death is not defined as a compensable workers’ compensation claim, the Oklahoma Constitution guarantees a remedy in district court. Not only would a jury verdict in a tornado death case be much larger than the cost of the workers’ comp claim, the employer’s general liability policy would not provide coverage because GL policies exclude injuries to employees. The employer might have saved pennies for workers’ comp traditional coverage – but spent big-time dollars in defending a district court action, with the loss of exclusive remedy, and paying a jury verdict out of pocket.
Another opt-out plan for an employer that subcontracts with state government for the treatment of juvenile offenders does not cover injures from “altercations and fights.” Many of the social worker cases I have handled involve injures suffered during an attack by an offender or while trying to break up a fight or altercation. Not only is the employer subject to a direct action in district court for not covering such an injury in comp, the State of Oklahoma may be at risk for a lack of these professionals.
I have asked the directors of two large state agencies to assess their subcontractors’ opt-out plans to determine if the state agency might become secondarily liable when the opt-out policy fails. The policy, written through an insurance company based in the Bahamas, does not cover replacement of prosthetic devices or hearing aids and limits coverage for home health care or rehabilitation in a nursing home to the first 60 days.
If the subcontractor’s employee is critically injured in an automobile accident, requires a blood transfusion to save his life, and is rendered quadriplegic, who pays for rehabilitation and home health care after the first 60 days? The most likely answer is the taxpayers, either through the state agency, Medicare, or Medicaid. If Medicare picks up the tab, will CMS ask the state for reimbursement?
These examples are only the tip of the iceberg. The appeals rights under opt-out plans are facially unconstitutional as a denial of due process of law. Many plans prohibit “de novo review” and “any arbiter or court” from overturning the employer’s decision on compensability and extent of benefits. The employer makes every decision, every time and can even force the worker to settle his case, using only the opinions of the employer-selected doctor and employer-selected actuary to determine the value of the case.
By the way, if the worker does not accept the settlement, “all plan benefits are terminated.”
Employers, government risk managers, and worker advocates must closely examine opt-out plans to make sure that society’s interest in providing reasonable benefits and medical care to injured workers, and the Grand Bargain we struck to achieve that goal, is preserved.
Editor’s Note: Bob Burke recently filed a constitutional challenge to Oklahoma’s opt-out system in the state Supreme Court but it was denied review. He was also the attorney behind the landmark Duck v. Morgan Tire case earlier this year, which invalidated the exclusive remedy because the accident was “foreseeable.” Burke has also authored a comparative analysis of the benefits provided under traditional Oklahoma workers’ comp, versus an approved opt-out plan in the state for a department store’s workers. Read that document in full by clicking on the link below.