Uneasy Neighbors: The “Option” and Why It Matters

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With our Texas neighbors’ unique system forming a constant basis of comparison for our state’s workers’ compensation industry, Louisiana Comp Blog reached out to the leadership of the Association for Responsible Alternatives to Workers’ Compensation (ARAWC) –  the national, Austin-based organization that advocates for expanding opt-out provisions to other states – to get their take on the movement and why it matters for the region.

The Beginnings of ARAWC

ARAWC Executive Director Richard Evans and his team are clearly enthusiastic about opt-outs and their potential to form a grassroots movement in the employer community, but the organization itself is relatively new.

“The group got started late last year [2013] as a coordinated effort, instead of just creating state chapter after state chapter,” said Evans. He explained further that ARAWC was not a tough sell for large employers already operating in Texas and non-subscribing. These employers, and others in neighboring Oklahoma, will likely opt-out again in Oklahoma now that it has an “Option.” Although ARAWC was not directly involved with the Oklahoma “Option” that passed last year, ARAWC encouraged the measure and worked with stakeholders in Oklahoma, including its member employers.

Membership in ARAWC seems to prove the national interest that Evans cited in our interview. Founding and full members include such well-known names as Wal-Mart, Best Buy, Nordstrom, Macy’s, Safeway and Sedgwick. ARAWC’s ranks also include top industry experts who develop and administer individual “Option” plans. Membership is open to any employer or association that desires to see ARAWC’s brand of “Option” available in other states.

How ARAWC Chooses its Target States

Fostering further interest in responsible alternatives and internal benefit programs in lieu of workers’ comp is driven by ARAWC’s lobbying efforts. “Our state lobby director, Steve Edwards, helped pass the Oklahoma law,” Evans said. “He’s been doing the assessments of some states that we are looking at based on certain criteria.”

Although Evans did not share the specifics of Edwards’ criteria, he emphasized that both general interest, and performance of each state’s workers’ compensation system, must be aligned so that legislators will be willing to consider an “Option” for employers in their state. “We’re looking at states that have high workers’ comp costs and looking at what the cost drivers are…and we’re also interested in our ARAWC members and where they have operations,” Evans explained.

opt out sidebar editedAdditionally, the political mood, as with many issues tied up in the world of workers’ comp, is a key point of investigation for ARAWC. The political environment, Evans said, begets a practical question: “Are we going to be able to get legislation passed in that state, and is it a state that is trying to compete with other surrounding states in terms of economic development?”

Evans indicated that ARAWC would announce its final list of states in which they would be working for the 2015 legislative session by the end of the year. “We’re looking at the Southeast regional area right now,” he said. “Tennessee, South Carolina, North Carolina, Alabama, Florida, Georgia…are all on the list of states that we want to have a deeper analysis of before deciding where to go.” As for large states like California, New York and Florida, Evans has no doubt that the interest is there and he believes that if they do not make the final cut this year, they may be under serious consideration for the 2016 sessions. “The goal is long-term, to take this to as many states as we can where the business community and the leadership see some positive benefits to an alternative to the traditional workers’ comp system.”

As for what the legislation looks like, Evans is a proponent of individualized solutions. ARAWC, though based in Texas, states in its frequently asked questions page that it has developed “model legislation” that provides a framework for what factors states should consider when crafting an “Option,” but that they serve only as a facilitator for “Option” design discussions – helping to educate legislators and stakeholders about how an “Option” can work, and providing resources to advocate for state-specific legislation.

Where Louisiana Stands in the Opt-Out Scheme

According to Evans, Louisiana is “not on the shortlist” for states that ARAWC is considering. He explained: “Louisiana might fall into that [high workers’ comp costs] category…but when we get to some of the other criteria, it’s not there.” However, given the list of prospects for the next two legislative sessions, if successful, Evans and his team at ARAWC will create a compelling situation for Louisiana. We are adjacent to “Option”-friendly Texas and Oklahoma already and would then be nearly alone in the region (minus Mississippi and Arkansas) if Alabama, Georgia, Tennessee and Florida were to pass opt-out legislation.

While the benefits for business in terms of lowering workers’ comp costs are generally established, the well-being of the employee population in states with an opt-out is not necessarily clear. This is perhaps why Evans does not emphasize a Texas-style opt-out as every state’s “Option” starting point. In Texas, employers that choose not to subscribe and purchase workers’ comp coverage also do not have to provide replacement or equivalent benefits, they simply lose their immunity from tort or negligence liability. By contrast, Oklahoma’s “Option,” also supported by ARAWC and its powerful members, is only available to private employers, and preserves an employer’s tort immunity, with the stipulation that each employer’s “Option” plan provide equivalent benefits to conventional workers’ comp coverage in the state. As of late September 2014, only nine employer “Option” programs in Oklahoma have met state equivalency standards and been approved.

Employee Care Under an “Option:” Is it Comparable?

In response to concerns about access to care, retaliation, lack of funds for legal representation, or other barriers to recovery that could become serious issues for workers with non-subscribing employers, Evans leaned on Texas’s wealth of experience. Due to the fact that Texas has had an “Option” per se since the inception of workers’ comp about a century ago, Evans seems to have distinct faith in the business community’s ability to make an investment in their employees’ care and health. “Critics who say that non-subscribers aren’t providing the same benefits as the comp system – that doesn’t mean that these employers aren’t providing good benefits, good medical care quickly, and getting [injured workers] their benefits. They are doing that, sometimes at a higher level [of quality] than the comp system and quicker than the comp system,” Evans explained. “It’s just not very accurate for someone to claim that the ‘Option’ isn’t going to provide a level of benefits that takes care of the needs of the injured employee.”

In fact, part of this “Option” benefits equation for Evans lies in the potential improvement of access to care. “Our goal is to have really good outcomes and to get better return to work than you do in the comp system,” he said. Further, an internal benefits program administered through the “Option,” according to Evans, could open up access to care even further by expanding the network of doctors that are willing to provide the treatment in question. “A lot of doctors don’t want to take workers’ comp patients because of the fee schedules and the pre-authorizations that have created a lot of administrative hassles for providers. And when they’re faced with these additional hassles, plus lower fees than their other payers, there’s not a lot of incentive for them to provide the care.”

The Future of ARAWC’s “Option”

Though the future of ARAWC’s mission does not currently place Louisiana in its path, the organization is modeled to go where it is needed the most, primarily as a reform measure to control costs. As for whether or not Evans thinks every state should have an “Option?” He says good outcomes are good outcomes. “In those states where you’ve got low costs and you’re getting good results, there’s probably not the pressure to have an “Option” there,” he said. “But as we progress through the country, I think there are plenty of states that you can point to now.”

Ultimately, the “Option” goes beyond workers’ comp to express what many perceive as the fundamental truth of American business prowess, that is, competition. Evans explained that the true strength of ARAWC’s mission is the “Option” as an agent for change. “Whether it acts as a competitive pressure that lowers workers’ comp premiums, which we’re hearing it is already doing in Oklahoma, or as a complete alternative to the comp system: employers may benefit either way. If they drop out and go with an ‘Option’ they may see reduced costs there, but also, if they stay in the comp system, the pressure of having a competitor out there [in the form of an ‘Option’] for employers to choose from can also lower their premiums.”

Brent Buchanan, Communications Director for ARAWC, also added his perspective on the competitive aspect of ARAWC’s mission explaining that, “It’s important to look at this as a competitive complement to workers’ comp, not as a replacement for workers’ comp. Traditional coverage and the ‘Option’ work well together because of competitive pressure on each other.” Evans continued, “We’re not trying to come into a state and say, ‘Hey, we’re going to replace your workers’ comp system.’ Employers that are happy with that workers’ comp system, that are getting results for their employees, that have low premiums, we don’t want to replace that. This is really something that is meant to live side by side with the workers’ comp system.”

 

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