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August 15, 2017

‘Opt Out’ Will Return; Pay Attention

Summary:

"Opt Out" will return, faster than expected, and with an improved concept that will quickly gain traction. We need to be prepared.

Photo Courtesy of Pexels

I had the opportunity to participate in a high-octane session at the 72nd Annual WCI Conference in Orlando, FL. With the somewhat imposing title of “The Grand Bargain or Contract of Adhesion: The Ongoing Debate Over Benefit Adequacy, Procedural Efficacy and Blanket Immunity in Workers’ Compensation,” it was a 90-minute discussion about both specific state legal challenges and the future viability (constitutionality) of workers’ comp overall. It featured Florida defense attorney H. George Kagan, Wyoming law professor Michael Duff, Georgia Administrator and Judge Elizabeth Gobeil and me. It was moderated by Florida plaintiff’s attorney Paolo Longo. While we covered a variety of challenges that the industry continues to face, there was one that I regret we did not have the opportunity to address. That one issue is the concept of allowing employers to opt out of workers’ comp altogether.

Since the Oklahoma Opt Out scheme was torpedoed by the state Supreme Court’s upholding of an earlier decision declaring it unconstitutional, many have assumed that this chapter has closed for the industry. We are quite content to put our heads back in the sand and wait for the next crisis before we stir from our slumber. You may pick up from my tone that I believe this to be a mistake. I am predicting here that the “threat” of Opt Out will return, faster than expected, and with an improved concept that will quickly gain traction. I’m telling you, we need to pay attention and be prepared, as this next round will be a more formidable challenge.

The advocates of Opt Out have, quite simply, made a few key changes in their pitch and approach, and the changes, for the sake of argument, have merit. The Achilles heel of Oklahoma Opt Out was “exclusive remedy”; the approach had been allowed to develop a closed and tightly controlled system that maintained the benefits of liability protection afforded to employers within the highly regulated workers’ compensation system. This was found to provide inconsistent benefits to some workers, and, combined with the one-sided controls granted employers within Opt Out, was deemed an unconstitutional restriction on employees’ rights of due process. Today, the backers of Opt Out seem to have learned a lesson and are now proposing an Opt Out scheme that operates without the layer of protections afforded by the exclusive remedy provisions.

See also: What Schrodinger Says on Opt-Out 

In other words, they are saying, “Allow us to accept the risk of full liability and set up our own alternative plans to mitigate that risk.” Although I am known for my opposition to Oklahoma Opt Out and am not a fan of Texas non-subscription, I believe this concept is more intellectually honest than its Sooner State predecessor and therefore worthy of inclusion in the debate about the future of workers’ compensation.

With my involvement with “national conversations” on comp over the last year and a half, one thing has become firmly etched in my mind. There is a feeling of frustration simmering in the industry over the regulatory complexity and paperwork required in helping injured workers. There is tremendous appeal in the idea of bypassing all the oversight and just doing the job that needs to be done. After all, in some systems, treatment of the injured worker now seems to be a secondary goal; we can get to it when all the appropriate paperwork has been completed in triplicate and submitted to the various participants that are required to have it.

By saying, “We accept the risks of open liability and can control those risks by doing the right thing by our employees,” backers change the argument significantly from that where exclusive remedy protected the employer either way. The new approach is going to have tremendous competitive appeal to employers and the legislators whose ears they reach.

There are, of course, concerns with this concept. One of the oft-understated purposes of the “Grand Bargain,” which created a system that was supposed to be no-fault in nature, is that it assures treatment and benefits for the careless and negligent worker. People who represent the injured workers’ interests hate to discuss this, but many accidents occur not because the employer was negligent but because the employee screwed up. The employee may have been simply careless or willfully bypassed safety practices. Either way, the injury is often the fault of the worker who suffers it. Workers’ comp, with few exceptions covers that. Employers who find no liability in an accident may not.

For example, let’s say you run a delivery service. You maintain a strict “no texting while driving” policy for your drivers, even going so far as to install apps on company-provided phones that will not allow texting when movement is detected. However, one of your drivers pulls out a personal phone (banned by company policy), over which you have no control, and drives headlong into a tree while texting his BFF. Were you negligent? If you did not have workers’ comp, would you need to be concerned with the liability of pain and suffering, loss of consortium and all the other threats of a negligence suit? Unlikely. Without the threat of a suit, would you be compelled to provide medical and indemnity benefits to this worker? Equally unlikely, I would suspect, especially in an Opt Out world.

Believe me, there is a real attraction to being released of financial responsibility for things that were not your fault. This really becomes a discussion at a societal level. Are we willing to start assigning blame, potentially placing the burden on taxpayers for injuries that occur while someone is working for the benefit of an employer? Are we ready to return to the days before workers’ comp existed?

Another issue, of course, will be how the concept is actually created in legislative form. Saying you will accept the risk of open liability is different than legislating that element. As with all things, the devil will be in the details of any specific proposal.

These questions will certainly be a part of the debate. In the meantime, the simplicity of bypassing an over-regulated system is going to provide tremendous appeal for some. At our Orlando session, George Kagan observed that Florida legislators have enacted so much legislation for workers’ comp that it would make the “central planners of the Soviet Union proud.” Employers will eventually look to escape an overly complex system where regulators cannot even agree on a simple standardized reporting form.

When the argument can be successfully made that benefits for the injured worker can be improved by leaving a burdensome system, then we will have a real dogfight on our hands.

See also: Debunking ‘Opt-Out’ Myths (Part 6)  

PartnerSource President Bill Minick, who is the primary supporter of the Opt Out concept, and I do agree on a couple things. One of those is that competition is healthy and almost always results in improved service for all. The concept that backers are beginning to put forth represents the opportunity for true competition to a system that cannot seem to respond to other external stimuli.

I remain a vociferous advocate for the workers’ comp system; its importance in stabilizing a contentious area of labor relations has been well proven over the past 100 years. However, I also want to see a vibrant and relevant workers’ comp system for the next 100 years. That means we must address some of our issues head on, and answer the questions about what is important to us as a society.

Opt Out will again soon be an issue we are debating, but with a change in focus on their side. It will be a concept worthy of a larger debate.

It will be a debate that we best be ready to participate in.

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About the Author

Bob Wilson is a founding partner, president and CEO of WorkersCompensation.com, based in Sarasota, Fla. He has presented at seminars and conferences on a variety of topics, related to both technology within the workers’ compensation industry and bettering the workers’ comp system through improved employee/employer relations and claims management techniques.

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