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The Flip Side of Nonsubscription

The proposed workers’ compensation opt-out legislation in South Carolina and Tennessee, coupled with the recent challenge to the Oklahoma opt-out statute’s constitutionality, has spawned many recent articles, publications and commentaries regarding legislation allowing employers to “opt out” of state-governed workers’ compensation insurance programs and become “nonsubscribers.” Most of these articles have attacked the nonsubscriber option as pro-employer and anti-employee.

Interestingly, however, when the Texas Department of Insurance (TDI) last investigated the satisfaction levels of injured workers employed by nonsubscribing companies, those studies showed that employees of nonsubscribers were generally satisfied with their treatment post injury, making nonsubscription a win/win for both employer and employee. Indeed, there are lots of reasons why employees like working for nonsubscribers:

1. Nonsubscribers Provide Enhanced Safety.

Nonsubscribing employers tend to provide safer workplaces overall. Why? Because their claim costs directly correlate to claim frequency and severity. Consequently, improved safety, with the resultant decline in claims and severe injuries, is in nonsubscribers’ best interest.

In her recent comprehensive study of nonsubscription, Stanford Professor Alison Morantz observed this phenomenon. Morantz studied 15 large multistate firms, analyzing and comparing data relating to their nonsubscriber claims in Texas and their workers’ compensation claims in other states. She found “strong evidence” that nonsubscription creates a “real safety effect,” because “[n]onsubscribers are, at least in theory, internalizing all of the costs associated with workplace accidents (including tort liability), which should induce them to invest more in safety-enhancing technologies.” She based this conclusion on the “sizable and statistically significant decline” in the claim frequency of severe, traumatic injuries.

See also: Even More Tips for Building a Workers Compensation Medical Provider “A” Team  

Steve Weatherford, vice president of finance and human resources at Daryl Flood Relocation (a Mayflower Transit agent), explained how safety is an integral part of Daryl Flood’s nonsubscription program: “The key ingredients to a successful non-subscriber program are an effective safety program (prevention); employee acceptance of the benefit of early reporting (early treatment); a quality medical network (effective treatment); and a proactive light duty program (restoration to employment).” He explained that “[t]he investment in these ingredients results in higher employee satisfaction; lower frequency of injuries; lower costs per injury; and a quicker return-to-work rate.” Because of its focus on these key ingredients, and notwithstanding the physically demanding nature of the employees’ work, Daryl Flood has gone more than four years without an employee missing a day of work due to a work-related injury.

2. Nonsubscribers Provide Enhanced Access to Quality Medical Care.

The Texas workers’ compensation system can actually impede an employee’s access to quality medical care. Texas workers’ compensation laws cap the amounts that doctors can charge when treating injured workers receiving workers’ compensation benefits. As a result, many prominent doctors refuse to treat patients under the workers’ compensation system.

Nonsubscribing employers, on the other hand, have the freedom to negotiate fees with medical providers, and they take advantage of this opportunity to enlist the most highly regarded specialists in many fields. “We search for and use credentialed doctors and strive to use only board-certified specialists,” says Jim Dickinson, Kroger’s claim manager, who helped roll out Kroger’s nonsubscription program in 1992. “And since we are not bound by workers’ compensation protocols, we are able to help associates who are in pain by expediting the treatment and testing they need.”

3. Nonsubscribers Provide Enhanced Benefits.

The vast majority of the employees covered by occupational injury benefit plans receive benefits that are more generous than their workers’ compensation counterpart. For example, many nonsubscriber benefit plans provide wage-replacement benefits on the first day of missed work.

Employees whose injuries are processed through the Texas workers’ compensation system, on the other hand, do not begin receiving wage-replacement benefits until the eighth day away from the job. Additionally, nonsubscriber benefit plans typically pay 85% to 100% of lost wages with no weekly caps, whereas an injured worker employed by a subscriber to the Texas workers’ compensation system is only reimbursed 70% to 75% of lost wages, with caps based on the state’s average weekly wage.

United Supermarkets, for example, pays 90% of the injured employee’s wages beginning the first day of missed work, and it does not set a ceiling for the maximum amount of a weekly paycheck. In addition, most nonsubscribers allow their injured workers to make their usual deductions from their paychecks, such as deductions for group-health insurance premiums—an option not available under workers’ compensation.

See also: How Should Workers’ Compensation Evolve?  

Statistically, these differences are significant, because most claims involve minor injuries with little missed work. Workers who suffer minor injuries and are out of work between one day and one week under the state compensation system receive no lost wages, whereas workers employed by nonsubscribers with benefit plans typically start receiving lost-income benefits immediately. Professor Morantz wrote about this benefit to workers in her article: “Some ubiquitous features of private plans—such as first-day coverage of lost earnings and wage replacement rates that are not capped by the [state’s] average weekly wage—are more favorable to injured workers than workers’ compensation.”

4. Both Nonsubscribing Employers and Their Employees Are Satisfied With Their Treatment Following On-the-Job Injuries.

For these and other reasons, “injured workers employed by nonsubscribers are generally satisfied with their post-injury treatment.” Indeed, in 1997, the last time that TDI studied the satisfaction rates of nonsubscribers’ employees, the study “revealed that worker satisfaction with employer treatment, medical coverage and income benefits paid during recovery was relatively high.”

Nonsubscribing employers’ satisfaction levels are likewise high.  In TDI’s 2014 study on nosubscription, the department found higher satisfaction rates for nonsubscribers – 67% overall – than for subscribers – 61% overall.  Historically, researchers have found the gap to be logical: “Differences in satisfaction levels observed between subscribers and nonsubscribers are not surprising since employers who have made a conscious decision to opt out of the WC system may feel a stronger sense of ownership over their alternative occupational benefits program than subscribers do about the statutorily based WC system. Thus, higher overall satisfaction levels, as well as a greater degree of satisfaction with specific aspects of their programs, can be reasonably expected from firms that choose to opt out of the system.”

And while there will always be employees who are dissatisfied or mistreated under any system—whether employed by a subscriber or nonsubscriber to workers’ compensation—many employees sing the praises of nonsubscription. Paul Philley, for example, describes his favorable experience following a workplace injury at Kroger: “They got right on it, and the treatment was excellent,” he said in a telephone interview. Philley, a 36-year-old produce employee with Kroger, suffered a severe cut to his finger when a baler door slammed closed on it. In previous years, he suffered several hernias, which he also treated through Kroger’s nonsubscription plan. “I give Kroger 100 percent A’s,” he said. “They went by the book and took care of me each time.” He confirmed that he never had to pay a penny for his medical care out of his own pocket.

5. The Most Criticized Features of Nonsubscribers’ Plans Have Little Impact in Real Life.

Four of the features of nonsubscriber plans that are most criticized have very little impact on workers as a whole: non-coverage of permanent partial disabilities, capped benefits, lack of chiropractic care and categorical exclusion of some diseases and non-traumatic injuries. Professor Morantz’s study concluded “that even in combination, these four plan features account for relatively little of the cost savings.” As Morantz explained, “The impact of these plan features on total savings looks much smaller than I expected.” These headline-grabbing provisions affect only a very small percentage of injured workers.

6. Nonsubscription Is a Win/Win for Employers and Employees.

While many organizations and lobby groups representing workers’ compensation insurers and plaintiffs’ attorneys spout unsupported criticisms of nonsubscription, the only objectively researched and published data shows that nonsubscription works, both for employers and employees. The ability to opt-out was a key component of the Texas workers’ compensation system as it was initially crafted in 1913, and nonsubscribers’ treatment of their injured workers has only improved since then.

See also: Five Workers’ Compensation Myths  

Most employers—whether subscribers or not—genuinely care about their employees and want to treat them right. Nonsubscription is an alternative way for employers to provide for their employees, and a way to get them better care, faster, so they can return to work sooner. The truth is, nonsubscription works, and it’s a win/win for both employees and responsible nonsubscribing employers.

Fixing Illinois’ Outdated Workers’ Comp

The American workplace has changed dramatically since Illinois created its workers’ compensation system in 1911. But the workers’ compensation system, especially in Illinois, has not kept pace. Not only does the current system do a poor job of serving the majority of workers, especially parents and other workers who need flexibility to work hours outside the traditional workday and in off-site locations such as their own homes, but it also prioritizes the financial interests of groups such as lawyers and workers’ compensation doctors over the needs of both workers and employers.

The system needs to be reformed. Illinois policymakers should allow workers and employers to opt out of the state-run workers’ compensation system and to craft their own agreements around their particular circumstances – rather than forcing all workers and employers to adhere to rigid regulations that often no longer serve their purpose.

The early 20th century origins of workers’ compensation

At the turn of the 20th century, increasing numbers of Americans found themselves in new, hazardous working conditions in the jobs created by the Industrial Revolution. But few protections existed for workers who might be unable to support their families if they became injured at work. Workers’ compensation was designed to remedy that situation by providing medical care and income replacement to injured workers. The system, however, has not evolved to meet the needs of today’s workers and employers and is ill-suited to address the problems of the modern workplace.

Changes in the modern workplace

Far fewer people work in inherently risky jobs today. The industrial sector employed nearly a third of the workforce in 1900, but employed just 19% in 1999. And even today’s dangerous jobs have become less hazardous. Deaths per 100,000 workers fell more than 93% to just four by the end of the 20th century, down from 61 deaths per 100,000 workers at the start.

But workers also face new challenges. In the middle of the 20th century, just 30% of women were part of the workforce. That number has risen to nearly 60%. Increasing numbers of Americans must now balance work responsibilities with caring for a child or elderly relative: 82% of parents are in families where both parents work. Many employers have met those challenges by offering more flexible work environments such as telecommuting and flexible schedules. But workers’ compensation – a system supposed to protect workers – increasingly stands in the way of new work arrangements to meet workers’ needs.

See also: How Should Workers’ Compensation Evolve?  

Workers’ compensation was designed for an industrial workplace. Yet, it applies equally to a telecommuter working from home. A professor who slips on papers in his home office or an interior designer who trips on her dog can claim workers’ compensation.

That makes businesses less likely to give workers flexibility to work at home or, when employers do, to let workers set their own hours. A worker who answers email at night, after taking time to pick up children from school and prepare dinner, could still be considered in the workplace as though the distinction between work and home could be drawn as simply as when workers punched a time card. Employers have little control over possible costs if the employee is injured at home, and the broken workers’ compensation system gives employers an incentive to take away flexible working arrangements for fear of legal liability.

These problems are not unique to Illinois, but the Prairie State is unusual both in having one of the most costly workers’ compensation systems in America and in not having exemptions for small businesses or domestic workers. The absence of an exemption for domestic employees hurts increasing numbers of workers who must balance work with child or elder care. As with telecommuting, this can affect all workers, but it disproportionately affects women, who tend to spend more time caring for children. And, while not everyone can afford a live-in nanny, reducing impediments to hiring domestic help makes it easier for women to hold more senior positions.

Opting out of the state-run workers’ compensation system

While Illinois has one of the most restrictive workers’ compensation systems, Texas has one of the least restrictive, even allowing employers to opt out entirely. Critics of the Texas system allege this has led employers to cut services, but the evidence suggests employers prefer to save money by cutting areas prone to fraud, while often increasing benefits that employees value. Employers often provide better benefits than required for the same reason they offer flextime: to recruit the best employees at the lowest cost.

Special interests benefit from the current workers’ compensation system to the detriment of workers and employers

The government-imposed workers’ compensation system has also been far more susceptible to co-option by special interests. While workers and employers use the workers’ compensation system only when there is an injury, lawyers interact with workers’ compensation every day. As a result, although the workers’ compensation system is supposed to provide quick resolution to workers’ claims, the powerful lawyers’ lobby helped create a system that can stretch claims out over years. This costs businesses money and denies injured workers rapid settlement of their medical bills.

Medical providers, too, have benefited from a system that unnecessarily prolongs treatment and facilitates the overprescription of certain medications, including addictive opioids.

See also: The Pretzel Logic on Oklahoma Option  

Employers and workers both have an incentive to design a better system, but the false presumption that the government-run system is better prevents them from doing so. Interestingly, Texas employers who opted out of the state-run workers’ compensation system have all but eliminated opioid overprescription.

Fixing Illinois’ workers’ compensation system means government must step back and allow workers and employers to reach agreements that make sense in their specific situations – arrangements that suit the needs of workers and employers, rather than line the pockets of special interest groups benefiting financially from the current system.

The REAL Objection to Opt Out

I have never really understood why the Property Casualty Insurers Association of America has been so vehemently against opt out.

While it seems that opt out returned to the back burner for this year with constitutional defeats in Oklahoma and political stalemate in other states, PCI has reignited the debate with an inflammatory paper.

The basic arguments, which PCI supports with some data, is that opt out results in costs shifting to other systems and that a lack of standards and transparency is detrimental to consumers (i.e. injured workers).

PCI also argues that opt out is all about saving employers money to the detriment of consumers by denying more claims earlier and paying less with capitations and restrictions not found in traditional comp.

I get that alternative work injury systems must meet certain standards and need to be more transparent to consumers — to me, that’s a no-brainer.

But the objections that PCI raises are exactly the same complaints made against traditional workers’ comp: inadequate benefits, unnecessary delays, cost shifting, etc.

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

Each statistic cited by PCI against opt out can be asserted against traditional workers’ comp — just use another study or data source.

For instance, just a couple of years ago, Paul Leigh of University of California at Davis and lead author of the study, Workers’ Compensation Benefits and Shifting Costs for Occupational Injury and Illness, told WorkCompCentral, “We’re all paying higher Medicare and income taxes to help cover [the costs not paid by workers’ compensation].”

That study, published in the April 2012 edition of the Journal of Occupational and Environmental Medicine, found that almost 80% of workers’ compensation costs are being covered outside of workers’ compensation claims systems. That amounts to roughly $198 billion of the estimated $250 billion in annual costs for work-related injuries and illnesses in 2007. Just $51.7 billion, or 21%, of those costs were covered by workers’ compensation, the study said.

Of the $250 billion price tag for work-related injury costs, the Leigh study found $67.09 billion of that came from medical care costs, while $182.54 billion was related to lost productivity.

In terms of the medical costs, $29.86 billion was paid by workers’ compensation, $14.22 billion was picked up by other health insurance, $10.38 billion was covered by the injured workers and their families, $7.16 billion was picked up by Medicare and $5.47 billion was covered by Medicaid.

The study drew criticism from the workers’ comp crowd, which defended its practices, challenged the data and anecdotally attempted to counter argue, with limited success.

If one digs deep enough in the PCI study, I’m sure one could likewise find fault with the data and the reporting on cost shifting — because the truth is that absolutely no one has a fix on that topic.

My good friend Trey Gillespie, PCI assistant vice president of workers’ compensation, told WorkCompCentral that “the fundamental tenets of workers’ compensation [are] protecting injured workers and their families and protecting taxpayers. The general consensus is that the way programs should work is to protect injured workers and taxpayers and avoid cost-shifting.”

Of course! All work injury protection systems should do that.

But they don’t.

See also: What Schrodinger Says on Opt-Out

That’s what the ProPublica and Reveal series of critical articles about workers’ compensation programs across the country tell us, both anecdotally and statistically: Injured workers aren’t protected, costs are shifted onto other programs, and taxpayers are paying an unfair portion of what workers’ comp should be paying.

Indeed, in October, 10 federal lawmakers asked the U.S. Department of Labor for greater oversight of the state-run workers’ compensation system, to counteract “a pattern of detrimental changes to state workers’ compensation laws and the resulting cost shift to public programs.”

I started thinking about the one truism that governs human behavior nearly universally: Every person protects their own interests first. And I thought of PCI’s name: Property and Casualty Insurers Association of America. “Property and casualty.” Ay, there’s the rub!

There’s no room for P&C in opt out! ERISA-based opt out uses only health insurance and disability insurance.

Workers’ comp is the mainstay of the P&C industry, the single biggest commercial line and the gateway to a whole host of much more profitable lines.

If opt out spreads beyond Texas, it is hugely threatening to the interests of the PCI members because they stand to lose considerable business, particularly if opt out migrates to the bigger P&C states.

PCI is protecting its own interests (or those of its members) by objecting to opt out.

And I don’t blame them. Their impression of this threat is real.

Michael Duff, a professor of workers’ compensation law at the University of Wyoming, told WorkCompCentral, “These are interested observers. They’re going to have an agenda. They represent insurers who are in the workers’ comp business.”

Bingo.

“Every commercial actor that participates in traditional workers’ compensation has an interest in seeing traditional workers’ compensation continue,” Duff went on. “But that traditional workers’ compensation imposes costs on employers. There is now a group of employers who would like to pay less, and Bill Minick has developed a commercial product that is in competition with this other conceptual approach to handling things.”

Here’s THE fact: Traditional workers’ compensation and ANY alternative work injury protection plan require vendors pitching wares and services to make the systems work.

Insurance companies are as much a vendor in either scenario as physicians, bill review companies, utilization review companies, attorneys, vocational counselors, etc.

Each and every single one makes a buck off workers’ comp, and each and every one has an interest in maintaining the status quo.

See also: States of Confusion: Workers Comp Extraterritorial Issues

Arguing that one system is better than the other without admitting one’s own special interest is simply hypocrisy.

Workers’ compensation is going through some soul searching right now. Employers leading the debate are asking, “Why stay in a system that facilitates vendors’ interests ahead of employers or workers?”

THAT’s the question that BOTH the P&C industry and the opt out movement need to answer. Further debate about the merits of one over the other is simply sophistry.

This article first appeared at WorkCompCentral.

Texas Work Comp: Rising Above Critics

Recently, published articles have been critical of the Texas workers’ compensation system and the choice of an “Option” available to Texas employers. Such articles tend to be an accumulation of plaintiff attorney opinions and confusion of out-of-state persons who do not have sufficient working knowledge of the subject matter. This article will address two recent examples:

  1. “The Status of Workers’ Compensation in the United States — A Special Report” by the Workers’ Injury Law and Advocacy Group (“WILG”).[1]

This is a group of attorneys supposedly “dedicated to representing the interests of millions of workers and their families.”[2]  Their paper is at best a rant against the original “grand bargain,” which was struck to create each state’s statutory workers’ compensation system. It is without virtually any legal citations or other back-up. It does, however, illustrate the wisdom of the Texas system in offering a choice — (1) workers’ compensation insurance or (2) the “nonsubscriber” Option. For example, the article notes that many physicians will not take workers’ compensation patients, that 33 states have cut workers’ compensation benefits and that insurance companies continually clamor for reform by lobbying legislatures to cut medical costs or implement other cost savings — all of which the authors say makes it more difficult for the injured worker to recover.

See Also: Who Is to Blame on Oklahoma Option?

The article changes course when it suddenly says that an option to workers’ compensation is at fault, boldly declaring that “opt-out is bad for everyone” and claiming that intervention by the federal government is “immediately needed.” WILG criticizes the no-fault workers’ compensation insurance system and in the same breath castigates those who elect the Texas Option and thrust themselves into the tort system, which plaintiff attorneys have long claimed they love. This is particularly perplexing for Texas readers in view of two factors: (1) the need for plaintiff attorneys has been largely eliminated from the Texas workers’ compensation system,[3] and (2) the fact that the Texas Option gives the injured employee the right to sue for negligence and recover actual and punitive damages. [4]

Responsible employers that elect the Texas Option establish injury benefit plans for medical, lost wage and other benefits.   The benefits are subject to the Employee Retirement Income Security Act (ERISA), which provides numerous employee protections, including communication of rights and responsibilities, fiduciary requirements, and access to state and federal courts.[5] Only negligence liability claims against the employer can be forced into arbitration, which many employers insist upon as a more efficient method of dispute resolution that has been sanctioned for decades by both the U.S. Supreme Court and the Texas Supreme Court. Arbitration even supports awards for pain and suffering and punitive damages. In those cases, plaintiff attorneys have the advantage because an Option employer loses the defenses of contributory/comparative negligence, assumption of the risk or negligence of a fellow employee.

Perhaps the real reason why WILG is fighting Options to workers’ compensation is a combination of not wanting to learn how to succeed at ERISA litigation and fear that other workers’ compensation systems will become as efficient as the Texas system. Why aren’t these self-serving lawyers touting workers’ compensation Option that embraces the tort system they have so righteously pledged to protect?

  1. “Worse Than Prussian Chancellors: A State’s Authority to Opt-Out of the Quid Pro Quo” by Michael C. Duff, University of Wyoming College of Law, Jan. 9, 2016. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2713180

Professor Duff complains primarily about “compulsory arbitration” of workplace claims. He erroneously and boldly declares, “In states both retaining the exclusive remedy rule and allowing employers to opt-out of the workers’ compensation system, employees of opt-out employers are left with no legal remedy for workplace injury.[6]

This apparently refers to the Oklahoma Option, in which an employer can adopt an injury benefit plan with benefits at least equal to or greater than traditional system levels. Such a high benefit mandate may merit application of the “exclusive remedy rule,” which prevents an injured employee from suing their employer. However, Professor Duff overlooks the fact that ERISA provides injury claimants with extensive legal rights, including causes of action for wrongful denial of benefits, failure to produce documents, breach of fiduciary duty and discrimination (including retaliatory discharge). He also overlooks the fact that ERISA claims generally cannot be made subject to mandatory arbitration. [7] So, is this really a matter of having “no legal remedy” or a case of Professor Duff (who is also a WILG member) trying to support the positions and business of his plaintiff attorney friends?

See Also: Strategic Implications of the Oklahoma Option

Professor Duff makes it clear in the rest of his long article that the real enemy is an employer’s ability to implement a employment dispute resolution system that includes arbitration. Professor Duff omits the fact that he is bucking almost the entire U.S. judicial system, which endorses arbitration. For example, the U.S. Supreme Court clearly maintains that arbitration is right, proper and allowed.[8] “By agreeing to arbitrate a statutory claim, a party does not forego the substantive rights afforded by the statute, it merely results in submitting the resolution of the claim in “an arbitral, rather than judicial, forum.”[9] The Texas Supreme Court has been even more clear by stating that “. . . an agreement to arbitrate is a waiver of neither a cause of action nor the rights provided under [The Texas Labor Code]” and is not the denial of a right but rather simply “an agreement that those claims should be tried in a specific forum.”[10]

Oddly, when discussing his arguments against arbitration, Professor Duff states emphatically that it might be “acceptable if employees have knowingly signed pre-injury waivers of workers’ compensation benefits.” [11] What Professor Duff apparently does not understand is that pre-injury waivers of negligence claims have long ago been essentially outlawed in Texas, and an injured employee under the Texas Option retains his rights to sue the company for negligence. [12] The Texas Labor Code also specifies strict conditions under which an employee is allowed to even settle such a tort claim — i.e., only after at least 10 days have passed following the employee’s receipt of a medical evaluation from a non-emergency care doctor, the agreement is in writing with the “true intent of the parties as specifically stated in the document” and the provisions are “conspicuous and appear on the face of the agreement.”[13]

Like the WILG report, Professor Duff confuses benefit and liability exposures in Texas and Oklahoma, overlooks available legal remedies in both states and refuses to accept well-established public policy and judicial precedent that favors arbitration of employment-related claims.

Conclusion

The publication titled, “Non-Subscription: The Texas Advantage,” [14] states that, “Fortunately . . . legislators who drafted the first workers’ compensation laws in 1913 were farsighted enough to provide an option.” Employers that elect the Texas Option to workers’ compensation are subjected to an extra measure of liability as they cut out the middleman and decrease the taxpayer expense of the governmentally prescribed workers’ compensation system. Those Option employers that are operating legally and responsibly should be credited with advancements, such as improving worker access to better medical care, offering modified duty job availability and oftentimes providing better wage replacement benefits.

At the end of the day, perhaps WILG and Professor Duff should make an investment of their time to learn how ERISA protects injured workers and how to litigate an ERISA dispute. These authors should also further consider the ample remedies under Texas law for employer negligence liability, an exposure that provides more incentive to maintain a safe workplace.

No doubt, pursuing such claims does require some effort. Perhaps, therefore, the real objectives of these two papers is a desire to maintain the profitability of legal work favoring injured workers and reducing the attorney effort.

[1]https://s3.amazonaws.com/membercentralcdn/sitedocuments/wp/wp/0245/745245.pdf?AWSAccessKeyId=0D2JQDSRJ497X9B2QRR2&Expires=1458161961&Signature=7rYh45nzAcLAZ%2BYqPx1HilrodQ4%3D&response-

content‑disposition=inline%3B%20filename
%3D%22WILG%20Grand%20Bargain%20
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filename%2A%3DUTF%2D8%27%27WILG%2520
Grand%2520Bargain%2520Report%25201%252D16%252Epdf

[2] www.wilg.org

[3] St. Mary’s Law Journal 2000, “Texas Workers’ Compensation: At Ten Year Survey – Strengths, Weaknesses and Recommendations,” Phil Hardburger, Chief Justice, Court of Appeals, Fourth District of Texas, San Antonio, page 3, 41, citing to research an oversight counsel on workers’ comp, an examination of strengths and weaknesses of the Texas Workers’ Compensation System (August, 1998).

[4] Tex. Lab. Code § 406.033 and Carlson’s Texas Employment Laws Annotated, 2015 Edition.

[5] 29 USC Chapter 18, Subtitle B, Parts 1, 4 and 5.

[6] Page 3 of Professor Duff’s treatise.

[7] 29 C.F.R. 2560.503-1(c)(4); see also Professor Duff’s footnote 26, stating “in Texas and Oklahoma, employers are able to combine opt-out with arbitration.”

[8] Scherk v. Alberto-Culver Company, 417 U.S. 506, 519, 94 S. Ct. 2449, 41 L. Ed. 2nd 270 (1974) (holding that arbitration clauses are, “in effect, a specialized kind of forum-selection clause.”)

[9] Id. at 631 quoting Mitsubishi Motors Corp v. Solar Chrysler-Plymouth, Inc., 473 U.S. 614, 628, 105 S. Ct. 3346, 87 L. Ed. 2d 444 (1985).

[10] In re Golden Peanut Company, LLC, 298 S.W.3d, 629 (Tex. 2009).

[11] Professor Duff at page 2.

[12] Tex. Lab. Code see 406.033(e) and (f) (a legal cause of action by an employee who claims to be injured on the job “may not be waived by an employee before the employee’s injury or death”); Tex. Lab. Code 406.033(a).

[13] Tex. Lab. Code 406.033(f) and (g).

[14] Published by the Texas Association of Business.

Texas Is NOT an Opt-Out State

There were two sessions on “Opt Out” at the 32nd WCRI Annual Issues & Research Conference, but a single, critical point was generally omitted by all six speakers across both sessions; an omission that could cause confusion for those not well-versed in the vernacular of alternative workers’ compensation systems.

Texas is not an Opt Out state. It never has been. No one may “opt out” in Texas. Period.

Instead, Texas is, and always has been, an “Opt In” state. Workers’ compensation coverage is not required of employers there. They can choose to buy insurance, or not. They can choose to set up alternative plans, or not. Either way, they can “opt” for some sort of coverage or go completely bare; they don’t have to have a policy, a plan or a prayer.

Those that do not acquire coverage or self-insure under state auspices are called “non-subscribers,” on the surface, the distinction about Opt Out vs. Opt In may seem like a shallow and insignificant point. But the differences in the Texas and Oklahoma systems run deep, and the speakers should have pointed that out.

Instead, I believe some intentionally conflate the two for the benefit of their arguments.

Most notably, for employers in Texas who choose not to opt in for workers’ compensation coverage, open liability prominently remains. They can be sued for negligence. They can be found responsible for pain and suffering. They are wide open to all of the foibles and pitfalls generally absent for those who choose to participate in the grand bargain and the exclusive remedy it provides.

By comparison, employers in Oklahoma have managed to develop a system that gives them unparalleled secrecy and control while maintaining the benefits of exclusive remedy. They have liability protections that Texas employers can only dream about.

Common sense would tell us that any alternative plans in Texas are probably better than those found to their north in Oklahoma. The looming reality of open liability means that employers actually have to be responsible if they wish to avoid litigious challenges and expensive jury verdicts. Yet people continually speak of “Opt Out” as if it was one common theme in both states. Our session speakers are not the only ones to do that. Recent articles in ProPublica and NPR also failed to adequately define the difference between the two.

See Also: The Bizarre Decision on Oklahoma Option

Bill Minick, a Dallas attorney whose firm has written most of the Oklahoma Option plans, mentioned the more than “20 years of history” when talking about the “proven” success of Opt Out. He did not really mention that the 20 years he repeatedly referred to was all based in Texas. Oklahoma has only offered the Option for two years, and only 60 of the state’s 70,000 employers have gone that route. Similarly, presenter Elizabeth Bailey of Waffle House, spoke only of their experience in Texas as a non-subscriber. To her credit, she was the only speaker to deliver hard statistics about the experience in that area, but she made no mention of the Oklahoma Option except to note that they had elected not to Opt Out in Oklahoma. She did not say why.

And I really would’ve liked to know.

Really, none of the speakers made an effort to define the difference between these two systems. To the uninitiated, it would seem they are the same thing. They are not. Oklahoma-style Opt Out is what is being proposed in at least two other states, not Texas-style non-subscription. Future sessions on the subject should clarify that point, focus on actual Opt Out and call out presenters if they dilute or confuse the facts.

Additionally, only one speaker, Trey Gillespie of Property Casualty Insurers Association of America, really mentioned that the Oklahoma Option has been ruled unconstitutional in that state. From an overall panel perspective, that fact was almost a non-event, like it never even happened. But more on that later…

See Also: Five Workers’ Compensation Myths

The point is, the Texas non-subscriber system has been around for a long time. The Oklahoma Option, by Minick’s own admission, is an “experiment” (one commenter at the conference pointed out that Frankenstein’s monster was also an experiment). We should not confuse the two. Oklahoma Opt Out, along with proposed similar plans in Tennessee and South Carolina, are unique creatures that deserve to be fully judged on their own scant merits and significant flaws. We should stop providing them cover by supporting them with the alleged achievements of a dissimilar system.

After all, Texas has never been an Opt Out state, and we should stop talking about it like it is.