My Thoughts on the Oklahoma Opt Out Debacle

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Toms Opt Out Debacle Article for Sept 2016

The Supreme Court of Oklahoma recently ruled that the Oklahoma Employee Injury Benefit Act i.e. “Opt Out” was unconstitutional. For 54 employers, including Dillard’s, Big Lots, Res-Care, Inc., Cabela’s Wholesale Inc. and Brookhaven Hospital, this means they will have to scrap benefit plans that no doubt took hundreds of hours to put in place. For these and scores of other employers, as well as the Oklahoma legislature, this whole process has been a debacle.

Joe Paduda, in his Managed Care Matters blog, said that Opt Out was “unneeded, unnecessary, and ill-conceived.” According to Paduda, here’s why: Workers’ comp, quite simply, is not broken. Does it need improvement? “Heck yes.” But overall, the system works for the vast majority of employers and injured workers. Also, because we have a tight labor market (we are at near full employment) workers’ comp payrolls are surging, workers’ comp insurance premiums falling, and workers are getting back to work faster likely because they are motivated to make 100% of their salary or hourly rate.

But after reading the Oklahoma Supreme Court’s opinion, one area stood out more than any other. Chief Justice Colbert, along with Justice Gurich, issued their own 26-page concurring opinion. In the opinion, they explain the benefit differences between the Oklahoma Workers’ Comp Act (called the AWCA) and Dillards’ employee plan pursuant to Opt Out. What follows is their summary of the benefit differences.

Under the AWCA, an employee must report an injury to his or her employer within 30 days. Otherwise, the claim may be denied. Medical and indemnity claims related to compensation are heard by an administrative law judge (ALJ) who also has the power to hear any interested party on its own motion. The ALJ hears evidence and establishes whether a party has met the burden of proof by preponderance of the evidence. An injured worker may appeal the decision of an ALJ to the Commission. After a hearing, the Commission may reverse or modify the decision if it was against the clear weight of the evidence or if there was an error of law (e.g.,f applying the wrong regulation to a particular benefit). While the employer and employee may settle the case at any time, they must file a joint petition for settlement with the ALJ or Commission, which will then review the petition and possibly approve it and enter it into the record.

In stark contrast, an injured worker proceeding by way of the Dillard’s “Opt Out” plan must report an injury by the end of his or her work day. Can it be the day after? Nope. All claims are initially decided by a company-designated claims administrator. No hearing of any kind is held by the claims administrator. An injured employee may appeal an adverse benefit determination by the claims administrator to an appeals committee. But the appeals committee is made up of individuals selected by the company. In addition, the appeals committee does not hold a hearing. The injured worker may appeal an appeals committee adverse benefit determination to an ALJ at the Oklahoma Workers’ Comp Commission. But the ALJ, in that instance, can only look to “the record” established by the appeals committee. Lastly, the employer can put language in the settlement agreement that says the injured worker gives up rights in any injury claims he may not even be aware of at the time of settlement.

As I read their summary of the benefit differences I could just picture Justice Tom Colbert getting hot under the collar, steam coming out his ears in anger, as he compared the benefits. To me, these two concurring justices simply did not like how Dillard’s got to pick and choose the benefit levels. I believe they simply didn’t think what Dillard’s created was fair to employees. And I don’t think they are alone. Lead plaintiff attorney Bob Burke called the ruling a “great day” for the people of Oklahoma as he said the Opt Out act was “the biggest attack on the American worker in my 36 years of representing injured workers.” There are others in the insurance industry, including insurance carriers and other AWCA system participants, that feel the same way.

So is this the end of Opt Out as we know it? Is Opt Out completely dead, or is it, to quote “The Princess Bride,” just “mostly dead?”

For Oklahoma it depends on the legislature. If the 2017 Legislature believes that companies can run their own workers’ comp benefit delivery systems in a more cost efficient manner than what is seen in the AWCA, then they will probably give Opt Out another shot. But they must be careful. They must craft the statute in such a way that the benefits to the injured worker seem fair. They must be basically the same, or slightly more generous, under an Opt Out plan. The summary in the instant case comparing the AWCA to the Dillard’s Opt Out plan was not an example of this. Furthermore, I believe that while a company-designated claims administrator can make the initial decision, an appeal pipeline must end at the AWCA with an ALJ having access to full hearing notes. An ALJ stuck with a bad record is not something that will work.

While Opt Out has certainly lost this round, the fight will go on. And who knows, maybe Oklahoma will one day come up with a system that will be the envy of other states.

Tom Swiatek

Tom Swiatek

As Assistant Vice President of Regulatory Services, General Counsel, and Editor in Chief of UR Nation, Tom Swiatek draws on his experience as an insurance attorney on both the general liability side, as well as on workers’ compensation matters. As a California Workers’ Compensation Section Member, Tom is leading the discussion with respect to the regulatory challenges and opportunities facing the workers’ compensation system.