The workers’ comp option

Workers’ compensation can be a costly expenditure.

But what if an option existed that has the potential to lower costs, get employees back on the job sooner and still provide the same benefits to injured workers?

Perhaps it does. One system, known as “the Option,” “opt-out” and the “opt-out option,” allows employers to pursue workers’ comp coverage outside the traditional state-mandated insurance provider system.

“What we found is that employers that pursue options to workers’ compensation are more focused on providing a safe work environment, more actively communicating pre- and post-injury with their injured workers, and recognize that if we keep the injured worker first, and think simply and logically on how to achieve the best medical outcome, everybody wins,” said Bill Minick, president at PartnerSource, a Dallas-based consulting firm supporting alternatives for workers’ comp.

Individual states run their own workers’ comp systems, and, when Safety+Health went to press, only Texas and Oklahoma offered opt-out alternatives to employers. However, lawmakers in Tennessee and South Carolina are pursuing opt-out abilities, and some stakeholders consider the Option a major player in workers’ comp systems of the future.

Proponents such as Minick believe opt-out options offer employers more choices and more control over post-injury processes, creating an opportunity to save money.

However, critics claim that the money employers save comes from stacking the deck against injured workers.

The Option

In many cases, when employers pursue the opt-out option, they set up their own internal, private work injury benefit program, according to Peter Rousmaniere, a workers’ comp consultant based in Vermont.

In Texas, which has had a workers’ comp alternative for decades, employers face few requirements under the law. If employers choose not to use traditional workers’ comp insurance, they are not protected by an “exclusive remedy” provision, which bars injured workers from suing their employer. So if Texas employers decide against opting into the workers’ comp system, they open themselves up to tort claims.

Oklahoma is a bit different. In its 2013 law providing employers with an alternative option, the exclusive remedy is kept in place and injured workers cannot sue an employer who opts out. However, employers in the Sooner State must provide benefits at the same level as traditional workers’ comp.

Although the specifics of opt-out legislation vary by state, some overlap exists. Generally, for injured workers to continue to receive benefits under employer-controlled plans, they must report their injury in a timely manner (within 24 hours) and complete the treatment plan outlined by medical providers selected by their employer.

“This is not a process about reducing benefits for injured workers,” Minick said. “We don’t have to reduce benefits to injured workers, and we don’t have to squeeze medical providers for the lowest possible reimbursement rate to reduce costs. If we focus on employee accountability, communication and better medical management, then we can afford to provide better employee benefits.”

Research

Minick said the Option is a tried process. He cited four examples, including three white papers (all referenced in a PartnerSource analysis) that demonstrate the Texas Option provides faster return to work and leads to fewer disputes, and said this points to employee satisfaction with the opt-out system.

However, other stakeholders suggest these assertions lack evidence.

“What do we really know about what’s going on in these closed systems? I haven’t seen a thing other than an employer’s claims,” said Emily Spieler, a professor specializing in workers’ compensation at Northeastern University School of Law in Boston. “The notion that this is all working great because [employers say] it’s working great ... is simply not good enough from a social and legislative standpoint.”

Bob Burke is an Oklahoma City-based workers’ comp attorney. Burke said that in Oklahoma, employers don’t have to report to the state claims filed or claims paid out. The lack of reporting requirements means employers have no accountability, he claims.

Rousmaniere, who authored one of the white papers cited by Minick, said some questions about opting out must be answered. Speaking specifically about Texas, Rousmaniere noted that the state has not evaluated the performance of its system. He also claims that supporters of opt-out plans have been actively keeping Texas regulators from getting more involved. “The opt-out community has resisted any kind of intervention by the state,” Rousmaniere said. “This raises in my own mind serious doubts about whether any state contemplating opt-out can rely on information provided by the opt-out advocates from Texas.”

Spieler also questioned the effectiveness of return-to-work interventions under the Option. Although she is a strong proponent of return-to-work, Spieler believes that simply looking at how many workers return to the job after an injury is not sufficient. One has to consider whether the worker was able to stay on the job after returning, she said.

More research on both opt-out plans and traditional workers’ comp should be done as part of an effort to improve alternative systems, Minick said.

Fundamental concerns

An alleged lack of research into the Option isn’t the only concern for some stakeholders. Burke has filed a lawsuit that claims Oklahoma’s opt-out law is unconstitutional because of its appeals process.

Under a traditional workers’ comp system, if an injured worker is denied benefits, he or she can appeal to the state, which may have either a review board or a judge to oversee the case and render an impartial judgment. Opt-out plans have an internal appeals process in which the employer selects who sits on a committee to review and decide the worker’s appeal. Additionally, Burke alleges that Oklahoma employers who have chosen to opt out are not keeping benefits at the level expected under traditional workers’ comp.

Beyond benefits and appeals, stakeholders also question fundamental aspects of option plans, including the requirements for workers to report injuries within one day and not being allowed to choose their own doctor.

“Even assuming the benefits are the same, if the access to the benefits are different, then I don’t see it as an equivalent plan,” Spieler said.

She used the example of an employee who has periodic back pain and pulls a muscle while at work. Instead of reporting it, the worker may assume the pain will go away in a day or two. In some cases, that may happen. But in others, instead of getting better, the pain from the injury worsens. If that happens in an opt-out plan, the employee is out of luck for receiving workers’ comp-covered care because the 24-hour window has passed.

Workers also may hesitate to report injuries in a timely manner out of fear their employer will retaliate against them, Spieler added. “The more you hand over systems to employer control, the more you have the potential for workers to feel [they] shouldn’t come forward,” she said.

Workers should not have years to report an injury, Burke said, but 30 days, which is a standard in place under many traditional workers’ comp plans and which he said works well.

However, according to Minick, allowing employees as long as one month to file their claim and giving them the option of choosing their own medical provider limits their accountability and delays care.

“That is a prescription for worse medical outcomes and higher costs,” he said.

Higher costs are driven by claims that are more severe in the nature of the injury, not reported in a timely manner and not effectively managed, Minick said. Instead, by requiring injuries to be reported within 24 hours and having care directed by employers simplifies the process and, Minick claims, results in better medical outcomes.

The better medical outcomes arise from a couple of different areas, he said. First, employers and insurance providers are more likely than the average employee to know what type of care or which doctor yields the best results.

“Why would one expect an employee to have a better sense of quality than an insurer?” Rousmaniere asked. “The vast majority of American workers have no experience with specialists and no way of judging which specialist is better.”

Second, opt-out programs hold employees accountable. Injured workers must follow treatment plans and return to work upon medical release or else they lose their benefits. According to Rousmaniere, this can help ensure faster treatment and recovery.

Burke acknowledged that many employers may have their workers’ best interests in mind and will direct the injured individual to a quality medical provider. However, he said unscrupulous employers may instead direct the employee to a doctor who may hesitate to refer the injured worker to a specialist. Because the injured worker doesn’t have a say, the system doesn’t have any type of checks or balances, Burke said.

An optional future?

Because of the apparent success of the opt-out option in both Texas and Oklahoma, most sources who spoke with Safety+Health believe the Option will spread throughout the country. As many as a dozen states could have a workers’ comp alternative within the next decade, Minick hypothesized.

Rousmaniere went even further, envisioning a time in the near future in which workers’ comp is no longer an isolated system and instead becomes part of an employee’s overall “absence benefits,” such as paid leave.

If the opt-out option similar to the Oklahoma model is adopted by more states, Spieler said a backlash could occur if too many injured workers don’t receive benefits. The opt-out option could be challenging to implement in some areas of the country, she added, as certain state constitutions guarantee some type of remedy for an injury.

A future can and should exist for the Option, Burke said, provided workers are protected and every case receives adequate appellate review by the state.

“Bottom line is I will never be happy with opt-out until it provides the same level of benefits to an injured worker as someone who goes down to the insurance agency and buys a policy,” Burke said. “I think we should all live by the same rules.”