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Workers’ comp opt-outs face legal challenge

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in Compensation and Benefits,Human Resources

Two states, Oklahoma and Texas, let employers opt-out of the traditional workers’ compensation system if they establish credible, alternative arrangements. However, the Oklahoma Workers Compensation Commission (OWCC) last month ruled that such workers’ comp alternatives are unconstitutional.

The decision is shining a spotlight on workers’ comp issues, even as opt-out proponents gear up to file an appeal.

Oklahoma and Texas are unique. Employers in those states can choose to self-fund an alternative to traditional workers compensation insurance. The appeal for employers is more control over claims, benefits and health management, which generally results in lower overall costs.

The chief architect of the opt-out plans in Oklahoma and Texas, Dallas attorney Bill Minick, claims the plans have saved employers more than $1 billion since they were introduced a decade ago.

In its decision, the OWCC argued those savings came illegally at the expense of injured workers.

The decision echoed a recent investigation of alternative plans by National Public Radio and the ProPublica journalism nonprofit, which found that opt-out plans stack the workers’ comp deck against injured workers: They often provide fewer benefits, make it easier for employers to deny benefits, give employers control over medical assessment and treatment, leave appeals in the hands of employers and force workers to accept lump-sum settlements.

The OWCC decision called the plans a “mirage on the highway that disappears upon closer inspection.”

The NPR/ProPublica report has prompted congressional Democrats to call on the U.S. Department of Labor to launch its own investigation into whether the plans violate the Employee Retirement Income Security Act (ERISA), which governs most employee benefits. ERISA’s Section 510 bars employers from interfering with employees’ attainment of benefits.

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Kay Goggin March 18, 2016 at 7:19 pm

Your article contains serious errors: Texas is not an opt out state, rather an opt in state. If an employer chooses not to subscribe to comp, they can be sued for negligence and they lose legal defenses. Texas has never In the 100-plus years with workers compensation laws ever provided that an employer offering its own injury plan is exempt from the law. You are either a subscriber or not. The occupational plans are, and never will be, a substitute for workers comp. at most, a negligent non-subscriber in Texas may get credit for payments made under their injury plan.

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