Claims management and financing options around workers compensation insurance are evolving. While, for over 100 years now, handling employee injury claims in Texas has been possible (and even common) outside the state's workers compensation statute (if an employer is a qualified nonsubscriber), a variation of this "option" has emerged in Oklahoma (effective February 2014) and is currently being pursued in Tennessee. The development of these alternative approaches to claim management and financing encompass the mission and objectives of the newly minted Association for Responsible Alternatives to Workers' Compensation (ARAWC) organization.
ARAWC was established in early 2014 by a collaborative group
of employers and their provider partners and quickly put key
people in place to pursue option legislation in selected
states, Tennessee being the first. These efforts are deployed on
behalf of US employers to deliver workers compensation options
in states where significant opportunities for enhancing employee
injury claim systems exist.
Opting Out
Workers compensation is dictated by separate statutes in
every state. Only Texas and Oklahoma offer the freedom to "opt
out" of the statute, though municipal employees in Tennessee
also currently have this option. In each case, the way the
option system functions is distinct. In Texas, opting out is
known as "nonsubscription" and has been in existence for more
than 100 years. Most participant employers have achieved better
outcomes and dramatic cost savings for many claims. Over time,
nonsubscribers also often experience significant reductions in
frequency and length of disability. These and other outcomes are
what employers work hard to achieve within a traditional workers
compensation system, but their efforts are often impeded by
statutory requirements that can bring bureaucracy and
controversy to what should otherwise be easily resolvable
claims.
In 2013, the state of Oklahoma enacted new workers
compensation legislation in SB 1062 (effective February 2014),
which allows any employer to exit, or opt out of, the state's
statutory system and offers employers the opportunity to manage
employee injury claims in a way that is more consistent with its
culture and priorities. While not exactly like "nonsubscription"
in Texas, this new alternative for responding to and financing
injury expenses and related benefits is a significant move
forward for Oklahoma employers.
State-Specific Opportunities
In this free market alternative to statutory workers
compensation insurance, the key focus is ensuring injured
employees are treated respectfully and compensated fairly in the
aftermath of an on-the-job injury. Just as there are significant
differences between what Oklahoma has done and what has been in
place in Texas for years, there are state-specific opportunities
to improve the claims management and financing processes in many
other states. And while this does not radically change the
fundamentals or best practices of claims handling, it does
improve the chances that they can be successfully implemented
and executed.
Where Oklahoma's SB 1062 offers employers that choose to opt
out of the statutory system the opportunity to substantially
reduce work-injury costs (50 percent cost reductions are common
in Texas) and avoid the system's extensive rules and
regulations, ARAWC leaders are establishing similar goals for
other states for the benefit of employers and employees. Two key
statistics reflect a clear basis for why Oklahoma changed and
improved its approach to employee injuries, even in the midst of
simultaneous reform of its statute. These include:
Currently, all but these two states effectively mandate
workers compensation insurance or self-insurance (though still
subject to statutory rules) as the sole options for employers to
manage employee injuries. Option strategies expand the delivery
of better medical outcomes to injured employees by expanding
employer choices in other states.
Experience under an alternative employee injury benefit
platform has proven to achieve higher employee satisfaction and
enhanced state economic development opportunities. Over the past
2 decades, Texas nonsubscribers have achieved better medical
outcomes for hundreds of thousands of injured employees and
saved billions of dollars on occupational injury costs. While
moves in other states are not necessarily mirroring the Texas or
Oklahoma models, they are leveraging the 100-plus years of
experience in Texas and what is emerging from Oklahoma's new
option alternative to drive a strategy for process improvements
and lower costs in employee injury systems where impactful
changes are often long overdue.
Core Benefits
The key core benefits that are expected from having an
opt-out alternative in other states include but won't
necessarily be limited to:
Providing employers more choice in how they handle and
finance injuries can positively impact employees, employers, and
other stakeholders. Experience shows that competition with
traditional workers compensation insurance has reduced premium
rates and improved claims management services. Enabling choice
in program design and claim processes increases employer
participation in employee recoveries and allows employers to
hold all service providers more accountable for results and
outcomes.
Other Benefits
In the absence of statutory mandates, responsible employers
create high-quality benefit plans for occupational injuries,
enabling improved access to better medical talent, leading to
higher employee satisfaction and better medical outcomes. Option
proponents aspire to refocus state-based mandates in response to
growing gaps in quality medical care, efficient risk financing,
effective return to work, and other gaps in many current
systems. Some of the other expected benefits include:
- improved workplace safety and training
supporting injury prevention;
- expanded access to more quality medical
providers offering exceptional care;
- opportunity for expanded benefits through
custom-designed plans;
- opportunity for reduced waiting periods for
wage replacement with greater benefits;
- more expedient medical treatment and more
immediate referral to specialized medical care
to enhance recovery;
- early identification of potentially
complicated medical conditions and securing
appropriate medical treatment to aid recovery;
and
- improved communications with injured
employees to address benefit questions, assist
with early return to work, and more fully engage
employees in their recovery.
States ripe for improvement in many of these areas around
employee injury handling are under review by option proponents,
and socialization of this approach is being pursued in several
other states. On February 12, 2015, a bill was introduced in the
Tennessee legislature by Senator Mark Green that will bring a
version of the option to Tennessee employers soon if passed by
the legislature and signed by the governor. If achieved in 2015,
the speed of change will have accelerated dramatically because
it took approximately 3 to 4 years to move similar legislation
in Oklahoma.
One key argument for the change in Tennessee is that the
current average cost of workers compensation insurance is $1.30
per $1,000 of payroll compared to the $0.60 rate achieved over
time by the Texas nonsubscription program—a major attraction to
many existing and prospective employers in the state.
Several other states are continuing to be vetted for
prioritized change efforts. The process for change includes
drafting state-specific legislation, securing a highly respected
bill sponsor, gaining the endorsement and support of major
employer players in targeted states, and beginning the formal
process of socializing and educating key stakeholders
instrumental to passing new legislation in the targeted states.
Conclusion
Change of this type and magnitude is not easy. It upsets many
apple carts and shifts the paradigms of many entrenched
interests. However, current proponents for change have a
thoroughly developed strategy for driving legislative change
allowing for an option to statutory workers compensation one or
two states at a time. While this change is a priority for an
increasing number of employers, the nature of this beast is such
that it will take some time to achieve. Many states will clearly
benefit from giving employers a choice, and that choice can
drive the type of results seen in Texas and hoped for in
Oklahoma. If you want to learn more and get involved, please
visit
www.arawc.com.