Why are States considering opting-out from workers’ compensation

For many years, Texas was the only state that allowed employers to opt out of the workers compensation system. Opting out from the workers compensation system, strips a state’s employers of the exclusive remedy protection of the workers compensation law, as well as certain common law defenses to worker injury claims.

Recently, other states have looked at the business climate in Texas and considered the merits of an opt-out system. Last year, Oklahoma began allowing employers to opt out of the state’s workers compensation law on the condition that they provide comparable benefits to injured workers under an alternative plan. While challenges to the law were expected, so far none have been successful in striking down the right of the employer to opt out. Last month, the Oklahoma Supreme Court declined to hear a case in which two injured workers were seeking to have the law declared unconstitutional.

Bills have been introduced in Tennessee and South Carolina that would allow employers in these states to opt out of the workers compensation system and create their own occupational injury benefit plan. As in Oklahoma, employers in these states would have to obtain approval from the appropriate state department by showing they are financially capable of supporting the plan and that all required benefits are being provided. With legislatures in recess, both bills — the Tennessee Employee Injury Benefit Alternative (Senate Bill 721) and the South Carolina Employee Injury Benefit Plan Alternative (H. 4197) are on hold until 2016. Even so, the opt-out movement appears to be gaining steam.

Published by IRMI  ISSN: 1949-419X

Compcheck Commentary: ¬† IRMI with this published article has made a very good and very important point. We are not here to “politicize” but we are here to earn a living by servicing our clients the best way we know how. First, there is no question that health care costs have skyrocketed. Second, there is no question that the costs of workers compensation insurance have skyrocketed also. The second is a direct consequence and a product of the first. In a previous news article we posted, published by Reuters on June 11, titled “Many US hospitals mark up prices 1000 percent”, Reuters makes it abundantly clear, that workers compensation medical costs are not as highly regulated as Medicare costs are, and therefore “…employers who pay into workers compensation…pay full freight…that results in higher premiums…”.

State Legislatures are starting to become aware of the disparity between “standard care” and “high costs”, especially as it affects local business. We all agree there is a definite link between domiciling business in a State and the actual operating cost of that business. If an owner has to choose between keeping the business healthy or driving it into the ground simply by operation of law, there will be no choice. Either the business will go bankrupt and local consumers will loose their jobs, or the business will re-domicile in another State, in which case, local consumers will still loose their jobs. Either way, the local economy and people will be affected.

We know we may be painting a simple picture of what is purported to be a complicated problem. Well, that may be true, but the fact is, the business owner has another option. Get involved in an attempt to control insurance premiums, which every one knows, are a big percentage of the overall operating expenses. The insurance industry and its machinations, is not being taught in the business schools or simply learned by reading. If a business owner finds the “right person” in an insurance broker and the “right” relationship is established, that business owner has accomplished one of the most important tasks in keeping their business alive and healthy.

With over 95 years of experience under our belt, Compcheck Corp has been in the forefront of successfully assisting insurance brokers and their clients, in drastically reducing insurance premium costs, especially in the workers compensation arena. These reductions can have a retroactive effect in reducing the applicable mod rates which insurance companies use to calculate workers compensation premiums. There are two (2) options: One is not to have any workers compensation claims, and two, is to mitigate the claims you have or the ones you will have. Obviously, option one is not a natural or a logical option; they call them “accidents”, in simple language and for a reason; they are after all, by definition, unexpected. These claims will always be there with a certain frequency and or severity. The other option, the one involving mitigation or reduction of claims costs, is what Compcheck Corp does. It reduces and or mitigates the frequency and or severity of these claims and thereby reduces the cost of workers compensation insurance.

There is one thing for certain; regardless of what State Legislatures do in the future to assist businesses in reducing their workers compensation insurance premium costs, the need for claims frequency and or severity mitigation, will always be there. That’s why you need Compcheck Corp.

Mike Turano, the founder of Compcheck, was a pioneer in identifying the universal need for workers’ compensation successful claims auditing, management and rate reduction with the associated subsequent overall insurance premium cost reduction.
Tony Damoulis has made the international world of the insurance and re-insurance industry his home since 1972. Tony’s professional experience includes declaratory judgements, medical malpractice, other professional liability claims and the standard primary and surplus secondary insurance markets, along with reinsurance and alternative risk funding.