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National Implications of Opt Out in Workers’ Compensation
In recent years, opt out alternatives to workers’ compensation have become increasingly popular systems for handling work-related injuries. Under an opt out program, employers are allowed to create their own system for taking care of employees that are injured on the job. To date, only Texas and Oklahoma allow employers to participate, but the list of interested states is continuing to grow. Despite the growing popularity, many are concerned that opt out programs will change the landscape of workers’ compensation for the worse and will incur unexpected costs both inside and outside the states that permit them.
In this episode of Workers Comp Matters, host Alan Pierce interviews attorney, author, and historian Bob Burke about the implications of opt out programs. Together, they discuss the effects on workers, taxpayers, and even the court system as these new systems are put into place. Stay tuned, as both Alan and Bob reveal the primary movers for opt out as well as predictions for future public acceptance.
Bob Burke is an attorney, author, and historian with over 30 years of experience practicing law in workers’ compensation matters. He is the former secretary of commerce and principal adviser on workers’ compensation during the administration of then-Oklahoma Governor David Boren. In 2011, he re-wrote the entire worker’s compensation law (Title 85) in Oklahoma as part of current Oklahoma Governor Mary Fallin’s reform. Burke has also been a speaker for over 100 CLE Seminars.View transcript
Workers Comp Matters: National Implications of Opt Out in Workers’ Compensation – 2/21/2016
Advertiser: This is Workers Comp Matters, hosted by attorney Alan S. Pierce. The only Legal Talk Network program that focuses entirely on the people and the law in workers compensation cases. Nationally recognized trial attorney, expert and author, Alan S. Pierce is a leader committed to making a difference when workers comp matters.
Alan Pierce: Welcome to Legal Talk Network and our show, Workers Comp Matters. I’m your host, Alan Pierce, I’m an attorney in Salem, Massachusetts with the law firm of Pierce, Pierce & Napolitano. And on today’s show, we are welcoming Bob Burke. Bob is an attorney in Oklahoma City, Oklahoma. He is an attorney who has been representing primarily injured workers in workers compensation matters since 1980. He’s a former secretary of commerce and principal adviser on workers’ compensation during the administration of Oklahoma Governor David Boren. He was the chairman of the Fallon Commissioner of Workers Comp Reform in the 1990’s. He rewrote the entire workers compensation law, Title 85, in 2011. And he has been a speaker for over 100 Continuing Legal Education Seminars. He’s the author and co author of numerous articles on workers compensation and related topics. Bob is going to talk to us today about a concept that is likely to change the landscape of workers compensation. It’s a term we’re going to refer to as opt out. However, before we get started, I’d like to thank our sponsors, Case Pacer, a practice management software dedicated to the busy trial attorney. To learn more, go to CasePacer.com. And also PINow; find a local qualified private investigator anywhere in the US. Visit PINow.com to learn more. Bob, welcome to Workers Comp Matters.
Bob Burke: Hey, thank you, Alan.
Alan Pierce: Okay. Oklahoma is one of two states that has a version, if you will, of something that is referred to generically as opt out. So why don’t we begin by defining what opt out means as it relates to Oklahoma. And perhaps you can compare and contrast it to a similar system that’s a bit different in the neighboring state of Texas.
Bob Burke: I will, Alan. Many years ago in Texas, which is unique in that it is the only state in which the employer is not required by law to take care of injuries or debts to their workers. The other 49 states have a statutory obligation for employers to in some form or fashion take care of their employees. So Texas did not have that. So it was easy for people in Texas to develop what I call an opt out plan of where that an employer stayed out of the normal workers comp system, even in Texas, did not carry a traditional workers comp policy. But instead developed its own benefit plan. I mean down to the secret plan of saying here’s what we’re going to cover. Our administrator at this plant is going to decide every case, there is no independent tryor effect anywhere along the way. The employer chooses all the doctors. The employer chooses if they’re going to cover anything and to what extent. So those plans are in effect in Texas now. Walmart is probably the biggest carrier as an opt out carrier in the state of Texas. So for ten years at least, Walmart and others have simply abided by this plan, which is not on file anywhere, which injuries do not have to be reported. In fact, none of the activity under the plan has to be reported to any authority anywhere. There’s no record, no data of if how many injuries an employer had. How many of those were found to be compensable because the employer controls everything. Now three years ago, that idea of the employers developing a plan and then defending that plan rather than through the traditional workers compensation system of the state, that came to Oklahoma. The Republicans have taken over the governor’s chair and the legislature in Oklahoma for the first time in history. And that was in 2013 pretty easy to pass along with some other changes in the workers comp law that frankly have made Oklahoma have the lowest comp benefits in the nation; we’re not very proud of that. Now the opt out that came to Oklahoma is kind of a strange duck because in Texas, recognizing that an employer can develop its own plan, Texas employers have always been subject to the common law negligence actions. Exclusive remedy does not lie with that opt out plan that the employers have in Texas. But in Oklahoma, the legislature has attempted to both keep exclusive remedy for an employer that opts out or becomes what the statute calls a qualified employer. So they want to have their cake and eat it too. There have only been 60 businesses in the first two years that have opted out in Oklahoma. And the company out of Dallas partnersource that writes most of the opt out plans in Texas and 90% of them in Oklahoma came in and marketing those. And of the 60, many are nursing homes, many are small businesses, and the only two large companies are like Big Lots – they don’t have a lot of storage in Oklahoma – but Dillard’s department stores has a number of employees. So the first case that came up was against Dillard’s and these opt out plans, our statute in Oklahoma, required opt out to have the same benefit as the normal workers compensation because there’s no question that opt out in Oklahoma and most other states would be just another way in which an employer could fulfill its statutory obligation to take care of its injured workers; it’s one of three ways in Oklahoma. So three different times in cases that are pending now pretty quickly going to be before the Supreme Court to see if the whole opt out scheme is constitutional or not. But Dillard’s and partner stores tried to remove the first three cases to federal courts saying no, no, no, it’s just like in Texas. These are ERISA claims. Well, even without a hearing, I filed the motion to remand, saying wait a minute; there’s an exclusion under ERISA that says any plan that is developed by an employer to fulfill its obligation under a workers compensation state law, is automatically exempt from ERISA. Well, that’s exactly what three different federal judges in the western district of Oklahoma found. So all of those cases are now pending before the Oklahoma Workers Compensation Commision. Now the problem with that is the statute does not really give a good appeal. And remember, I’m spending a lot of time talking about the Oklahoma law. But it’s trying to be replicated in Tennessee, in South Carolina, and other states and conservation Republican-controlled legislatures throughout the south, and it will spread to the nation. That’s what Walmart and a lot of other companies would like to do.
Alan Pierce: Bob, as you know, there was a recent series of articles about opt out that appeared nationally that described these systems. Could you give us some illustrations of how the various benefits or the way injured workers can access those benefits are materially different under the opt out plans as we know them than the traditional workers comp laws that apply to everybody else?
Bob Burke: Yes, Alan, I’ve been analyzing about 40 of the plans that exist in Oklahoma and every one of them, there are 40 to 50 shortcomings of what normal workers compensation law is. There are so many of them. In fact, the marketers of opt out will say, “Hey, we provide the same benefits or sometimes even greater benefits!” Well, our Oklahoma law and most of the laws that you see are being proposed around the country will say they’ve got to provide the same benefits. But here is where the rubber meets the road and what the real story is. For example, our law says that you’ve got to have the same statute of limitations. But each of the 60 plans in Oklahoma have a maximum of a 24 hour statute of limitations. Now some of them, like Dillard’s department stores, their statute of limitations, they will provide benefits only if the injured worker reports the accident and files a written report by the end of the shift on which the injury occurs. That’s the statute of limitations. If the injury occurs at 4 o’clock on a Friday afternoon before the employee gets off at 5, then there’s practically a one hour statute of limitations. Now I have a case pending in the district court right now in which I asked the Oklahoma state insurance commissioner to be injoined from approving any further plans because they are not the same. Because I have a lady who worked for a healthcare company. She is injured in plain sight of her supervisor. She fills out a report immediately, the employer sends her to her doctor. But she is denied by the home office because she did not call a toll free number as is required by the opt out plan within 24 hours. Basically, she was asleep from all the medicine given to her at the emergency room and she waits 27 hours. Now the local company management was so enraged by the denial, the employer accepted the claim provided about two weeks worth of benefits, but then hired a doctor out of New Mexico to come in and examine her. But of course he says, even though she’s 33 years old, “Everything is preexisting in her shoulder and we’re not going to provide anything else.” We have appealed that within the plan, which we have to do, we go to the Workers Compensation Commission, and then take that issue to the Supreme Court. Many, many examples, for example it looks like on paper that an opt out plan provides the same benefit for medical. However, under opt out, the employer totally decides what medical is appropriate, what kind of injuries are going to be found convincible. Many of the opt out plans in Oklahoma simply do not allow any claims for what they call injuries that occur at a keyboard, which effectively eliminates from opt out all repetitive carpal tunnel claims. Many times, for example, they will not allow mental claims at all. They will not allow heart attacks, strokes, lightning strikes. They simply, none of the opt out plans I’ve seen, will allow the aggravation of a preexisting condition to be a convincible injury. So basically they don’t cover anything. Even when they do say we provide the same death benefits or we provide the same permanent total disability benefits; here’s how they get around paying anything: Every plan that I’ve seen allows a deduction from what the employer owes of any social security benefits ever paid. Whether it’s death benefits, retirement benefits, or social security disability insurance benefits. So that prevents any payment ever in a death case to kids. Here’s why: Every worker in the country covered by social security, that worker is killed, then there’s going to be a substantial sum going via social security to that child each month. That’s going to be deducted from what the employer owes and under our schedule of benefits in Oklahoma, the employer never has to pay a child. If a wife happens to be on social security because of her age or disability, then she gets no death benefits. So on paper it says same benefits, for permanent total disability indebt. But they deduct anything that anybody ever gets from social security. That’s a double whammy for disabled workers because everyone knows that social security disability would deduct any payment that should be paid under a state workers compensation plan. So workers are going to really, really get hosed on that deal. The other examples in the statute of limitations and benefits like that, for example, all of the employees that are working for opt out employers in Oklahoma, injuries are not covered if they are from “altercations and fights”. One of the big opt out companies subcontracts with our state government for treatment of juvenile offenders. I’ve had many, many social worker cases where they were injured during an attack. They’re now covered by opt out and that’s not covered by workers compensation. And some of them are even laughable. For example, the opt out plans that I’ve seen will not require the employer to pay for the blood in a blood transfusion. Why, I don’t know. But it’s strictly prohibited under the opt out policy. And they limit home healthcare or nursing home benefits to the first 60 days. Now what really irks me is the situation where you have an injury that renders a worker quadriplegic. If he’s with a normal insurance company, then the blood transfusion that saved his life is going to be paid for, 100%, no copay, no deductibles, and then if he has to spend five years at his local nursing home for rehab, that’s still going to be covered if it’s reasonable and necessary. But for opt out, they’re only going to pay for the first 60 days. So for the quadriplegic, the paraplegic, the terribly injured person for perhaps for ten years, who’s going to pay that? Most likely is the taxpayers, either through a state agency, Medicare, Medicaid. And one of my big gripes about the entire opt out scheme is it’s nothing but a wholesale, national effort by a number of companies to pass the buck to simply put to the taxpayers the entire burden of caring for injured workers, especially the most severe ones who will require great care, millions and millions of dollars’ worth for a long time. Opt out is nothing but employers shifting the cost of injured workers in this country to Medicaid and Medicare, of course the taxpayers. And if Medicare picks up the tab, we’ll see them as the state’s reimbursement later on; a lot of them are unanswered. But those examples are just the tip of the iceberg because one of the real due process problems with opt out is the area of appeals rights. Every plan I’ve seen prohibits any “de novo review” or any “arbiter in court” from ever overturning the employer’s decision on conceivability and extent of benefits. Now remember, the employer does everything. The employee never gets to testify to anybody; the workers never gets to have his own doctor come in and render an opinion. And so all at once, the opinions of the employers select a doctor and their comrades rule everything. So that’s the entire record. And our statute in Oklahoma says that our Workers Comp Commission can only overturn the decision if the plan itself was not followed. Well, that is a terrible problem with due process and that will be the crux of our attack as the opt out cases get to the Supreme Court. Because I’ve said publicly before, Alan, I’m not against opt out if they do four things. Number one is you’ve got to have exactly the same benefits. Secondly, you’ve got to have the same remedies within a workers compensation law on change of doctors, on the appointment of medical examiners. Thirdly, there has to be somewhere along the line, an independent arbiter to see if the worker has been done right and if the employer has been done right. But fourthly, the appeal. There has to be significant due process appeal to the highest court within the state. It is not ERISA, it is still workers compensation, and each Supreme Court of each state has to decide, is this kind of a plan going to fulfill the employer’s responsibility under public policy of taking care of injured workers in this country. I believe opt out is the greatest threat to rights of injured workers in this country in half a century.
Alan Pierce: Thanks Bob, that was a great answer. We are going to take this opportunity to take a short break and we will be back on Workers Comp Matters with our guest, Bob Burke.
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Alan Pierce: I’d like to welcome everybody back to Workers Comp Matters. Our guest today is Bob Burke. We left off by a discussion of opt out in Oklahoma and a comparison and contrast of benefits available by employers who opt out of the traditional workers compensation system. Bob, there is an organization and I’ll have you describe it. I don’t know if the acronym is ARAWC, the Association For Responsible Alternatives to Workers Compensation. Tell us who they are and what their agenda is.
Bob Burke: I believe that this organization is certainly started by companies like Walmart and Nordstroms and Lowe’s and Big Lots and a number of companies who decided that they wanted to push opt out across the country. Now that’s their only agenda that I’m aware of. In Oklahoma, we have involved Steve Edwards. He is a former Republican chairman in Oklahoma who is the legislative director nationwide. And what has happened is this group, in fact the chairman of the group is a former Walmart risk manager. Walmart’s had great success with opt out in Texas so they would like to replicate that elsewhere. They have not opted out in Oklahoma for some reason and I suspect that this organization is really behind. The introduction of bills and we know in Tennessee, in South Carolina; we’ve had other rumblings in Georgia and some other states. Many of the states in the south. And when those bills have been introduced, they again come across to the employer saying this is a reasonable alternative, because workers comp has gotten out of control. So therefore, why don’t you develop your own benefit plan? Even good employers, and I think probably in America, most employers want to take care of their injured workers, I really do. And those people will be very disappointed if they participate in an opt out plan, because they will soon find out that their plan didn’t cover anything, that’s why it’s cheaper. If you don’t cover anything or if you cover something and the employer totally controls what doctors and what kind of injuries are covered and to the extent of that and have just limitations everywhere, even to the point of – for example – the opt out plans in Oklahoma don’t even cover injuries from tornadoes. My goodness, this is the state where Twister was filmed, we’re known as tornado alley. And that’s an example of where script down coverage can hurt both the employer because you’ve got to be able to include common law negligence. But I think this national effort is just simply a desire by these big companies to shift all of the costs of caring for injured workers in this country – both indemnity, and medical.
Alan Pierce: Indemnity being wage replacement disability benefits.
Bob Burke: And the way they do that is because if somebody’s permanently, totally disabled, then they’re probably going to get on social security disability. So the employer, under opt out, gets to deduct any payment from social security from what they owe so they’re not going to owe anything. So it’s simply cost shifting. It’s a major social cost shifting from employers and injured workers to cover injuries for injured workers and all the costs associated with that. All of that to the federal government.
Alan Pierce: So how did something like this get passed in Oklahoma? I know obviously it’s a political issue. It had to be done by the legislature, it had to be signed by the governor.
Bob Burke: Totally political because we have a heavy Republican majority, the state chamber of commerce got behind it and several big businesses, unit drilling. Some other large companies in Oklahoma got behind it and they simply told the members of the legislature this is the same thing or even better benefits. They continue to say that and I’ve had many, many legislators the last two years say, “We’re sorry, Bob, we didn’t read that bill. We were told it was better for injured workers.” They now recognize that we have the lowest benefits in the land. And part of that is opt out and many legislators have said, “Well we don’t want anything to do with that.”
Alan Pierce: Let me stop you there. We’ve been talking about the big employers, and from what I’ve read, I think it’s because to develop such an alternative plan, you need to be a fairly large and well funded company because the average business, the small business, the medium sized business can’t afford to do this. So what is the effect of removing the Walmarts and the Nordstroms and the big box stores and the big retailers and the big employers from the system. What effect is that having on the rest of the employers and the rest of the employees – in Oklahoma, for example – that are still under the traditional workers comp system?
Bob Burke: I think without a doubt, it means a coming cost increase or rate increase for those other employers. Here’s number one: The big employers in this state like Walmart, obviously, they have safety engineers and safety programs and they’re what the insurance industry calls creme of the crop underwriting. And if you remove those really good risk operations, those businesses out of the pool, then everybody else gets a rate increase; it’s a matter of math. You take away the good risks then everybody’s going to have to pay more, especially for the small employer who can’t afford. For example, in Oklahoma, an employer’s got to pay a $1,500 fee just for the insurance commissioner each year to have such a plan. That wouldn’t work for me in my small law office with my small staff. I only pay $1,200 a year for workers compensation. Why would I want to go away from the traditional workers compensation system and pay $1,500 to the state to opt out and then pay a high dollar ERISA company to develop me a plan and then pay corporate downtown lawyers to defend me if I try to say that it’s going to be defended under ERISA? It just doesn’t make sense for any small or medium sized employer to ever considering opt out. So it’s nothing but bad things for about 90% of the businesses because they’re going to see a rate increase.
Alan Pierce: So the legislature passed it, the governor signed it, some of the legislators hae expressed to you privately they have second thoughts. Aside from the legislature reversing the legislation and restoring traditional comp, are the courts getting involved?
Bob Burke: Big time. We do not anticipate our legislature will ever go back on that, they have too much on the line and the state chamber of commerce still says it’s the same benefits, it’s better benefits. So they’ll never go back on that. However, we are working up our way. Our Supreme Court in Oklahoma will not give advisory opinions. So even though we are the first of next month, two years into the new law, we are just now having cases that will be able to be heard by the Supreme Court. They will only give their opinion about the constitutionality of the law if there is a specific case with a specific set of facts.
Alan Pierce: Yeah, you’ve got certain significant due process and equal protection arguments here. And that’s a battleground. You need a case in controversy.
Bob Burke: Yes, we do. And we have two cases in controversy right now where they are about ready in the next 60 days to be heard by the workers comp commission. We have exhausted all the internal appeals under the plans themselves and now they go to the workers compensation commission. Now what’s held that up about 9 months is because in each of those two cases, Dillard’s is the respondent in both of them, tried to remove those to federal court to say they’re under ERISA. So it took a while to battle that so now we’re back in the commission; they’ve been remanded. And the commission’s not going to be able to change anything because all they can do is to look at it and say, “Oh gee, yeah they followed their own plan.” So they’re not able to do an inquiry on the merits. They’re not able to be an independent arbiter. So therefore, once that’s done, we’re going to make a lot of noise and preserve all the constitutional arguments and go straight to the Supreme Court. We expect that our Supreme Court will not allow the court of civil appeals – which is our intermediate court – to look at that first but that will retain the appeal. We’ll retain original jurisdiction in the case which hopefully renders the decision. But constitutional arguments galore on just the failure of due process for the injured worker.
Alan Pierce: And you mentioned a southern strategy if I can go back to maybe a little political history. A bill currently pending in Tennessee, I know there’s been discussion in South Carolina and some other states, Georgia and others are concerns. What’s the current federal landscape about opt out as you see it?
Bob Burke: Right now it’s only being introduced in the south and I think their philosophy there is you have really conservative Republican legislators who would be willing to listen to such a pro business proposition because it sounds like such a wonderful idea. We have helped get out the word in Tennessee and in South Carolina, and we think there will be a stiff fight for the passage of opt out in Tennessee and in South Carolina and any other state just simply because once they find out what has happened in Oklahoma and what the actual plans look like. Not just in theory, but what do they cover and what do they not cover. Then I think that you’re going to have more and more opposition to opt out. And I think many employers are going to resist to that. Now, Alan, I really anticipate the federal government getting involved in some point. Because as a taxpayer, I’m concerned that the big employers of this country would like to dump all the costs of their injured workers onto Medicare and Medicaid. And ultimately that affects my pocketbook. That affects my Medicare premium. I’ve recently been enrolled in Medicare – so I’m telling you my age. So I am going to have to pay higher premiums. And just the dumping of the employers of this country of the costs of workers compensation onto federal government is objectionable as a taxpayer; it’s just not right. So I think you’re going to find several agencies of the government when they learn more about this situation. I hope that the federal government will take an active role in looking into this and see it as exactly the way I see it is.
Alan Pierce: Well, Bob, I want to wrap it up right there. I want to first of all thank you for educating me and our audience on the concept of opt out, for fighting the fight in Oklahoma. Because it’s obviously not easy to go the traditional route to make seismic change or to reverse something like this. This is something we have to watch around the country. So we may be calling upon you again to update our audience on workers comp matters as to how opt out is progressing in Oklahoma and elsewhere in the country. So again, thank you very much for joining us. This is Alan Pierce on Workers Comp Matters on the Legal Talk Network. Go out and make it a day that matters.
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