Opt-Outs: A Discussion

Transcription

1 Opt-Outs: A Discussion NOTE: The information in this presentation mostly comes from the IAIABC Understanding the Opt-Out Alternative paper authored by Gregory Krohm

2 It is what we know already that often prevents us from learning -Claude Bernard Claude Bernard was a famous French physiologist. He was most known for applying the scientific methods and using experiments.

3 Workers Compensation Basic Facts: Workers Compensation laws are just over 100 years old. Grand Bargain between Business and Labor. Employers gained exclusive remedy and defined costs. Employees gained defined benefits and a no fault system. Employees get medical and indemnity benefits. State run program.

4 What about exclusions? Most states have some sort of exclusion for some employers. The most common exclusions is with some corporations and executive officers or sole proprietors. Nebraska and Wisconsin exclude Agriculture/Farmers unless certain requirements are met. Independent Contractors are another potential exclusion, depending on the state.

5 What states have Opt-Out programs? Texas has a non-subscriber system. Non-subscribers lose the exclusive remedy protection afforded those that do participate. Oklahoma has an Opt-Out program that became effective Jan. 1, Unlike Texas, Oklahoma only allows qualified employers to optout of the workers compensation system. There is proposed legislation in Tennessee and South Carolina. However, both bills have stalled in committee at this time.

6 When Oklahoma passed the Opt-out legislation, it also passed reforms to the traditional system. The reforms included changing causation to require work to be a major cause, and tightening conditions for compensability of repetitive trauma, mental injury, and heart attacks. As a result of the reforms, the cumulative change in loss costs over the last three years is a decline of 37.2%. In 2012, the Opt-Out and reform legislation was passed, Oklahoma had the 6 th highest ranking in the Oregon Premium Rate Ranking Survey. In 2014 Oklahoma was still ranked 6 th. The next Oregon study should be released later this year. It will be interesting to see if the ranking has changed.

7 In Oklahoma, what were Opt-Out programs designed to resolve? Reduce workers compensation costs for employers. Employers also felt the following needed to be fixed : Compensable claims not related to work, Protracted periods of temporary disability, High medical costs, and Excessive litigation. Give the employer greater control over claims.

8 In Oklahoma, did the Opt-out plan resolve the employer concerns? Employers in an Opt-Out plan have broad discretion to limit covered events (injuries and occupational illnesses) and covered benefits. Plans have broad freedom to control/manage delivery of medical costs. Plans have the ability to force a lump sum close out of claims based on actuarially fair present value of the future obligations. First level of appeals is within the plan.

9 How are medical benefit payments in the Opt-Out plan compare with traditional systems? Both have the same general requirement: pay the full cost of all reasonable and necessary medical treatment to cure the employee from the effects of the injury. Opt-Out employers can potentially have significant savings from the ability to manage and streamline the medical care. Opt-Out plans use narrow definitions and conditions for determining necessity of medical treatment. Plan can also deny future medical treatment if an employee fails to attend medical appointments.

10 How do Indemnity benefit payments compare between Opt-Out and traditional plans? Difficult to get a clear measure of the benefits. Plans often start TTD payments from the first day as opposed to having a waiting period. Also, some plans may pay more than the maximum allowed in traditional plans. However, the benefits are also subject to taxes. The IAIABC paper has a chart that shows the longer the claims lasts, the less beneficial the TTD payments become to the employee. The paper did not find any deviation on permanent benefit payments.

11 How do Indemnity benefit payments compare between Opt-Out and traditional plans? Difficult to get a clear measure of the benefits. Plans often start TTD payments from the first day as opposed to having a waiting period. Also, some plans may pay more than the maximum allowed in traditional plans. However, the benefits are also subject to taxes. The IAIABC paper has a chart that shows the longer the claims lasts, the less beneficial the TTD payments become to the employee. The paper did not find any deviation on permanent benefit payments.

12 There are several ways that Opt-Out plans are most distinct from traditional systems. Some plans have benefits conditioned on employment. If the employment ceases, voluntarily or involuntarily, benefits may cease. Plans also have a variation in coverage limitations. The paper found that most plans have similar restrictions to what is found in Oklahoma law, but there are some differences. One plan that was reviewed does not cover a participant that was employed in violation of law. Does this exclude illegal aliens? Claims may also be denied if not reported timely, often end of shift or 24 hours.

13 Thank you. Let s form some small groups to further discuss Opt-Out programs.

14 THE WINNERS ARE Overburden-some regulation High attorney costs Process is too long