The Oklahoma Supreme Court likely will determine the fate of the state's controversial workers' compensation opt-out law, after the Oklahoma Workers' Compensation Commission ruled part of the law to be unconstitutional.
The commission's Feb. 26 decision comes as state lawmakers in at least two states are pondering legislation based on Oklahoma law that would create an opt-out system, although bills in Tennessee and South Carolina appear to have stalled at least for the time being. The American Insurance Association, the National Association of Mutual Insurance Companies and Oklahoma Insurance Commissioner John Doak all expected an appeal.
State lawmakers in 2013 passed the current opt-out law, the Oklahoma Employee Injury Benefit Act, despite opposition from insurance industry groups. It gave employers the opportunity to opt out of provisions of the Administrative Workers' Compensation Act and instead accept employee benefit plans governed by federal law under the Employee Retirement Income Security Act. Supporters such as the Association for Responsible Alternatives to Workers Compensation said the change would save employers money in legal costs.
However, the Workers' Compensation Commission ruled the opt-out plan did not provide benefits that were equal to or better than those employers can use under the Administrative Workers' Compensation Act. "The appearance of equal treatment under the dual system is like a water mirage on the highway that disappears upon closer inspection," the commission ruling said.
The ruling said equal benefits are to be required for opt-out, including those that are in existing law. However, the commission ruled the opt-out law fails to do so because those employers operating under opt out can remove the right to benefits by defining what injuries are eligible. It illustrated the difference in stating coverage mandated under the Administrative Workers' Compensation Act and the opt-out law by stating the Act permits benefits for bodily harm caused by exposure to asbestos, something the plan used by Dillard's department store defined as a non-covered injury. The opt-out plan also has much tighter restrictions as to what pre-existing conditions are eligible for benefits than the Administrative Workers' Compensation Act.
Oklahoma's Constitution allows enactment of so-called "special laws" in limited circumstances, but the commission ruled the opt-out was not a valid special law. "We can conceive of no rational basis upon which to establish a separate system for providing workers' compensation benefits under which a subclass of injured workers is subjected to a benefit plan under which their employer, by defining ‘injury' under the Act, can determine when it will be liable and when it will not be liable by excluding from the definition of injury the damages or harm to their workers for which it will not be responsible," the decision said.
Doak said in a statement he looks forward to "a complete and careful review of these issues by the judicial branch. My department will continue to perform its statutory responsibilities while this consideration occurs, and we will support our legislators as they continue to develop Oklahoma's workers' compensation system this session."
Steve Bennett, AIA's associate general counsel, told Best's News Service the pre-opt-out workers' compensation system in Oklahoma provides the best benefits and best care for injured workers. "If workers are going to have to be treated equally ... there is no rationale or justification for multiple systems," he said. "There should just be one system and you try to make it work the best that it can."
There had been rumors of possible opt-out legislation being introduced in Southern and Midwestern states, but nothing has been offered to date. Bennett said the commission's decision "should make legislatures think twice" before offering opt-out bills.
The top five writers of workers' compensation insurance in Oklahoma during 2014 were CompSource Oklahoma, with a 32.36% market share; Travelers Group, with 8.18%; American International Group Inc., with 5.89%; Zurich Financial Services NA Group, with 5.33%; and Liberty Mutual Insurance Cos., with 5.31%, according to BestLink.