Tuesday, April 3, 2012

OK Bill Allows Companies to opt Out Of Workman’s Comp

The Legislature finds that certain employers, by virtue of the number of employees employed by the employers or the nature and type of the work undertaken by their employees, are experiencing significant costs associated with occupational injuries subject to the Workers' Compensation Code.  The Legislature further has determined that the inability on the part of those employers to effectively and efficiently manage those claims has contributed to the increased costs associated with those claims and has also resulted in reduced efficiency in the treatment of injured employees.
HB2155 creates the Oklahoma Employee Injury Benefit Act. The measure authorizes any employer to voluntarily elect to be exempt from the Workers’ Compensation Code and elect to become a qualified employer by satisfying several requirements. The Insurance Commissioner will collect and maintain the qualified employer’s information, maintain compliance and may require the employer to confirm its qualified employer status.
To be a qualified employer the employer must have  fifty or more employees as of the end of the preceding calendar year, and either has a workers' compensation experience modifier, as reported by the National Council of Compensation Insurers (NCCI), greater than one (1.00) for the preceding Oklahoma workers' compensation insurance policy year, or has total annual incurred claims, as reflected in an NCCI workers' compensation experience modifier worksheet or their workers' compensation carrier loss runs, greater than Fifty Thousand Dollars ($50,000.00) in at least one of the preceding three (3) Oklahoma workers' compensation insurance policy years.
The qualification criteria in this subsection shall apply only as of the date the employer elects to become a qualified employer is in compliance with the notice requirements  this law and has established a written benefit plan as described in this act.
The qualified employer shall pay to the Commissioner an annual nonrefundable fee of $2,500.00 which shall accompany the filing of the written notice.
A qualified employer must notify all employees of its status and that it does not carry workers’ compensation insurance coverage. Instead, the employer will adopt a written benefit plan which will provide for payment, not less than a minimum amount as provided by this measure, of medical, disability, permanent bodily impairment, death and dismemberment benefits as a result of an occupational injury. The benefit plan must provide some level of benefits for sickness, injury, and/or death not due to an occupational injury. Additionally, the benefit plan may provide for lump-sum payouts, voluntarily entered into settlement agreements and further conditions and limitations on benefits. Benefit plans must comply with and be subject to the federal Employee Retirement Income Security Act (ERISA).
A qualified employer may self-fund or insure benefits payable under the plan, employer’s liability, and other related risks with any qualified insurance carrier. A qualified employer must obtain accident insurance coverage, a surety bond, or other security as may be acceptable to the Insurance Commissioner.
The measure provides for exclusive liability and remedy protections for a qualified employer. The qualified employer will only be liable if the occupational injury of a covered employee is the result of an intentional tort. Other claims for occupational injuries must be filed within two years. The qualified employer or its insurers will be responsible for certain damages and attorney fees awarded.
Covered employees and qualified employers must resolve occupational injury benefit disputes in accordance with the benefit plan and ERISA and intentional tort or death claims through the appropriate courts of Oklahoma. A qualified employer may require, as a condition of employment, a requirement for voluntary or mandatory mediation.
The measure provides required procedures and effects of challenges brought against this Act.
According to the Insurance Department (OID), approximately 50 to 100 qualified employers will apply within the first 12 months.  At $2,500 per application, that would be $125,000 to $250,000 in revenue (OID share $29,375 to$ 58,750)(GRF share $95,625 to $191,250).  OID estimates 2 FTE’s will be required.  At $60,000 each for salary and benefits, the cost to OID would be $120,000 per year.  There would be additional costs to create and implement the electronic reporting and public information system, but OID is unable to estimate those at this time. 
OID estimates that over a 2 to 3 year period the total qualified employers will reach 300-500.  This would be annual revenue of $750,000 to $1.25 Million (OID share $176,250 to $293,750)(GRF share $573,750 to $956,250).  No more than the original 2 FTE’s would be needed.
According to the Workers’ Compensation Court (WCC), there would be a revenue loss from claims closed outside the WCC system.  Similarly, WCC workload would decrease from claims handled outside the system and the number of staff positions required may go down to offset the revenue loss.  Since it is difficult to estimate the number and claim experience of qualified employers that would opt out of the current system, WCC is unable to estimate any cost.
Joe Woods, vice president and regional manager of Property Casualty Insurers Association of America (PCI) in Austin, said benefits under the opt-out plan for injured workers would be more limited than those provided through workers’ compensation.
Under HB 2155, Oklahoma’s larger employers could leave the system and lose their motivation for changing it — while the smaller employers left in the system might “lack the political juice” needed to force changes, Woods said.
Bill Minick, president of PartnerSource, a Dallas-based provider of services to Texas nonsubscribers, who has worked with OBIC on the legislation, said passage of the opt-out measure “will be a game-changer for workers’ compensation … not just in Oklahoma but nationally,” by encouraging other states to consider similar plans.
Asked by WorkCompCentral why the OIBC proposal has been limited to larger employers with high loss histories, Minick said the provisions were to “deal with insurance carrier concerns” over “protecting their turf.”
The bill passed the House by a 70 to 22 vote. It has been reported Do Pass, as amended by senate committee substitute, by the senate Judiciary committee today.

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