what you need to know: worker’s comp

Formed in late 2013, the Austin, Texas-based Association for Responsible Alternatives to Workers’ Compensation — or ARAWC — would like to see an expansion of alternatives to state workers’ compensation systems, such as the nonsubscriber system in Texas and the recently enacted Oklahoma option, to other states.

The goal “is to advocate in state legislatures for free market alternatives to workers’ compensation. Our internal lingo for that is option with a capital ‘O,’” said ARAWC Communications Director Brent Buchanan.

Instead of lobbying for a one-size-fits-all measure, Buchanan said the group wants to work state-by-state with stakeholders to come up with a workers’ comp alternative that works best for them, one state at a time.

Association members include companies like Nordstrom, Best Buy, Lowe’s, Walmart, Safeway, J.B. Hunt and Sysco Food Services, large companies that are nonsubscribers in Texas and are interested in the alternative now available in Oklahoma. Such companies would like to have options in every state in which they operate, said ARAWC Executive Director Richard Evans.

Members also include insurance-related entities, such as broker Amwins and Great American Insurance, as well as service providers like Partner Source and Sedgewick. Nonsubscriber companies “will set up their occupational injury benefit plan under the federal ERISA laws, like their health insurance plan. It’s an employee welfare plan and it’s regulated under federal law. That’s typical,” though not the case with every employer, Evans said.

They work with service providers, such as insurance companies, third party administrators and medical claims management companies for help in administering their programs, Evans said.

“It’s a lot like a health insurance program except it’s targeted for occupational injury benefit,” he said.

Texas, Oklahoma

Nonsubscription has been available in Texas for more than 100 years, “ever since we’ve had a workers’ comp law,” said Evans, who has worked with nonsubscription issues for 15 years.

There is no requirement in Texas that workers’ comp benefits be provided to employees, but employers that opt out of the worker’s comp system, “don’t get the exclusive remedy that you do when you’re in the system. So there’s negligence liability for employers in Texas that elect to be a nonsubscriber,” Evans said.

The situation in Oklahoma is somewhat different. In that state, employers are still required to provide benefits either under the workers’ comp system or an alternative, and exclusive remedy applies to all employers.

Oklahoma’s alternative option went into effect this year and the law was passed before ARAWC was formed, “but we’re watching how that program rolls out so that we can learn from that and take those lessons and apply them to the future states,” Evans said.

In Texas the nonsubscriber system works very well and gives employees access to good quality medical care, he said. The plans “produce good medical outcomes; they get good return to work rates.”

An Option in Every State

In promoting workers’ comp alternatives, the current plan is to pick one or two initial states in which the group will work with legislators, employers and other stakeholders to develop a system for each state.

The association is assessing states to move into before the legislative sessions begin in 2015 and have couple in mind. Ultimately the goal would be to have an alternative option in every state.

“Naturally that’s going to take a while, if we’re going to pick one or two states a year. And we could grow that list as the organization grows. But I think that our leadership would like to see every state have this option for their employees,” Evans said.

The group is conducting “state assessments to kind of see where the political environment is ready for this kind of legislation and where the workers’ comp costs are higher than average, so there’s the need by the business community to want to try to find a potential solution outside of the workers’ comp system that will produce good outcomes and reduce costs,” Evans said.

Tennessee seems to fit the bill and ARAWC is holding exploratory meetings there to “test the waters,” he said.

There a couple of different outcomes that the association is looking for as options are added from state to state. One is that “you’ve got an alternative for employers to explore and utilize. The other is that you put competitive pressure on the workers’ comp system to do things better; to get better results and to lower costs. Whether you’re an employer that stays in the comp system or you elect the option, I think there’ll be a positive benefit,” Evans said.

Article written by Stephanie K. Jones  and published in Insurance Journal.

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