Workers’ Compensation and the Employer “Opt-out” Concern
When an employer “opts out,” the state regulations that ensure minimum benefit levels do not apply anymore. This is a major concern. In any workers’ compensation case, one of the most important aspects is to ensure that the work-related injury is clearly documented in the claimant’s medical records. Medical record review for attorneys handling workers’ compensation cases would focus on evaluating causation, injury/impairment and appropriateness of care. Workers’ compensation benefits cover the medical/hospital expenses required to diagnose and treat the injury; it provides disability payments for the period the worker is unable to work, which may amount to 2/3 rds of his/her regular salary; and it may also pay for rehabilitation/retraining along with other benefits. The benefits are typically paid for by the employers of the state and the payment
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may be either as premiums to a state-run insurance program; payments to an insurance company or payments made directly to the workers. The Opt-out Concern State-regulated workers’ compensation benefit systems require all employers to obtain workers’ compensation insurance, and they have also set minimum standards of coverage. When the system is state regulated, a certain level of benefits is ensured for injured workers. However, Texas and Oklahoma are 2 states in the U.S that have laws allowing employers to “opt out” of the state-regulated system. When an employer “opts out,” the state regulations that ensure minimum benefit levels do not apply anymore. According to a publication “FAQ: Workers’ Compensation Opt-Out Laws” by the Center for Justice & Democracy's Public Policy Clinic at New York Law School, opting out
gives the employer
huge advantages such as:
Decide under what circumstances to compensate the injured worker
Choose the doctor who would examine the worker and perform the medical records review
Refuse to give approval for any treatment
Deny compensation completely for certain kinds of disability
Have full discretion to terminate benefits
Have the employee sign a contract so that all cases are settled through an employerdesigned, covert arbitration system rather than in court
Oklahoma employers, unlike Texas’s system must meet certain financial and other requirements to qualify to opt out. This includes a written benefit plan that provides coverage and benefit levels that meet or exceed the minimum requirements laid down in the law. Private employer plans are also required to comply with the Employee Retirement Income Security Act, a federal statute that has proposed minimum standards for most of the health, welfare, and pension plans offered through private industry. The Case of a Macy’s Department Store Employee The opt-out law is raising major concerns among employees in the light of incidents such as that related to Kevin Schiller, a Macy’s department store employee in Denton, Texas
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reported in npr.org (NPR). Schiller is one among the 1.5 million workers in Texas and Oklahoma who don’t have the support of state-regulated workers’ compensation when they are injured on the job. An employee at the department store for more than 21 years, Schiller has struggled to receive the medical attention and compensation he deserves. The concern now is that millions of other workers may join those in Texas and Oklahoma if more states think of allowing employers to opt out of state workers’ compensation. Why do employers opt out? According to employers, this is a better alternative because the state systems lead to expensive and long-lasting benefits, costly litigation and delays in the treatment of the injured workers. They hold that even if they opt out, employees are still protected by ERISA (Employee Retirement Income Security Act) that initially applied to pension plans but now include healthcare and other workplace benefits as well. However, there is a question whether ERISA really governs opt-out plans because it does not apply to plans “maintained solely for purpose of complying” with state workers’ compensation law. Sadly enough, ERISA didn’t support Schiller much and NPR found that the law does not provide the protections promised by opt-out promoters. Workers can take their cases to federal court under ERISA, but federal judges have to first determine whether employer decisions are “arbitrary and capricious.” They can reject benefits decisions if it is proved that employers did not adhere to their plans or were unreasonable. Employers are likely to win as long as they follow their plans irrespective of how unfair the plans or decisions may be. In federal court, workers who win will only get the benefits they were denied. They cannot hope to win compensation for pain and suffering; moreover, if they lose they may have to pay the legal expenses of their employers. Therefore, as expert lawyers point out, ERISA can pose risks to an injured worker if not approached diligently. In Schiller’s case, his attorneys decided that a federal court appeal would be too risky. What Can Employees Do? Many employer plans contain provisions that expressly violate ERISA. These include mandatory settlements. Employers alone determine when to cut off benefits and pay lumpsum settlements, and also decide how much to pay the injured worker. Workers who refuse stand to lose all their benefits. Workers who are injured are also expected to report their
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injuries within 24 hours or by the end of their shifts even if the injuries don’t seem serious, or even if supervisors are witnesses. What are the alternatives available to injured workers working for employers who have opted out?
They can challenge the employer’s “qualification” under the program or file a claim with the qualified employer’s private disability insurance company.
They can utilize their “minimum appeals rights.” This begins with appealing to a panel of three persons appointed by the employer. Compared to the state-regulated system that provides the right to a hearing before an Administrative Law Judge, this offers lesser protection.
Employees who receive insufficient benefits usually depend on programs such as Medicaid, Social Security and food stamps. Opt-out laws pose concerns for the insurance industry as well because disability insurances such as ERISA purchased by opt-out employers are not like the state-regulated system under which the claims are paid by a guarantee fund in case the insurer becomes insolvent. Moreover, in disability plans that conform to ERISA standards, federal regulations would forestall the state’s supervision, preventing the state from enforcing control over factors such as eligibility, benefit amount, and delivery mechanism.
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