This past week, we passed Senate Bill 1062 to create an administrative workers compensation system based on the highly successful Arkansas model. The bill now goes to the House for their consideration.
Twenty years ago, Arkansas had a workers’ comp system similar to ours - costly and ineffective - but that changed after they switched from an adversarial system to an administrative one. Their administrative system adequately compensates and restores the injured worker as well as protects the employer (all the while reducing litigation costs, which remain the real culprit).
I discussed this in January, after traveling to Arkansas with Senator Anthony Sykes to see the system firsthand but I wanted to provide more information about this important pro-business legislation that tackles the biggest inhibitor to job growth in our state.
Oklahoma has gained national attention for our states’ enviable manufacturing statistics and low unemployment rates yet there’s room for improvement. Despite reforms in recent years, our workers’ comp system still ranks as one of the most expensive in the country for employers and that has driven business out of state and limited business expansion opportunities.
An October study released by the Oregon Department of Consumer and Business Services placed Oklahoma’s premium index rate per $100 of payroll at $2.77, or 147 percent of the national median. That places Oklahoma’s ranking as the 6th highest in the country. For comparison, Arkansas’s rate is $1.19 (3rd lowest in the nation) while Texas is $1.60 and Kansas is $1.54.
Oklahoma is one of only a few states in the country that uses the judicial system to resolve workers’ comp cases. As a result, the system is adversarial in nature and rewards specialty workers compensation lawyers and certain physicians as much as it aids injured workers. Instead of a company and an employee working together to get the employee healed and back to work as quickly as possible, legal battles linger to increase awards (and chargeable legal percentages), regardless of the needs of the employee.
The proof of this is in the numbers. In Oklahoma, there were over 28,000 trials and contested case hearings in 2011 versus approximately 4,000 in Arkansas and Texas, respectively. The average lost time claim frequency per 100,000 workers in Oklahoma is 1,415 days while in Texas it’s 732 days and in Arkansas it’s 653 days.
Also the average Permanent Partial Disability Award has increased 35 percent from $24,903 in 2007 to $33,681 in 2011. The average indemnity cost per case in Oklahoma is $29,000. In Arkansas, it’s $14,000.
SB 1062 would make several reforms including:
1) Switch to an administrative system instead of a system based on adversarial litigation.
2) Options for arbitration.
3) Reduce doctor shopping among claimants.
4) Place restrictions on legal fees that may be extracted from clients.
5) Require work comp claims to be filed in a timely manner.
6) Drug and alcohol tests after work comp claims are filed.
7) Require objective medical evidence before a claim will be granted.
8) Allow companies to create their own benefit plan under the “Oklahoma Option” with certain restrictions and guidelines.
As with all issues there are always opponents so I’d like to share a study from a nonpartisan organization that recently ranked this legislation and its potential impact in Oklahoma.
The National Council on Compensation Insurance (NCCI) is a U.S. insurance rating and data collection bureau specializing in workers’ compensation. Operating with a not-for-profit philosophy and owned by its member insurers, NCCI annually collects data covering more than four million workers compensation claims and two million policies in order to provide industry trend analysis in workers’ comp costs and other areas.
Overall, the NCCI explicitly quantified a 14.2 percent savings to policy holders. However, when potential savings for an administrative system, Permanent Partial Disability changes on return to work, and changes to the American Medical Association current edition are taken into account, it’s conservatively estimated that policy holders could save as much as 30 percent annually, which equates to $288 million saved statewide.
If we’re serious about growing jobs and promoting a strong business climate, we must put the brakes on the runaway cost of workers’ compensation premiums and pass SB 1062.
To contact me at the Capitol, please write to Senator Josh Brecheen, State Capitol, 2300 N. Lincoln Blvd. Room 428B, Oklahoma City, OK, 73105, email me at firstname.lastname@example.org, or call (405) 521-5586.