Thousands of employees in the United States who are injured on their jobs are likely to be significantly affected by the new and developing trend of the “opt-out” movement with regard to workers’ compensation. Employers following this trend opt out of state workers’ compensation laws and formulate their own independent policies for their employees.
Workers’ compensation is a state-based social insurance program that is mandatory and offers workers insurance protection against disability/death that occurs while at work. The disability is determined on the basis of a detailed medical record review of the claimant’s healthcare documents. Compensation can be provided in the form of:
- Disability benefits
- Medical benefits
- Rehabilitation benefits
- Survivors’ benefits
Workers’ compensation laws are compulsory in most U.S. states and ordain businesses to accept the provisions of the law and provide the specified benefits. However, the coverage is optional in some states, and employers are allowed to opt out of the state workers’ compensation system in exchange for the loss of certain liability limitations. In some states, businesses with fewer than three or four employees are exempted from workers’ compensation insurance requirements.
It is believed that the popularity of the opt-out movement stems from reasons such as the huge costs related with benefits, lengthy dispute resolution process and other problems related to workers’ compensation. A state offering the opt-out option is required to first pass a law that allows employers who would otherwise have to provide workers’ compensation coverage to provide their employees with substitute forms of reimbursement for compensable injury.
In Texas, many companies have been utilizing the opt-out opportunity for many years now, and Oklahoma passed similar laws in the year 2013. At present, Georgia, Florida, Tennessee and South Carolina are considering this option. More states are expected to follow suit in the near future. This is a matter of concern because:
- A company that chooses not to adhere to the state workers’ compensation laws will have complete control over the type of medical care injured workers receive.
- Employers can create provisions that may prove damaging to workers because these provisions may include not covering certain injuries, and putting restrictions on the type and amount of care an injured worker can receive.
- When employers create their own work injury policies, it is very likely that they can hold themselves blameless when an injury claim is filed by an employee.
A study of the injury benefit plans of more than 100 companies that had opted out of workers’ compensation laws carried out by ProPublica and National Public Radio (NPR), found that almost every plan contained lower benefits and increased restrictions for employees. Their report points out that the opt-out program is increasingly becoming popular in the South, but is very likely to meet with stiff resistance in the Midwest and Northeast.
However, supporters of the opt-out plan believe that the program will be beneficial for both employers and their workers. It will help avoid the red tape often associated with workers’ compensation claim processing. Moreover, employees also stand to benefit from better medical treatment than what would be made available via the state programs.
A report by the Risk & Insurance Management Society Inc. says that employers considering opting out of the workers’ compensation state program must make sure that they understand the differences between traditional programs and the requirements imposed on employers that forgo coverage via state systems. Employers must then develop a benefits plan that will vary on the basis of the minimum requirements of each state. Plans must be made to cover those benefits. They must also make sure to communicate with their employees to improve employee compliance and increase employee satisfaction.
So what alternative does an injured worker have, who believes his benefits are inadequate and works for an employer who has opted out? He/she can seek legal remedy by challenging the employer’s qualification under the program or file a claim with the qualified employer’s private disability insurance firm. This will provide the worker with “minimum appeal rights,” which begins with having to appeal to a panel of three persons who are appointed by the employer. In the state-regulated system, more protection is offered because the worker has the right to a hearing before an ALJ or Administrative Law Judge.