, Muskogee, OK

November 17, 2012

‘Workers’ comp costs jobs’

Official: State’s high rate hurts job creation

By D.E. Smoot
Phoenix Staff Writer

— Oklahoma ranks sixth in the nation when it comes to the costs of its workers’ compensation system, which has been an occasional target for reforms during the past two decades.

A national study released every two years by Oregon’s Department of Consumer & Business Services, shows Oklahoma employers spend $2.77 of every $100 in payroll for workers’ compensation costs. The study, released in October, “calculates rates using a standard mix of the 50 industries with the highest workers’ compensation claims costs in Oregon.

The state’s ranking improved from its fourth-place ranking in 2010, but Oklahoma businesses still pay 47 percent more than the national median cost of $1.88. Workers’ compensation costs for employers in the six contiguous states surrounding Oklahoma range from the median in New Mexico to 37 percent below the national median in Arkansas, where employers pay an index rate of $1.19 toward workers’ compensation rates.

Labor Commissioner Mark Costello said workers’ compensation costs turn off employers considering relocation or expansion plans in the state. Costello said he has made it his mission to lobby for an overhaul of a system he says is broken, but claimants’ lawyers believe works just fine.

“I took a 200-page bill and — in my simplistic way of doing things — I broke it down in seven words: It’s workers’ comp, not lawyers’ comp,” Costello said. “I sense a movement in the Legislature to put our state on parity with our neighbors ..., but to do that ... they have to fundamentally redo the adversarial system we’ve developed over the last half century.”

Costello, who bankrolled his 2010 campaign for labor commissioner to the tune of nearly $680,000, formed a tax-exempt organization to lobby for an administrative workers’ compensation system.

The system, Costello said, would remove lawyers — those who represent injured workers and the attorneys who represent the employers’ insurers — from the equation. The first-term labor commissioner said an administrative system would reduce costs and make the state more competitive in attracting new businesses.

Costello provided no specifics about how the switch to an administrative system would reduce the cost of workers’ compensation insurance premiums. Oregon’s biennial study shows the index rate in Nebraska — the only other state that employs an adversarial system —  is substantially less at $1.71 per $100 in payroll and 9 percent below the study’s median. That’s 38 percent lower than the index rate in Oklahoma.

Bret Smith, who has been representing injured employees in the workers’ compensation court for 20 years, described Costello’s proposal as a “smokescreen” for the insurance industry. Smith said Costello’s proposal would benefit insurers at the expense of employees who are injured on the job.

Workers’ comp reduces

employee’s burden

Workers’ compensation laws began as a compromise that sprang from concerns about the perceived harshness of common law remedies. Before workers’ compensation laws were put in place, an injured worker had to prove the employer at fault.

Workers’ compensation laws reduced the employee’s burden, who now must show only that the injury occurred on the job. In exchange, employers were shielded from liability beyond the actual injury unless a worker could prove the injury resulted from an intentional act.

Ideally, the system is designed to provide workers and their families with temporary income while receiving the treatment needed to return to work. The state’s adversarial system has devolved into one that favors lawyers over the parties, say Costello and other critics of the system.

“This is not about depriving someone out of their just compensation,” Costello said. “It’s not just the employers, it’s not just job creation, it’s also, I believe, the workers — you can bet that for decades or longer working women and men ... in Muskogee have been paid less in trying to make up this difference in what is the worst, most expensive, least efficient system in the country.”

Smith said the present system works just fine. He sees Costello’s move as another attempt to strip injured workers of their rights. An administrative system, he said, would give insurance companies “the upper hand.”

“Essentially what you have right now is the ability to bring your case before the judge in a timely fashion and get the treatment and benefits you deserve,” Smith said. “If you change the system, that would increase the insurance company’s power and deprive workers of the benefits and the treatment to which they otherwise would be entitled.”

Professor: Reforms to

current system hard

Andrew C. Spiropoulos, a professor and director for the Center for the Study of State Constitutional Law and Government at Oklahoma City University’s law school, is another advocate for an administrative workers’ compensation system.

In a position paper published by the Oklahoma Council of Public Affairs — an independent, nonprofit public-policy organization — Spiropoulos sets out a case for an overhaul of the state’s adversarial system. Spiropoulos honed his knowledge about the subject while working as former House Speaker Todd Hiett’s policy adviser.

Tasked with learning everything about the workers’ compensation system, Spiropoulos discovered “the field of workers’ compensation reform was littered with the remains of failed reforms of years past.” Spiropoulos, in his position paper, states while the number of claims dropped significantly since 1994, the amount of the awards trended upward  particularly for claims involving permanent, partial disabilities.

Spiropoulos suggests in his article that reforms to the present system are hard to accomplish for a couple of reasons. The first is a state constitutional guarantee of equal access to the courts. The second involves the separation of powers.

Those two provisions, Spiropoulos argues, have resulted with elements of past reform efforts to be struck down by the courts. Under the separation of powers doctrine, courts have held, the legislative branch lacks the authority to dictate what evidence courts may examine before rendering a decision.

As a result, workers’ comp cases have become what Spiropoulos describes as a battle between “dueling doctors.” An administrative system established under the executive branch would be granted a greater degree of deference by the courts. Under an administrative system, lawmakers typically have more control of the administrative review process.

Both Spiropoulos and Costello cited support for judicial review of any ruling that exceeds the authority of the administrative law judge or if it clearly contradicts the evidence presented.

Group seeks option

to let employers opt out

While Costello and Spiropoulos are pushing an administrative system with the option of judicial review, another group is pushing a system that would let employers opt out of the state system altogether.

The option advocated by the Oklahoma Injury Benefit Coalition would allow employers the opportunity to establish and manage a plan that meets statutory minimums for coverage. The system set up by employers who opt out would be subject to the Employee Retirement Income Security Act, which is enforced by the U.S. Department of Labor.

On its website, the organization sets out its argument for the option it is proposing. The group believes employers who opt out would save money through “increased focus on immediate injury reporting, treatment by the best medical providers, employee accountability to follow the prescribed medical treatment plan, and more efficient resolution of injury disputes.” The organization, which failed to respond to inquiries, is backed by scores of Oklahoma businesses.

Costello said the state of Texas has experienced some success with its opt-out provisions. While he believes Texas has a better system than Oklahoma, Costello said he favors the administrative system for which he has become an advocate.

“I favor this system because it is a system that works for all businesses — small and large — and for all Oklahomans,” Costello said. “Their system is more self-insured — they are almost as good as Arkansas and trending toward Arkansas — but there is a little more peril involved for having a self-insured system.”

Costello said an overhaul of the state’s workers’ compensation system makes good business sense. But getting it done, he said, will take political will and leadership in the face of lawyers who might oppose his efforts.

“The Democrats in Arkansas fixed their system 20 years ago ... (and) it is probably the best or second-best system in the country,” Costello said. “If the Democrats in Arkansas can get it right, why can’t the Republicans with a super-majority in the Legislature get it right?”

Despite Costello’s rosy claims about an administrative system, Smith stuck to his guns in his opposition. The administrative option, Smith said, would put the power in the hands of a bureaucrat whose independence is hamstrung by lawmakers influenced by the insurance lobby.

“The injured worker, who has no understanding of the system or how it works, would not have a lawyer,” Smith said. “But the insurance companies wouldn’t go away, the lawyers for the insurance companies aren’t going to go away, and workers would lose the ability to seek the treatment they need from the doctor of their choice.”

Reach D.E. Smoot at (918) 684-2901 or dsmoot