By D.E. Smoot
Phoenix Staff Writer
A push for the overhaul of Oklahoma’s workers’ compensation system is in full swing as state officials criss-cross the state in support of sweeping reforms.
Labor Commissioner Mark Costello made a swing through Muskogee earlier this month, promoting his plan for an administrative system. Costello has formed a social welfare organization to fund his push for reform.
Denise Engle, deputy commissioner of the Oklahoma Insurance Department’s worker’s compensation division, made a similar stop Wednesday. Engle participated in Gov. Mary Fallin’s working group that shaped reforms passed during the 2011 legislative session.
“Workers’ compensation has such a big impact on our state’s economy,” Engle told a small group of mostly insurance professionals at Wednesday’s issues forum. “Compared to other states, we have always stuck out like a sore thumb.”
Engle said Oklahoma has a lot going for it when it comes to attracting new businesses. Oklahoma ranked third in the nation in 2010 with regard to the cost of doing business. That fact, she said, was overshadowed by “the average cost of our workers’ compensation benefits.”
“We have great air, water and land, and low-cost utilities and good people,” Engle said. “Where we’re getting kicked in the teeth is with workers’ compensation.”
In other states, Engle said, medical expenditures drive the costs of workers’ compensation systems. Regionally and nationally, according to the National Council on Compensation Insurance, the ratio averages about 60 percent toward medical costs and 40 percent toward the wage replacement for injured workers.
In Oklahoma, about 45 percent of the costs of workers’ compensation go toward medical expenses. The remaining 55 percent, Engle said, goes toward an injured worker’s wage replacement in part due to a higher frequency of permanent partial disability claims. Engle described the 15 percent discrepancy as “friction costs,” much of which she said goes toward legal fees.
Although the labor commissioner favors a move away from the state’s adversarial system toward an administrative system, the insurance commissioner is proposing an administrative system with an opt-out provision. In support of an administrative system, Engle compared workers’ compensation costs associated with Oklahoma’s adversarial system with those associated with administrative systems in Arkansas and Texas.
Engle pointed to figures that would seem to indicate Oklahoma’s system is much more litigious. Those statistics, however, fail to take into account the differences between Oklahoma’s court-based system and the administrative systems of other states.
Engle also was unable to provide data that might explain why the costs of Nebraska’s workers’ compensation system are significantly lower than Oklahoma’s. Nebraska is the only other state in the nation with a court-based, or adversarial, system. Advocates pushing for an administrative system in Oklahoma, however, have made no comparisons with that state.
The opt-out proposal discussed by Engle is advocated by the Oklahoma Injury Benefit Coalition. It would allow employers the opportunity to establish and manage a private plan that meets statutory minimums for coverage. Such plans would be subject to the Employee Retirement Income Security Act, which is enforced by the U.S. Department of Labor.
Rep.-elect Arthur Hulbert, R-Fort Gibson, said he agrees there is room for reform for the state’s workers’ compensation system. But he isn’t ready to support one system over the other.
“I think we need to look at all our options before we come up with a final opinion,” Hulbert said after listening to the discussion at the forum. “If Nebraska has the closest system to ours and their claims costs are significantly less than ours, it doesn’t hurt to do our homework to find out what they are doing differently to make those costs savings we aren’t realizing with our system.”
Hulbert also said another way to immediately ease the burden on employers and employees would be to establish regional hearing offices. At present, litigants must travel to Oklahoma City or Tulsa to have claims heard.
“At the very least ... I am definitely in support of having more locations,” Hulbert said. “That way the employer and the employee are not out the time, energy and expense of having to go to Oklahoma City or Tulsa to settle claims.”
Reach D.E. Smoot at (918) 684-2901 or email@example.com.