At the WCRI Conference, PartnerSource’s Bill Minick began his talk stating that one shouldn’t just read the language of ERISA opt-out plans but rather understand what actually happens in the real world. I’m a bit skeptical of this, as whenever something goes wrong, it comes down to the contractual/legal language. I’ve been involved in a few contractual disputes and in every instance the interpretation of the legal agreement was the deciding factor.
Minick noted that the insurance policies issued to cover excess losses under opt-out usually contain language that provides comprehensive coverage, in direct disagreement with the limitations cited by PCI’s Trey Gillespie. Ed. note – As these are excess loss policies they specifically address claims above a certain dollar limit, and may not cover any claims not deemed “eligible” by the employer due to their ERISA plan.
Key to the argument in favor of opt out is litigation rates and risk thereof.
While the employer liability risk inherent in opting out of workers’ comp is certainly high, there is less litigation in opt out than in comp in Texas. Minick asserted that litigation in TX is quite low relative to workers comp, while the risk of litigation and the potential high costs are real. Evidently there have been over 90 awards and settlements in Texas >$1 million.
He also suggested that modifying and altering current ERISA contracts to address some of the shortcomings pointed out by others can and should occur to address issues including reporting timeframes, medical benefits and coverage.
The data cited by Minick certainly supports his assertion that employers’ financial results are better under opt out than in the work comp system. However given that employers can reject claims much more readily in an opt out environment than under work comp, I’m not sure lower LT claims rates, faster RTW, or lower costs cited by Minick are comparable as the “covered incidents” may be significantly different.
Jeff Eddinger of NCCI noted that less than 1/10th of one percent employers in OK have opted out. Gillespie opined that the legal uncertainty surrounding OK opt out has prevented the vast majority – including the largest employers who originally promoted opt-out – from electing opt out.
There was a series of other questions from several audience members, with the general sense one of skepticism towards opt out. That’s not surprising as this is, after all, the Workers’ Compensation Research Institute annual meeting.
The final word on opt-out is coming up next…
Now that the feds are looking at it, perhaps there will be more skepticism on the part of those who are not sure it will do what they promise, and the whole idea fails.
At the heart of opt-out is the idea to get rid of workers’ comp altogether, and go back to the bad old days. Yes, the employers are saving money, but that is because they are denying claims and certain injuries.
But it is workers who are being hurt, as my post yesterday pointed out…so opt-out is only good for the employers, not the employees, and that is who matters here.