Nearly two dozen major corporations including Walmart, Nordstrom, and Safeway are listed as founding members of the Association for Responsible Alternatives to Workers’ Compensation (ARAWC), that has already helped write legislation in Tennessee. Richard Evans, the group’s executive director, told an insurance journal in November that the corporations ultimately want to change workers’ comp laws in all 50 states.
According to its website the group focuses on ensuring that employees receive the best possible care and employers have the choice to provide what is best for their employees. We call it an “Option.” “Option is our term for allowing employers to elect an alternative to traditional workers’ compensation insurance. Each state may have different requirements for employers that choose to exercise an Option, but the fundamental principles of any alternative are to improve access to quality health care, increase employee accountability, improve medical and return-to-work outcomes, and reduce claim costs. Allowing an Option creates competition that can reduce rates and drive improvements to the workers’ compensation system.”
Employers that opt out would still be compelled to purchase workers’ comp plans. But they would be allowed to write their own rules governing when, for how long, and for which reasons an injured employee can access medical benefits and wages. Two states, Texas and Oklahoma, already allow employers to opt out of state-mandated workers’ comp. In Texas, the only state that has never required employers to provide workers’ comp.
Now Sen. Mark Green, introduced the opt-out bill for Tennessee. Green’s proposal, which supporters are calling the Tennessee Option, bears many of the hallmarks of the Texas and Oklahoma system: It allows businesses to place strict spending caps on each injured worker and to pick and choose which medical expenses to cover. “We took the best of both and put it together to make it work for Tennessee businesses,” Green reported in an article published in the Insurance Journal. Oklahoma’s Legislature took four years to create its opt-out system. ARAWC hopes to achieve the same thing in Tennessee in a single legislative session and then it’s on to the next state.
These initiatives have spawned expected heated controversy. Mary Elizabeth Maddox, a Tennessee workers’ compensation attorney who represents both employers and employees and opposes Green’s bill, recalls a case in which a workplace accident paralyzed a 23-year-old man and confined him to a wheelchair. He sued her client, the employer. “For him, $300,000 is not going to go very far.” Gary Moore, president of the Tennessee AFL-CIO Labor Council, claims “This piece of legislation is designed as a cost-saving measure for the employer, Anywhere they save a dollar, it costs the employees a dollar. It’s just a shift in costs.”
Businesses can save millions of dollars by opting out and writing plans with narrow benefits, putting pressure on their competitors to do the same. “It creates a race to the bottom,” says Michael Clingman, a workers’ advocate in Oklahoma, which passed an opt-out measure in January 2014.
California has had for years its own “Carve-Out” program which allows some employers to opt out of the Workers’ Compensation system. “Carve-out” programs allow employers and unions to create their own alternatives for workers’ compensation benefit delivery and dispute resolution under a collective bargaining agreement. Eligibility of parties to participate in a program must be approved by the administrative director of the Division of Workers’ Compensation. The requirements to participate and the elements required to be in “carve-out” programs are contained in Labor Code section 3201.5 (for the construction industry) and Labor Code section 3201.7 (for all other industries), as well as California Code of Regulations, title 8, sections 10200-10204.
It remains to be seen if Opt Out programs gain traction nationally.