Workers' Comp Initiatives

National Employers Push for Comp Options

Wal-Mart, Safeway, and Nordstrom are among companies pushing for a free-market alternative to traditional state workers’ comp systems.
By: | September 16, 2014

National employers already benefiting by opting out of Texas’ workers’ compensation system are now pushing for “free market alternatives” to traditional state systems across the nation.

They launched a new organization called the Association for Responsible Alternatives to Workers’ Compensation. ARAWC plans to lobby state legislators to allow employers to develop new options for delivering medical and wage replacement benefits to injured workers.

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Its members include nationwide companies such as Wal-Mart Stores Inc., Lowe’s Companies Inc. and Sedgwick Claims Management Services Inc.

The employers are frustrated with being forced into “entrenched” workers’ comp systems that prevent them from adopting practices that could benefit them and their employees, said Richard Evans, executive director of Austin-based ARAWC.

“Many employers in Texas have experienced first-hand the financial savings and positive employee benefits of an alternative occupational injury benefit plan. Companies need flexibility in other states.”– Janine Kral, ARAWC president and VP of risk management at retailer Nordstrom Inc.

Traditional state systems, influenced by various interests, make it impossible to adopt medical delivery practices that can lower costs and speed employee return to work, he elaborated. State administrative burdens, for example, discourage the best doctors from treating workers’ comp cases.

“Workers’ comp is slow to change,” Evans said. “There are a lot of stakeholders involved and it’s hard to make those changes.”

Therefore, it is better to push for alternative options than to “try to come in and tinker around the edges with workers’ comp,” Evans said.

Members of ARAWC, pronounced a-rock, have succeeded in controlling costs and improving claims outcomes by opting out of Texas’ workers’ comp system.

Unlike all other states which mandate employer participation in their workers’ comp systems, Texas has long allowed employers, called “non-subscribers,” to forego participation.

Many Texas non-subscribers provide wage replacement coverage and medical benefits delivered through health plans regulated by the federal Employee Retirement Income Security Act of 1974, although they are not required to.

“Many employers in Texas have experienced first-hand the financial savings and positive employee benefits of an alternative occupational injury benefit plan. Companies need flexibility in other states to provide the best solution for their employees, and ARAWC’s mission is to help expand those opportunities,” Janine Kral, ARAWC president and VP of risk management at retailer Nordstrom Inc. said in a statement.

ARAWC member companies include employers that pushed for Oklahoma’s adoption of “option” legislation in 2013. Employers there can now provide an employee injury benefit plan as an alternative to meeting their obligation to care for injured employees through the state’s traditional arrangements.

“Some of the employers that were active in Oklahoma decided that we wanted to have a more coordinated effort as we go forward into other states to open up those states to allow employer options,” Evans said.

Texas and Oklahoma’s alternative options are significantly different from each other. While Oklahoma requires employers to provide injured workers with benefits equal to those provided under the state’s traditional system, Texas does not. But Texas employers can be sued by an injured worker.

Now ARAWC plans to assess the political landscape and workers’ comp costs in other states to identify which ones may be ripe for adopting their own alternative structures. Tennessee is said to be on a short list.

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Evans said he expects other states to adopt alternatives that look more like Oklahoma’s model rather than follow Texas, although “we are not trying to come in with a one size fits all” for all states, Evans said.

Nor will ARAWC attempt to dismantle existing state workers’ comp systems.

“Workers’ comp works well for some employers and some are going to want to stay in that,” he said.

ARAWC’s effort is likely to face opposition, however. An ARAWC fact sheet states that insurers “typically resist an Option because the competition tends to drive down premiums.”

Roberto Ceniceros is senior editor at Risk & Insurance® and chair of the National Workers' Compensation and Disability Conference® & Expo. He can be reached at [email protected] Read more of his columns and features.

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The R&I Editorial Team can be reached at [email protected]