Oklahoma Option

Oklahoma Justices: Opt-Out No Longer an Option

Have employers have been left in the lurch by the state Supreme Court decision ruling Oklahoma's Opt Out Act unconstitutional?
By: | September 15, 2016

Raising considerable concern for employers and their injured workers, Oklahoma Supreme Court justices ruled 7-2 that the state’s workers’ compensation opt-out law is unconstitutional.

The dissenting justices wrote that the majority’s opinion eliminating the Oklahoma Employee Injury Benefit Act adopted in 2013 now leaves “employees and their employers without a clear path to enforce their respective remedies or defenses.”

Indeed, whether the path forward has been thrown into a disarray regarding claims resolutions and new insurance coverage that opt-out employers must now purchase became a debate topic immediately following the Supreme Court’s Sept. 13 ruling in Jonnie Yvonne Vasquez v. Dillards, Inc.

Any assertion that the employers will now face difficulties purchasing coverage, or resolving injured worker claims filed under their opt out plans is inaccurate, said Bill Minick, a chief advocate of the state’s opt out law and president at PartnerSource.

“The trial attorneys and workers’ compensation insurers would love to paint a picture of chaos and the end of the option as a result of this decision,” Minick said. “But the reality couldn’t be further from the truth.”

Since the adoption of the opt-out law that supporters call “The Option,” about 55 employers created their own alternative workers’ comp plans outside Oklahoma’s traditional system.

Bill Minick, president, PartnerSource

Bill Minick, president, PartnerSource

Those employers have 90 days to negotiate for insurance coverage or arrange to self-insure the risk. However, it was unclear immediately following the decision when the 90-day period would begin.

The employers will also have to revisit all of their insurance-related contracts for services such as claims administration, provider networks and consulting services, Minick said.

But in anticipation of the unfavorable court ruling, his firm began development last summer of “well-defined contingency and transition plans for employer clients to return to the Oklahoma workers’ comp system,” Minick said.

He described the process for those employers as similar to annual insurance renewals and said 90 days is sufficient time for such negotiations.

“The PartnerSource team and others are now assisting employers and their insurance brokers with each step in that process,” Minick said.

Yet questions remained, experts said.

“There are going to be a lot of questions that need to be answered moving forward,” said Jonathan Buxton, senior VP of government affairs for the State Chamber of Oklahoma, which expressed disappointment with the court ruling.

“I don’t know how the courts or the [Oklahoma Workers’ Compensation] Commission will handle the claims that are in the pipeline.”

The Supreme Court ruled that the “core provision of the Opt Out Act creates impermissible, unequal, and disparate treatment of a select group of injured workers.”

The court majority emphasized that its ruling applies to “a number” of other cases currently before the Commission and in the appellate pipeline.

Those claims in the appeals pipeline had been stayed until the Supreme Court decided the Vasquez case.

“I don’t know how the courts or the [Oklahoma Workers’ Compensation] Commission will handle the claims that are in the pipeline.” — Jonathan Buxton, senior VP of government affairs, State Chamber of Oklahoma

The Commission will lift the stay as soon as it is instructed to do so by the Supreme Court, said Kim Bailey, the Commission’s executive director. Then, the claims will proceed under normal administrative procedures.

However, not all work injuries result in claims heard by the Commission.
Employers’ operational policies will have some bearing on how those claims are resolved, Buxton said.

The original opt-out legislation anticipated a court challenge against its provisions and provided employers with the 90-day period to arrange insurance coverage, said Bob Burke, an Oklahoma claimants’ attorney known for leading the constitutional challenge against the opt-out law.

Burke said that opt out employers may now be without workers’ comp coverage. But the statute protects them from injured workers filing civil claims during the 90-day period, he said.

Undeterred opt-out proponents, meanwhile, vowed to continue pressing their goals in Oklahoma and other states.

Following the Supreme Court decision, the Association for Responsible Alternatives to Workers’ Compensation released a report stating that option employers experienced better return-to-work and medical outcomes while their costs were 70 percent lower than employers under the traditional workers’ comp system.

Minick said he is confident those results will encourage Oklahoma lawmakers to pass legislation addressing the Supreme Court’s concerns, so that the option can continue in the state.

Insurers, meanwhile, praised the court’s decision.

“The Oklahoma Opt Out Act allowed some employers to shift much of their responsibility for occupational injuries to injured workers and their families, government programs, charities, and ultimately taxpayers,” the Property Casualty Insurers Association of America said in a statement.

“The opt-out plans put all power in the hands of the employer, with no independent review of the employer’s decision.”

“This Court has previously made it clear we will not accept the invitation of employers to find a discriminatory state statute constitutional by relying on the interests of employers in reducing compensation costs.” — Oklahoma Supreme Court decision in Vasquez v. Dillards

The Supreme Court ruling stems from a September 2014 claim filed by Vasquez, who injured her shoulder and upper neck. Her employer, Dillards, covered her treatment. But when Vasquez requested an MRI, two review doctors obtained by the retailer found the injury resulted from a pre-existing condition.

Dillards denied the claim and Vasquez appealed, eventually leading to the Supreme Court decision.

“This Court has previously made it clear we will not accept the invitation of employers to find a discriminatory state statute constitutional by relying on the interests of employers in reducing compensation costs,” the high court’s majority opinion states.

The court’s dissenters criticized the majority, however, for ruling on opt-out’s constitutionality while skirting the case facts on whether Vasquez should receive benefits for a pre-existing condition.

“Here, the Court has provided no guidance for employees, or their employers, as to where a cause of action should be pursued if the Opt Out Act ceases to exist,” Justice James Winchester wrote in his dissent.

“Further, other employers with plans under the Opt Out Act that have met or exceeded the Act’s terms will never get the opportunity to have the validity of their plans tested.”

Roberto Ceniceros is a retired senior editor of Risk & Insurance® and the former chair of the National Workers' Compensation and Disability Conference® & Expo. Read more of his columns and features.

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