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Risk Insider: Nick Parillo
Uncertainty in Oklahoma
Nick Parillo has over 40 years of insurance and risk management experience. He is VP, Global Insurance for Royal Ahold, N.V., and president of MAC Risk Management, Inc. and The MollyAnna Co., which provide claims and risk management products and services to Ahold USA, a subsidiary of Royal Ahold, N.V.
Much has been written recently about the Oklahoma Supreme Court’s decision to hear the appeal of a case — Vasquez v. Dillard’s — regarding the constitutionality of Oklahoma’s workers’ compensation “opt-out” provision.
For those businesses that pursued that option, the risks are substantial should Oklahoma’s highest court rule that opting out of workers’ compensation is unconstitutional.
Presently, only the Texas and Oklahoma legislatures have allowed businesses to opt-out of their respective state workers’ compensation systems and instead design and implement customized workplace injury plans for their employees.
How will the liabilities — for those claims reverting to the traditional worker’s compensation system — financially impact the balance sheet of those companies who opted out? Would those employers who have opted out be required to self insure the reverting claims?
To be sure, efforts are being made to extend the opt-out provision to other states but those efforts appear to be stalled until some of Oklahoma’s legal questions are answered.
According to research performed by NPR and ProPublica, there are approximately 1.5 million workers in Texas and Oklahoma who do not receive state-mandated benefits under their respective state workers’ compensation regimes because their employers have chosen to opt-out.
Under the opt-out provisions, some benefits and benefit levels which are customarily provided under traditional state workers’ compensation programs may not be available to employees.
Those companies in Oklahoma that have chosen to opt-out are confronted with several financial uncertainties should the Supreme Court rule that the provision is unconstitutional.
Some of these uncertainties are:
• Will those claims, which have already been filed under the opt-out provision, revert to the traditional workers’ compensation system and the benefits provided therein? Would such benefits be applied retroactively to the date of the accident?
• How will the liabilities — for those claims reverting to the traditional workers’ compensation system — financially impact the balance sheets of those companies who opted out? Would those employers who have opted out be required to self- insure the reverting claims?
• What happens to those companies who do not have the financial strength to self-insure such claims? Who will be responsible for the funding?
• If claims were denied under the opt-out system but would have been covered under the traditional workers’ compensation system, would such claims now need to be covered along with the attendant benefits?
Even if the Oklahoma Supreme Court upholds the constitutionality of the opt-out provision, the court may elect to modify certain provisions on constitutional grounds.
Much is riding on the outcome of the Oklahoma Supreme Court decision for those businesses who have chosen to opt-out.
For risk managers who may still be considering such an election, there are compelling reasons to assume a wait and see approach.
