Dreams can come true: Workers Compensation administrative shift to trigger quick savings
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Published: 09-Sep-2013

OKLAHOMA CITY – In the Sooner State, hoped-for savings in workers compensation insurance now seem more likely than ever. It is easy to translate anticipated lower premiums as upbeat news for state businesses.

An influential national group’s new assessment of projected costs for the emerging administrative system – replacing the past litigation-based structure – is the primary reason for celebratory reflections from state officials who pushed through reforms this spring

The National Council on Compensation Insurance Inc. (NCCI), an advisory panel, credits May passage of Senate Bill 1062 for the drop in projected costs, anticipated by Jan. 1, 2014. With some caveats, the NCCI said last week that insurers could lower compensation insurance premiums an average of 14.6 percent.

The conclusions are based on projections of indemnity and medical payments, as well as “associated claim adjustment expenses,” according to an Oklahoma Department of Insurance disclosure. While the analysis is technical -- and the estimate does not reflect overhead and profit -- its practical impact will be to lower costs for businesses with full-time employees, as soon as next year. 

Commissioner of Insurance John Doak described the report as “fantastic news for Oklahoma businesses. Reducing workers compensation costs by enticing new companies to come to the state and allowing current businesses to expand operations can trigger a new wave of economic prosperity. These decreases over a period of time will help to make Oklahoma much more competitive.”

Another statewide elected official, Commissioner of Labor Mark Costello, pressed for the administrative approach since taking office in 2011, cheered the latest news, declaring, “The days where trial lawyers dominated Oklahoma politics for their own economic interests are at an end. After all, it is workers’ comp, not lawyers’ comp.” 

In addition to compensation award limits and restrictions on judge-shopping, the measure phases out the workers comp judicial system, replacing judges  with administrators. Anticipated costs for the administrative system were lowered when the Legislature decided to transition current judges into new roles as administrators, lowering transition expenses.  

The report projects almost immediate savings, beginning with the 2014 cycle. A breakdown at the industry group level “loss cost impact,” provided to Oklahoma Watchdog, follows: 

 

Industry Group                                                      Impact

Manufacturing                                                      -16. 3%

Contracting                                                           -16.2%

Office and clerical                                                 -13.4%

Goods and services                                             -14.1%

Miscellaneous                                                      -12.2%

Total                                                                     -14.6%

The report incorporates lost-time claim frequency, indemnity average cost per case, and loss adjustment expenses. The impact is slightly larger than the preliminary 14.2 percent average that NCCI projected during the spring legislative debate over S.B. 1062. 

Further changes in the system are possible. Legislators considered, but did not enact, an “opt-out” system for some businesses, to allow larger enterprises to devise their own workers’ comp structures. The idea still has some advocates across the nation, including in Oklahoma and Tennessee. 

Senate President Pro Temp Brian Bingman, R-Sapulpa, co-sponsored the comprehensive workers comp reform legislation with Speaker of the House T.W. Shannon, R-Lawton. 

Bingman made the workers comp package his top priority for the 2013 regular session. In a statement to Oklahoma Watchdog, Sen. Bingman said, “Workers’ compensation costs are noted by employers of all sizes across the state as their top barrier to growth, which is why we passed comprehensive reform.

“Lower rates mean more money for investment, expansion, wage increases and job creation for businesses here, and a more competitive economic climate for companies looking to expand and relocate to Oklahoma. This dramatic reduction in rates shows the legislation is working and I believe is only the tip of the iceberg in savings Oklahoma businesses will see over the long-term.”

In a separate statement, Rep. Shannon commented, “Oklahoma continues to be a leader by proving to the country that conservative pro-business policies lead to economic growth and prosperity. By replacing an archaic adversarial system with a modern administrative system, we have opened the doors for employers and employees to settle claims in a fair and affordable manner.”

In the spring, Speaker Shannon called the change from litigation to administrative governance of workers comp “a monumental shift.” 

Former state Rep. Fred Morgan, president and CEO of the leading private sector group that pressed for workers’ comp changes, the Oklahoma State Chamber of Commerce, expressed delight over “significant savings being realized from this year’s historic workers’ compensation reforms.

“Savings of more than fourteen percent before the new system is fully operational shows what great things can happen when the business community engages in the political process and works with the Governor, House and Senate to create an environment optimum for growth in Oklahoma.”

Commissioner Doak’s staff has posted more detailed, up-to-date information regarding workers compensation, here: http://www.ok.gov/oid/workerscompreform.html.

Beyond enactment of the shift from a litigation-based workers comp system to an administrative structure, Gov. Mary Fallin is impacting workers’ comp developments through her choice of judges in the old system, and administrative personnel in the new.

Last month, Fallin named Troy Wilson, Sr. as her first appointee and chairman of the Oklahoma Worker’s Compensation Commission that will, in the coming years, replace the judicial system. Wilson, a University of Oklahoma graduate, is a native of Blackwell, and has worked previously for Xerox and Business Unlimited Inc. The new administrative commission will have three members. 

Fallin said of her kickoff appointee to the commission, “He knows that good businesses treat their workers – especially injured workers – fairly. He’s also seen firsthand how skyrocketing worker’s compensation costs can cut into a company’s bottom line and stifle growth. These lessons will help to make Troy a balanced and experienced voice on the new Oklahoma Worker’s Compensation Commission.”

In the 2014 regular legislative session, Wilson will face Senate confirmation. 

You may contact McGuigan at Patrick@capitolbeatok.com  

A technical note to readers: The frequency of “claims for lost-time” at work is a factor in provision of compensation insurance. Companies will sometimes not renew policies due to lost-time claim frequency. 

As for average cost per case, Oklahoma’s average ran $47,000 in 2012, the highest in the central states region, where the average was only $25,000 

Concerning “loss adjustment expenses,” a common definition is those costs “assignable or allocable to specific claims.”



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