Budget & Tax , Law & Principles
Mike Brake | April 7, 2017
Workers' comp reform is working
By Mike Brake
For decades, advocates of growth and prosperity for Oklahoma argued for three crucial reforms: income tax cuts, right to work, and reform of our costly, unwieldy workers' compensation system.
Cuts in the top income tax rates began in the 1990s and have continued sporadically since. Right to work won voter approval in 2001. And in 2013, state legislators finally passed a sweeping workers' comp reform measure that transformed Oklahoma’s system from an adversarial one to an administrative system designed to be fair to all while controlling costs.
It was necessary. Before the reforms, Oklahoma workers' comp premiums were the sixth-highest in America. In fact, for the five-year period from 2006 to 2010, Oklahoma premiums rose a staggering 23.4 percent, the second-highest rate of increase in the country.
If there is one indicator of the success of the 2013 reforms, says Robert Gilliland, chairman of the Oklahoma Workers' Compensation Commission created by the new law, it is that from 2012 to 2016 (a period only partially covered by the reforms) Oklahoma premiums recorded a 34.3 percent drop—the best in the nation.
In hard dollar terms, workers' comp premiums paid by Oklahoma employers in 2013 before the reforms passed totaled $961.5 million. In 2015, premiums totaled $792.7 million, despite an increase in employment in those two years of 2.45 percent. When you adjust for that increase, the amount paid by employers for workers' comp insurance dropped in the first two years under the new system by 19.5 percent.
“Employers could use those savings to hire more workers' or expand their business or add new safety features to better prevent injuries,” Gilliland said.
Workers' compensation was originally designed to protect injured workers' without driving their cases through the civil courts. It was insurance, not a lawsuit system, but in Oklahoma for most of our state’s history it was hard to see the difference. Cases dragged endlessly through the special Workers' Compensation Court as medical costs skyrocketed along with legal fees. As in any adversarial legal system, it was to the benefit of many lawyers to seek delays and ratchet up fees. The result was that sixth-highest premium ranking in a state where other costs of doing business usually ranked in the bottom 10.
Some joked in those years that the Oklahoma Workers' Compensation Court of Existing Claims was more like a giant cash register or slot machine where lawyers lined up to yank levers and dispense insurer-provided dollars, grabbing the first third or so for themselves. It was no wonder that some employers, looking at the graphs showing ever-soaring workers' comp costs, opted to go elsewhere.
The 2013 law abolished the old court system and replaced it with a three-member commission who in turn appoint administrative law judges to hear the cases. (Cases filed under the old law are still winding through a Court of Existing Claims which is expected to work itself out of existence by 2020, further cutting costs.)
Gilliland says most cases are now adjudicated within 8 to 10 months, compared to the year or two that was common under the old system. That boosted medical costs significantly to the point where amounts paid out by insurers were dramatically out of balance. Today, he said, that balance has been largely restored.
Another crucial reform curtailed the often-notorious practice of “doctor shopping,” where lawyers referred injured workers' to physicians known to be overly generous in awarding disability ratings. Under the new system the employer selects treating physicians from a suggested pool of no more than three. That also allows for continuity of care.
The new goal of the system is to help injured workers' get well and return to work where possible, or receive fair and prompt compensation where their disability proves permanent. That’s quite a contrast from the old lever-yanking money machine.
But injured workers' are hardly at the mercy of heartless employers and insurance companies, as some critics of the reforms would like to claim. Claimants still have a right of appeal, Gilliland says.They can appeal to the three commissioners within 20 days after a judgment has been rendered, and those appeals are decided on a same-day basis. But so rare are such appeals that of some 11,000 cases processed under the new system in its first three years, only 165 reached the commissioners.
What, aside from the clear savings of more rapid handling of cases, has led to the dramatic cost reductions? There have been judicious reductions in benefits by about 30 percent and limitations on the length of eligibility for some temporary disability payments, Gilliland says. But perhaps the most significant savings has resulted from the reduction in filed cases.
In 2012, Gilliland says, there were about 15,000 workers' compensation cases filed with the old court. In 2014, after the new system was implemented, those filings fell to an astonishing 3,800. They rebounded in the second and third years under the new system to some 6,200 and 7,700, respectively, but the trend line was clear. There were significantly fewer workers' comp cases entering the system at one end, and those being handled were being decided more rapidly at the other.
Those numbers, Gilliland says, show that many of the cases previously filed were marginal at best.
“You don’t suddenly see a bunch of people not getting hurt,” he says, noting that lawyers who have continued to handle workers' comp cases seem to be doing a better job of screening them.
Of course some of those lawyers have resisted damage to the golden-egg-laying goose that the old system represented. There have been a number of court cases filed seeking to declare portions of the reform law unconstitutional, though Gilliland says those challenges have merely “nibbled at the edges” and have not seriously changed the fundamental nature and purpose of the law.
One successful challenge ruled an opt-out provision in the law unconstitutional, but that only impacted 65 employers. Other challenges have clarified provisions dealing with injuries suffered in employer parking lots and those from cumulative overuse, and another challenge still pending has delayed conclusions in a number of disability cases.
But Gilliland says the spirit of the law is intact, as are its beneficial effects. Among them is the new image of Oklahoma as a state where workers' comp operates under a fair and balanced system, where costs are sensibly controlled, and where businesses can use that money they save to grow and thrive.
Mike Brake is a journalist and writer who recently authored a centennial history of Putnam City Schools. He served as chief writer for Gov. Frank Keating and for Lt. Gov. and Congresswoman Mary Fallin, and has also served as an adjunct instructor at OSU-OKC.
Mike Brake is a journalist and writer who recently authored a centennial history of Putnam City Schools. A former reporter at The Oklahoman (his coverage of the moon landing earned a front-page byline on July 21, 1969), he served as chief writer for Gov. Frank Keating and for Lt. Gov. and Congresswoman Mary Fallin. He has also served as an adjunct instructor at OSU-OKC, and currently serves as public information officer for Oklahoma County Commissioner Brian Maughan.