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National conversations and controversy over workers comp opt-outs

A century ago, Texas started allowing employers to opt out of state-mandates workers’ compensation benefits. In spite of opposition and controversy, it has stood the test of time. In those 100 years, other states have tried to model their worker’ compensation programs after the Lone Star State.

Texas continues to stand alone.

Many decades later, conversations throughout the country may lead to more serious consideration by states to adopt alternative compensation models. A report out of Texas released last week predicted national growth in opt-out options. Other states have tried with varying levels of success, including Texas’ neighbor to the north.

Oklahoma passed an opt-out measure in 2013 that was ruled unconstitutional by the state Supreme Court last year. Many though the high court ruling would have a chilling effect on further efforts. Yet, conversations on opt-out options continue throughout the country. Other states seem to be testing the waters of a new direction in workers’ compensation coverage.

The most recent effort is taking place in Arkansas. Senate Bill 653 proposes an alternative benefit system under the state’s workers compensation act. To date, it is the only legislation of that type under consideration in the U.S. In the past, South Carolina, Tennessee and Florida legislatures have also considered bills but haven’t filed anything to date.

Claiming that the Arkansas bill is an attempt to keep the alternative workers comp conversation going, the American Insurance Association, asserted that they take this and all similar bills seriously. The AIA said that it would continue talks with Arkansas legislators to dissuade the progress of legislation that would create an unequal system of benefits for employees.

Supporters of opt-outs claim that legislative momentum is growing organically. They believe that market-driven solutions result in competition that has already driven down employer costs, premium rates and claims disputes. In their opinion, Texas’ nonsubscription model not only improves benefits for injured workers, but also provides faster claims payouts and closures.