Policy Documents

Research & Commentary: Oklahoma Workers’ Compensation Reform

March 1, 2013

Oklahoma’s workers’ compensation insurance system is currently the sixth most expensive in the nation and in dire need of reform. The costs of maintaining the system are high, and the size and burden of the system are a strong factor in businesses’ choice to expand or relocate.

Oklahoma is one of only two states that use a court-based system: 10 workers’ compensation judges across the state hear disputed cases, and the decision of the judges is considered final. Critics say the system creates a disincentive for employees to return to work because they can receive 70 percent of their salary tax-free. Also, the use of judges rewards litigation and slows down the resolution of new claims. 

According to the National Council on Compensation Insurance, the cost of workers’ compensation is driven less by health care costs and more by its system of adversarial adjudication and processing of claims. 

According to a new policy report from Lt. Gov. Todd Lamb, Oklahoma’s rate of workers’ compensation claims filed per 100 workers shrank from 1.97 in 1990 to 0.93 in 2011. Although the decrease in claims is a step in the right direction, the cost per claim has risen dramatically. In 1990 Oklahoma’s average permanent partial disability order was $12,069; in 2011 the average cost skyrocketed to $33,681. 

In 2012, Oklahoma lawmakers considered moving to a voluntary workers’ compensation system similar to that of Texas. Employers would be allowed to opt out of the state system if they establish an alternative plan. The goal of the proposal was to encourage competition among providers in an active market, giving employers more choices for the insurance. A private workers’ compensation system, while creating more competition in the market, doesn’t mean automatic rate cuts for everyone. However, the track record of programs that opened up workers’ comp markets generally found private competition lowers claims rates and improves service. 

Reforms that move Oklahoma away from the adversarial model to a voluntary or “opt out” model are needed to ensure the state remains economically competitive. 

The following articles examine various efforts by states to manage workers’ compensation costs.

Once More into the Breach: The Path to Effective Workers’ Compensation Reform in Oklahoma
http://heartland.org/policy-documents/once-more-breach-path-effective-workers-compensation-reform-oklahoma
Andrew C. Spiropoulos of the Oklahoma Council of Public Affairs outlines a legal and structural path for implementing comprehensive reform in Oklahoma. 

Group Targets Workers’ Compensation System in Oklahoma
http://newsok.com/group-targets-workers-compensation-system-in-oklahoma/article/3750785
Michael McNutt of the Oklahoman discusses the efforts being undertaken by Republican legislators in Oklahoma to enact workers’ compensation reform during the current 2013 legislative session. 

Time to Replace Oklahoma’s Broken, Adversarial Workers’ Compensation System
http://www.ocpathink.org/articles/2180
Jonathan Small of the Oklahoma Council of Public Affairs contends Oklahoma should replace its workers’ compensation system with an administrative system: “Policymakers have an opportunity to make this session an historic one by replacing our broken, adversarial worker’s compensation system with an administrative system that actually helps workers, families, employers, taxpayers and the state achieve their greatest potential.” 

Lt. Governor’s 2013 Policy and Issues Report
http://heartland.org/policy-documents/lt-governors-2013-policy-and-issues-report
Oklahoma Lt. Governor Todd Lamb outlines in this Policy and Issues Report several topics he believes policymakers need to address in the 2013 legislative session, with special emphasis on workers’ compensation reform. Lamb derived these recommendations from his town hall forums and personal meetings with small-business owners across Oklahoma. 

Research & Commentary: Fee Schedules for Workers’ Comp Reform
http://heartland.org/policy-documents/research-commentary-fee-schedules-workers-comp-reform
Workplace safety has improved dramatically over the past few decades, yet the cost of workers’ compensation insurance has risen. One cost-containing effort has involved implementation of fee schedules placing a ceiling on provider reimbursement. Fee schedule proponents argue reasonably limiting payments to providers is effective and necessary in reducing the cost of workers’ compensation insurance. This Research & Commentary examines various efforts by states to manage workers’ compensation costs through fee schedules.

Workers’ Compensation: A Guide for Policy Makers
http://heartland.org/policy-documents/workers-compensation-guide-policy-makers
In a guide for legislators, the American Legislative Exchange Council explains the workers’ compensation system—how it developed and how it works—and examines emerging policy issues. 

A Study of the Privatization of State-Chartered Workers’ Compensation Funds
http://heartland.org/policy-documents/study-privatization-state-chartered-workers-compensation-funds
Mehmet E. Ozbek of Colorado State University presents the findings of a study identifying the effects of privatizing state-chartered workers’ compensation funds. 

A Study of Issues Related to Privatization of Workers’ Compensation in Nevada
http://heartland.org/policy-documents/study-issues-related-privatization-workers-compensation-nevada
Kathryn A. Mack of the University of Nevada-Las Vegas examines legislative initiatives for reform of workers’ compensation in Nevada. Her examination focuses on issues relating to open competitive markets, market pricing, privatization of a state fund, and cost controls that have affected workers’ compensation in the state. 

Six Steps to Improve Workers’ Compensation
http://news.heartland.org/newspaper-article/2008/09/01/six-steps-improve-workers-compensation
Writing in Health Care News, John C. Goodman, president of the National Center for Policy Analysis, discusses six policy initiatives for addressing problems with workers’ compensation. 

Open Competition, Workers’ Compensation Costs, and Injury Rates
http://heartland.org/policy-documents/open-competition-workers%E2%80%99-compensation-costs-and-injury-rates
Anthony J. Barkume and John W. Ruser of the Compensation Research Group at the Bureau of Labor Statistics assess the impact of rate deregulation on workers’ compensation insurance, finding that jointly dropping both prior approval and rate bureau pricing leads to a decline in both injury claims and workers’ compensation premiums. 

This Year in Workers Comp, the Oklahoma Bowl Is the One to Watch
http://www.workerscompensation.com/compnewsnetwork/from-bobs-cluttered-desk/16043-this-year-in-workers-comp-the-oklahoma-bowl-is-the-one-to-watch.html
Robert Wilson argues that significant workers’ compensation reform is both possible and likely in the 2013 legislative session in Oklahoma: “I suspect that the reformers have the upper hand, and that we will see significant changes in Oklahoma this year. Legislative leaders there are concerned about business opting out of the state altogether, and are likely to take the steps they deem necessary to prevent that from happening.” 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the FIRE Policy News Web site at http://news.heartland.org/insurance-and-finance, The Heartland Institute’s Web site at www.heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org

If you have any questions about this issue or The Heartland Institute, contact Heartland Institute Legislative Specialist Matthew Glans at 312/377-4000 or mglans@heartland.org.