Okla. Workers’ Comp Reform Passes in Special Session

June 20, 2005

Oklahoma lawmakers passed workers’ compensation reform legislation, Senate Bill 1X, in a special legislative session that began May 31, the end date for the regular session. The bill was sent to Gov. Brad Henry who promptly signed it.

Insurer groups, legislative leaders and the governor all expressed their satisfaction with the lawmakers’ progress in addressing the state’s workers’ comp problems. The Oklahoma Department of Labor, however, expressed concern over the portion of the measure that repeals two sections of Oklahoma law and abolishes the Certificate of Non-Coverage (CNC) for independent contractors. The repeal is effective July 1, 2005.

According to an announcement released by the governor’s office, a preliminary estimate from the National Council on Compensation Insurance indicates the compromise agreement would achieve cost savings of as much as $108 million each year. The Oklahoma State Chamber gave the measure an “A” rating, saying in a report that it is “probably the best workers’ compensation bill ever seen in the state of Oklahoma.”

The American Insurance Association applauded passage of the bill, calling it a “significant victory for AIA and the business community.”

The bill adopts a use-and-file rating system, which both the AIA and the Property Casualty Insurers Association of America said would streamline the rating process.

“Most importantly, this new system should encourage more competition in the market, which is a key factor in improving the overall health of the system,” said John Marlow, AIA assistant vice president, southwest region. “Insurance companies also will be able to enter the Oklahoma market without receiving prior approval from the state, which should be another boost to competition.”

PCI Vice President and Regional Manager Joe Woods called the measure a “step in the right direction,” adding that it “will help to reduce medical and legal costs while ensuring that injured workers receive the quality medical care they need.” Woods said, however, that the “bill falls short of fully reforming the system. Workers’ compensation will certainly be on the agenda again in 2006.”

According to the state labor department, the CNC program, created in 1994, was intended to help out bona fide independent contractors by exempting them from the Workers’ Compensation Act. The DOL said the program had consistently been criticized as being ineffective, but pointed out that for more than 20,000 Oklahomans, the new measure does not provide a gradual program phase out provision or any alternative to replace the CNC program.

Without an alternative mechanism to exempt legitimate independent contractors from the workers’ compensation system, the full impact of this change for both the cardholders and the labor department is uncertain. Because the program must be phased out at the end of June, new CNCs can only be issued to those independent contractors who need immediate documentation in order to get paid for current jobs. Due to this new legislation, all existing CNC cards will be void as of July 1, 2005.

The DOL noted that concerned business owners and CNC cardholders should discuss the implications of the new law with a workers’ comp insurance provider.

The workers’ compensation reform package passed in SB 1X includes four major areas:

  • Increased benefits for workers, including increasing benefits for disfigurement from $20,000 to $50,000, death benefits from $20,000 for a spouse to $100,000, and from $5,000 for a surviving child to $25,000 for a surviving child.
  • Reducing legal costs by allowing lawyers that strike settlement deals to make money only on the amount they obtain for a client above the settlement offered by the employer, and eliminating “dueling doctors” that fuel lawsuits and increase costs. Workers’ comp judges will appoint an independent doctor to provide evaluations of injured workers.
  • Reducing medical costs for workers and increasing workplace safety by encouraging enrollment in certified workplace medical plans to allow more efficient and effective use of medical services by employees; offering a $1,000 tax exemption for any company in the state that uses the Safety Pays program; and providing tax incentives for employers who make it possible for employees to return to work quickly and safely.
  • Increasing competition by adopting the use-and-file system for insurance rating. Insurance companies will be able to enter the Oklahoma market without receiving prior approval from the state.

    According to The Oklahoman, some union leaders and a lawyers’ group think the legislation does not do enough for injured workers, particularly in the area of temporary disability payments to workers with soft tissue injuries that do not require surgery.

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