We have recently reviewed the shrinking workers’ compensation market. The potential for a disappearing workers’ compensation market driven by the reduction in injuries, heightened safety measures, and sometimes unreasonably high workers’ compensation insurance premiums also begs the question whether there really is a nationwide trend to be rid of workers’ compensation insurance all together.
In some states, laws have been passed allowing employers to opt out of workers’ compensation insurance. These states include Texas and Oklahoma. Large companies such as Wal-Mart, McDonald’s Nordstrom, and Lowe’s have helped campaign to create these opt-out provisions. This does not mean, however, that workers are left completely unprotected – it simply means that the employers have opted out of the state workers’ compensation option. In Texas, approximately a third of all employers have opted out. This includes many of the states’ largest employers. These employers typically offer other plans to their employees to cover them in the case of a work related incident. Despite the offer of alternative insurance, many of the plans offered by employers can result in lower benefits and without the state to oversee the plans and the benefits they could provide, this may produce problems in the future. For example, without the state oversight, employers in some of these opt out states can provide plans that exempt certain conditions from coverage, such as carpal tunnel syndrome or bacterial infections. It can also result in procedural requirements, such as requiring a worker to report any injury by the end of a shift if the injury is to be covered under a plan.
So far, Texas and Oklahoma are the only states that have allowed companies to completely opt out, but other states have bills that are being pushed to also have opt out options for employers. In California, a company may not opt out. Self-insurance is an option, but only in limited circumstances.
As the companies lobbying for these opt out provisions are enormous corporations with lots of resources, it is not unlikely that they will continue to push for opt out options in other states. With little oversight and heightened control over what they will be responsible to cover in the event of a work-related injury, it is obvious to see why large companies would find this situation desirable.
Opt out is not an option in California, and it is mandatory that businesses carry workers’ compensation insurance or meet the requirements to select self-insurance as an option. If you have questions about self-insurance options for your company, contact me today at 714-516-8188. I can review the requirements with you and discuss whether your company is a candidate.