Tuesday, June 6, 2017
In a new article prepared for the IAIABC, the American Insurance Association official Bruce Wood (now retired but working as a consultant), takes his turn in critiquing both opt-out and the non-subscription plans which have become popular in Texas. Mr. Wood succinctly sets forth the familiar, persuasive arguments that opt-out defeats the workers’ compensation goals of (1) affording most workers (within a particular state, in any event), with equivalent injury recoveries; (2) promoting safety via experience rating; and (3) affording due process through independent adjudication via state agencies and courts, as opposed to internal employer panels. See Bruce C. Wood, What are the Public Policy Implications for Alternatives of Non-Mandatory Work Injury Compensation Arrangements?, IAIABC Perspectives, p.24 (March 2017).
A prominent aspect of his criticism is the dubious “free market” claim of opt-out promoters. “What is the social cost,” he queries, “of a system of work injury compensation that effectively rewards employers for refusing to assume the costs of protecting its workers, including survivors, from the financial travails of work injury or death, by permitting them a cost advantage over the competitor subscribers to the workers’ compensation system. Is this a defensible result of the free market?” Workers’ compensation, he reminds us, “is not merely a product, with its merit judged by cost alone. It is a system of social insurance governing relationships between and among employers, employees and political institutions ….”
An important part of Wood’s commentary focuses on the safety-promotion purpose of the law. He explains that classification and experience rating means that “safe employers do not subsidize injury costs generated by less safe employers…. For employers opting out or not subscribing, there is no experience rating system. Furthermore, if substantial numbers of employers do not participate, workers’ compensation will lose actuarial credibility for those employers remaining under it…. [A]lso, by not participating, employers with ‘bad’ claims experience can ‘dump’ their bad experience and avoid the financial consequences of a more hazardous workplace.”