Workers Comp Advice Given

For every premium dollar earned by insurers, they had to pay out $1.07 in compensation costs. Major businesses were threatening to leave the state, many businesses stopped carrying compensation insurance and the public looked upon the system with open cynicism.

All of that changed in 1989, when Texas lawmakers rewrote their compensation laws, reducing the role of attorneys, eliminating lump sum awards in most cases and making sure that injured employees received their benefits on time.

Loss ratios incurred by workers compensation insurers in Texas have dramatically decreased, and premiums in the Lone Star State are 35 percent below what they are in Oklahoma.

This is what two Texas workers compensation insurance experts told a group of more than 200 Oklahoma business leaders, employees and others working to find ways to reduce compensation costs here.

"Don't let anybody tell you it will take 10 years (to change the system) -- it won't," said Texas attorney Tommy L. Smith, who defends workers compensation claims in Texas.

The meeting at the Cowboy Hall of Fame was one of a series of meetings held by Lt. Gov. Mary Fallin in Oklahoma City on the issue of workers compensation reform.

Fallin said business leaders from throughout the state have identified workers compensation premiums as the biggest problem facing Oklahoma businesses. Despite a series of highly touted workers compensation reforms passed by Oklahoma state lawmakers in recent years, Fallin said state leaders "have merely tinkered around the edges" of the problem.

Despite her claims, the American Insurance Association counts Oklahoma in its list of success stories on recent workers compensation reform. Reforms of workers compensation laws in 1992 helped reduce Oklahoma's workers compensation system costs that year by 2.2 percent and reduced costs by an estimated 6.9 percent to 7.2 percent for 1993. The association has yet to report the effects of the 1994 legislation.

Smith and fellow Texas attorney Michael Phillips outlined some of the successes and pitfalls that the state of Texas has had with workers compensation reform. Both attorneys made it clear they were not advocating that Oklahoma adopt the Texas model, but noted that the two states share similar work forces in the oil industry and agriculture.

Prior to 1989, "everyone knew that the system was broke," Phillips said. "There was a breakdown of faith (in the system) by citizens. It was not viewed as a trustworthy safety net for people with work-related injuries."

Business leaders and others involved in the Texas workers compensation system began building a grass-roots campaign among small business owners throughout the state to reform the system.

"In Texas, we essentially took the lawyers out of the system," said Phillips, who maintained that prior to the reforms attorneys ran the system rather than the state. The attorney system was replaced with an ombudsman system designed to resolve workers compensation disputes before they got to court. Texas also established a strong administrative agency designed to regulate the workers compensation system.

Texas lawmakers also eliminated lump sum awards in many workers compensation cases, Smith said. Lawmakers had determined that such lump sum settlements were a driving force behind escalating compensation insurance costs. After elimination of lump sums, the number of claims filed the following year dropped 15 percent, Smith said.

The Texas attorneys warned about the potential pitfalls of seeking reform, including attempts by state legislators there to attach "poison pill" amendments that would be unacceptable to proponents of change.

"If you reduce your premiums, someone will have to lose," Smith said. "It is a matter of who loses. Be sure that it is not the injured worker."

Fallin's group plans to finalize a set of proposed reforms by Nov. 19. Many of the reforms could be presented to the state Legislature in 1997.

Al Leighton-Floyd, complex personnel manager for Tyson Foods' chicken processing plants in Broken Bow and Grannis, Ark., presented Fallin with a $200 check to help kick off a public campaign for workers compensation reform in Oklahoma.

Floyd said the cost of workers compensation at the 1,200-worker Broken Bow plant is 33 cents per man-hour, while the same cost at the 400-worker Arkansas plant is only 5 cents per man-hour. "The bottom line is that it costs a lot of money -- not just for the employer but for the workers as well," he said.

Floyd said lump sum settlements for employees who claim permanent partial disabilities are in large part responsible for keeping the cost of workers compensation costs high in Oklahoma. He said the attraction of getting a large sum to help pay for a new pickup truck causes unnecessary claims.

Rae Faltysek, workers compensation administrator for the Ford Glass Co. plant in Tulsa, welcomed the work of the compensation reform group. "All employers feel there is no hope of a fair (workers compensation) court decision," she said. "This is the first time I've felt really good that something positive will happen."