Update on SC’s Proposed Workers’ Compensation Opt-Out Bill

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In May 2015 a new workers’ compensation bill was introduced to South Carolina’s lawmakers. House Bill 4197, known as “The South Carolina Employee Injury Benefit Plan Alternative,” contained an opt-out option for employers in the state from the state’s traditional workers’ compensation insurance program. The employers who would choose to opt-out would be required to obtain insurance coverage for their injured employees via a qualified employer injury plan. LexisNexis.com reports that the National Workers’ Compensation and Disability Conference predicted that this breed of workers’ compensation opt-out legislation would be popping up in states across the country in 2016. However, South Carolina’s opt-out bill seems to have been put on hold as it has not be revisited in months, and other states have been slow to adopt opt-out legislation as well. But why is proposed Bill 4197 currently stalled? This article provides a brief overview of South Carolina’s proposed opt-out legislation and examines how opt-out bills in other states have worked to stall South Carolina’s opt-out bill.

South Carolina’s Employee Injury Benefit Plan Alternative 

In a nutshell, if Bill 4197 is passed into law it would allow employers in South Carolina to opt-out of the state’s workers’ compensation insurance system, provided that they secure alternate insurance that meets minimum levels prescribed in the bill. This law would not replace South Carolina’s current workers’ compensation system, but would simply provide employers with an alternate option. This law would impact most employers in South Carolina as under our state’s current workers’ compensation laws, most employers who have more than four employees are required to carry workers’ compensation insurance obtained via the South Carolina Department of Insurance. According to InsuranceJournal.com other key components of the bill include:

  • Employer benefit plans would be allowed to provide lump-sum payouts to injured employees under certain circumstances,
  • Employers would be prohibited from charging employees a fee for enrolling in the benefit plan, and
  • South Carolina’s Workers’ Compensation Commission would have the option of requiring employers to make a deposit in order to secure the payment of benefit plan liabilities.

If passed, Bill 4197 would greatly alter South Carolina’s workers’ compensation model. However, it is unclear whether this change would be for the better or not, and interested parties are arguing passionately both for and against the proposed legislation. An article on InsuranceJournal.com outlines the main arguments being made on both sides and reports that the following key arguments have been expressed:

  • Arguments in Favor of the Bill 4197: The Association of Responsible Workers’ Compensation Alternatives (ARAWC) is in favor of the bill because the organization claims that injured employees receive the best care and protection when competition exists in the market. The ARAWC supports the proposed legislation because they believe that it would allow much needed competition to enter South Carolina’s workers’ compensation marketplace.
  • Arguments against Bill 4197: On the other hand, the American Insurance Association (AIA) opposes opt-out options and opposes the bill. The AIA argues that under the current system injured workers are guaranteed uniform administration of benefits, and that under the proposed opt-out system injured employees would be entitled to unequal benefits depending on who they work for. The AIA argues that this unjust discrepancy would result under the new system due to the fact that employers would largely be able to design their own workers’ compensation insurance plans that would be subject to very little state oversight.

Similar Bills in Other States 

South Carolina is not the only state that has attempted to enact a workers’ compensation opt-out provision. LexisNexis Legal Newsroom reports that several other states have also explored legislation that would allow employers to opt out of traditional workers’ compensation systems. For example, Arizona, Arkansas, Indiana, Georgia, Tennessee, Texas, Wisconsin, and West Virginia and have all considered similar opt-out legislation. In fact, Oklahoma passed the first workers’ compensation opt-out law, the Oklahoma Employee Injury Benefit Act, in 2013. Oklahoma’s law was passed under the impression that the law would allow for increased transparency in workers’ compensation and would allow employers to take control of their injured employee’s treatment in order to provide more specialized care and to help them get back to work faster. Unfortunately, LexisNexis reports that there was a disconnect between what was promised and what actually occurred and sites to numerous employer opt-out plans that contained provisions allowing employers to deny benefits that would have been afforded to injured employees under the state’s traditional workers’ compensation system.

Why is South Carolina’s Opt-Out Bill Stalled?

Both South Carolina and Tennessee have proposed opt-out legislation that is stalled in their legislatures. According to BusinessInusrance.com these standstills may indicate that opt-out legislation is either dead or slowly dying. But why did this type of legislation, which was touted as being a top workers’ compensation issue to watch in 2016, come to such an abrupt halt? The answer likely revolves around a couple of key workers’ compensation decisions that were announced earlier this year. One of these cases came from the Oklahoma’s Workers’ Compensation Commission in the case of Vasquez v. Dillards in which the commission ruled that Oklahoma’s opt-out legislation is unconstitutional and that because the company’s insurance plan was more restrictive than Oklahoma’s traditional workers’ compensation system that the plan was inherently unfair. However, legal experts anticipate that this case will be appealed and therefore the matter does not yet seem to have a final resolution. As Oklahoma pioneered opt-out workers’ compensation legislation, it is very possible that South Carolina’s out-out bill has been stalled until legislation relating to Oklahoma’s opt-out statute has been resolved. However, regardless of why Bill 4197’s progress has been slow, opt-out provisions are still very much on the horizon in South Carolina and is definitely an area that those interested in workers’ compensation should keep an eye on.

Speak to a Legal Expert

Workers’ compensation claims can be complicated. As such, if you were injured while on the job in South Carolina it is definitely advisable to consult with a competent workers’ compensation attorney about your legal options as soon as possible. Contact the experienced workers’ compensation lawyers in Rock Hill at the Elrod Pope Accident & Injury Attorneys at our office in either Rock Hill or Lake Wylie to schedule a free consultation.

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