OKLAHOMA OPTION: Up & Running! How Does It Work? April 23, 2014

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OKLAHOMA OPTION:

Up & Running! How Does It Work?

April 23, 2014

© Copyright 2014 PartnerSource

For More Information:

Russell Huber

Mike Moureau, JD

(214) 239-4590

(214) 239-4650

[email protected]

Brian Merrell

Oklahoma Option Hotline

(214)-740-9928

844-OKLA-OPT

[email protected]

(844) 655-2678

[email protected]

Presented by:

Bill Minick

(214) 239-4584

[email protected]

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TABLE OF CONTENTS

Page

AGENDA ... 3

INTRODUCTIONS ... 4

WHAT IS THE OKLAHOMA OPTION? ... 5

COMPARING ADMINISTRATIVE WORKERS' COMP AND THE OPTION ... 6

TIMING AND STEPS TO ELECT THE OPTION ... 8

Phase 1 1. Planning and Analysis. ... 9

2. Present Insurance Quotes for WC and the Option ... 9

3. Program Design and Documentation ... 9

Phase 2 - Qualify 4. Submit Application to OK Insurance Department ... 9

5. Receive Certificate of Qualified Employer Status from the Department ... 9

Phase 3 - Implement 6. Bind Option Insurance Coverage upon Receipt of Department Certification ... 9

7. Confirm Claims Administration Agreement and Procedures ... 9

8. Communicate Program to Employees ... 10

Phase 4 - Support and Oversee. ... 10

OPTION INSURANCE MARKETPLACE ... 10

BENEFIT PLAN DESIGN AND PROGRAM SUPPORT ... 13

EMPLOYER QUALIFICATION ... 14

FINANCIAL SECURITY ... 14

CLAIMS ADMINISTRATION ... 15

RESOURCES ... 15

ATTACHMENTS ... 15

Attachment #1 - Benefits Comparison Chart ... 16

Attachment #2 - Sample Insured Acknowledgement ... 17

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OKLAHOMA OPTION:

Up & Running! How Does It Work?

AGENDA



Introductions



What is the Oklahoma Option?



Comparing Administrative Workers’ Compensation and the Option



Timing and Steps to Elect the Option



Option Insurance Marketplace

o

Coverages

o

Approved Insurance Products

o

Agent Considerations



Benefit Plan Design and Program Support



Employer Qualification



Financial Security



Claims Administration

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INTRODUCTIONS

• Goals for Today:

o Understand How to Compare Workers’ Comp and the Option o Understand How the Option Program Actually Works

• Thanks to Legislative Leadership, Chambers of Commerce, OIBC, IIAO, and Regulatory

Agencies

• Who is PartnerSource?

o Consulting Firm that Supports Insurance Agents on Alternatives to WC

 Separate division of Arthur J. Gallagher & Co. with track record of successfully working with agents and brokers across the U.S.

 37 employees in four states

 Clients include dozens of Fortune 500 companies • All have another P&C broker

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o PartnerSource Oklahoma Option Services:

 Enhance and do not disrupt the agent/employer relationship

 Simplify a complex process for employer and agent

 Compliment the role of in-house personnel, claims payor, insurance company & defense counsel

 Different service levels based on program size & need



Execute successful programs long-term

WHAT IS THE OKLAHOMA OPTION?

• Electing to be Exempt from the Administrative Workers’ Compensation Act

o Need Certification by the OK Insurance Department

• Not a Permanent Decision – can go in or out of WC

• Program Components (see FAQ at

http://www.partnersource.com/oklahoma-option-an-alternative-to-workers'-compensation/, Q&A-12)

• Private and public entities can elect the Option

o Initial focus on private employers subject to ERISA o ERISA applicability and requirements (see FAQ‘s 19-20)

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• Features:

o Mandated minimum benefits o Financial security requirements o Guaranty funds

o No employee cost

o Exclusive remedy applies (no fault coverage) o More employee accountability

o More medical management control

COMPARING ADMINISTRATIVE WORKERS’ COMP AND THE OPTION

• Employee Injury Benefits:

o Benefits Comparison Chart (see Attachment #1)

o At least the same dollar, duration, and percentage limits

 May be higher

 Tax issue

o Non-Occupational Benefits?

 May support ERISA applicability • Full Explanation of the Process:

o Summary plan description (ERISA) and state mandated notice o Consider formal employee meetings

• More Employee Accountability: faster, more persistent care, while maintaining the

employment relationship.

Admin. WC Act Typical Option Benefit Plan * Reporting Timeframes:

Accident

Death

30 days from date of injury (after 30 days – rebuttal presumption not work-related) Claim filed within two years after date of death

24 hours (subject to good cause exception)

Claim filed within 90 days after date of death

Reporting Process Over a dozen potential forms 2-to-4 forms First Medical Treatment Within one year Within 30 days

Continuing Treatment No lapse in care more than one year from date of last payment of disability or medical

treatment or two years from date of injury whichever is greater

No lapse in care more than 90 days from date of last medical treatment

Wage Replacement

Check Issuance By insurance carrier By employer

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• More Medical Management Control: true medical management by the best physicians.

Admin. WC Act Option Act Medical Provider

Access Providers that normally take WC claims Providers that normally take WC claims, plus other desirable providers attracted by less paperwork, fast/fair pay, more employee accountability, and fewer disputes

Direction of Medical Care Employer can direct care to

approved or CWMP providers Employer can direct care to approved or network providers Employee Request for Change

in Providers Can change upon request to Commission; pick from list of 3 provided by employer

Claims administrator directs all care

Pre-Authorization

Requirements Might be specified by Commission or Commission-appointed provider

ALL care requires pre-approval. Written and verbal

pre-authorization requirements can be detailed in benefit plan; and can rely on Plan’s Physician Medical Director. Reduction in automatic/unnecessary referrals to specialists Missed Medical Appointments Can terminate benefits after

two missed appointments Can terminate benefits after missed appointment(s) – totality of claim is considered, including employee cooperation and truthfulness

Who Makes Medical

Judgments? Treating Provider (MD, chiro., etc.), Physician Advisory Committee, ALJ, Commission, and Commission’s Voc. Rehab. Director

Treating Physician and the Plan’s Physician Medical Director

Official Disability Guidelines Only provides advice to the treating provider; not mandatory

Can be Enforced by the Claims Administrator or Physician Medical Director

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• Settlements and Commutations:

o Option relies on statutory protections rather than government agency approval o Shorter tail claims

• Risks:

o Compliance with Applicable State and Federal Laws

 Rely on experienced advisors

o Benefit Claims inside the insurance policy’s self-insured retention (SIR)

o Potential future litigation on benefit claims or WC/Option law constitutionality

 Consider insurance coverage for defense costs and list of industry supporters o Potential Return to Workers’ Compensation

• Rewards:

o Better Medical Outcomes o Higher Employee Satisfaction

o

Lower Costs

TIMING AND STEPS TO ELECT THE OPTION

Stage 1: Develop

• Planning & Analysis • Insurance Quotes

• Design & Documentation

Stage 2: Qualify • Application • Certificate Stage 3: Implement • Bind Insurance

• Setup Claims Administration • Employee Communication

Stage 4: Support &

Oversee

•Ongoing Communication •Support & Oversight •Program Update

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PHASE 1

1. Planning and Analysis:

o Understand Your Options. Every employer now has a choice between the NEW

Oklahoma Administrative Workers’ Compensation Act (“workers’ comp”) and the Oklahoma Employee Benefit Plan Act (the “Option”). They have many similarities, but also have fundamental differences.

o Start early and develop a timeline. Most accounts will require a minimum of 90 days from beginning of the insurance application process to the program effective date. More time may be needed for employers that (1) desire more customization in benefit plan design, employee communications, and/or claim procedures, or (2) do not satisfy financial security safe harbors described below.

o Financial feasibility study: Consider starting here on accounts with more than ten claims per year.

2. Present Insurance Quotes for WC and the Option

o Option insurance markets described further below

 Understand differences in Option coverage and claims administration! o Can elect the Option mid-term

 Consider cost savings, any short rate cancellation penalty, and employer business priorities

o Seek quotes for Option insurance coverage that will be good for 90 days

3. Program Design and Documentation

o Develop benefit plan, employee communications, claim procedures, etc. o Process will vary by account size, as described below

 General rule: The bigger the account, the more time needed PHASE 2 - QUALIFY

4. Submit Application to OK Insurance Department

o “At least 60 days” in advance

o Application must include (among other things) proof of coverage or a “bindable“ quote. Financial security rules and the qualification process are described further below.

o $1,500 “non-refundable” filing fee.

o May require detailed dialogue back and forth with the Department on satisfaction of qualification requirements.

5. Receive Certificate of Qualified Employer Status from the Department o This is a mandatory prerequisite to Option program implementation. PHASE 3 - IMPLEMENT

6. Bind Option Insurance Coverage upon Receipt of Department Certification

o May require a “no loss” letter

7. Confirm Claims Administration Agreement and Procedures

o Will the insurance carrier or a TPA handle claims?

Is a separate contract required?

 There will be significant variability in the quality, compliance and results from different claim administrators, based, in part, on the training, support and oversight they receive.

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8. Communicate Program to Employees

o Distribute “summary plan description” and notice of Option election (at a minimum) o Consider formal rollout: “Sell the program” to enhance employee appreciation and

compliance with program requirements

OPTION PROGRAM EFFECTIVE DATE PHASE 4 – SUPPORT AND OVERSEE

o Ongoing communication of expectations for employees

 Report injuries timely

 Go to approved medical providers

 Follow the treatment plan

 Return to work

o Support claim adjusters in plan interpretation and claim decisions o Accountability from all service providers

o Program updates o Measure results

OPTION INSURANCE MARKETPLACE

• Three Coverages:

o Benefits

 Occupational Injury

 Non-Occupational?

o Employers Liability – “exclusive remedy” applies, but consider:

 Same employers’ liability under Option as under WC

 “Action Over Claims”

• liability to a third party

• by reason of a claim against the employer by that third party • to recover damages claimed against such third party

• as a result of bodily injury to the employee

o Example: employee who was injured using a piece of machinery that the employer had not properly maintained. In addition to the benefits received, the employee also sues the manufacturer of the equipment. In turn, the manufacturer of the equipment sues the employer for contributory negligence due to poor maintenance.

 “Loss of Consortium” or “Consequential Injury” - consequential injury to a spouse, child, parent, brother or sister of the injured employee

 “Dual Capacity Suits” - damages because of injury to your covered employee in the course and scope of employment, claimed against you in a capacity other than as employer

• Example: lawsuit brought by an injured employee, against the employer when the injury arises from a product the employer manufactures. In such a case, the employer is liable not only as an employer but also as a manufacturer.

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o Defense Costs – on claims for:

 Benefits

 Employers Liability

• Approved Insurance Products:

o Great American Security Insurance Company

 Designed for employers of every size

 Admitted P&C company, A+ (Superior) XIII

 Access: Employers Comp – www.gaig.com/eca or 800-299-5250  Statutory Benefits + Employers Liability + Duty to Defend

 Flexible benefit sublimits (at or above statutory requirements)

 EL coverage up to $1mil, with no annual policy aggregate limit

 SIR’s from $1,000 up (or from $5,000 up for trucking) • Employer should have some “skin in the game”

• Key factor in success: employer cares and gets involved

o Requires no additional staff, but Option is not designed for employers that just like to write checks and be done!

 Clean policy form wraps around Injury Benefit Plan • Carrier template, enhanced or custom plan

 Carrier handles claims, unless TPA approved with SIR at or above $50,000

 Employer is the “Plan Administrator”

 Standard retail agent commission = 12%

o Safety National Casualty Corporation

 Designed for large employers with active risk mgmt programs

 Admitted P&C company, A+ (Superior) XII

 Preferred Wholesale Partner: Jerry Murphy, AmWINS – www. AmWINS.com; 214-561-6866

 Statutory Benefits + Employers Liability + Defense (inside the SIR and limits)

 EL coverage of $1mil or higher per occurrence

 SNCC requires a minimum of 5 years of payroll and loss history.

 Stop loss aggregate coverage possible with five years of loss data

 SIR’s generally start at $350,000

 Surety bonds available where needed to comply with Department security requirements

 Clean policy form wraps around Injury Benefit Plan o Custom plans only

 Approved TPA must be selected to handle claims.

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o Atlantic Specialty Insurance Company (One Beacon)

• Carriers Developing Products (among others):

o American Fidelity and Essex Insurance Company

 Midlands Management programs

 Admitted carriers

 Statutory benefits + EL coverage up to $1 mil + Defense Costs

 SIR’s from $25,000 to $350,000

 Standard retail agent commission = 12.5%

o Pan American Life Insurance Group

o Strategic Comp

• Insurance Agent Considerations

o Carrier Reputation in Texas Nonsubscription

o Experience and Depth of Resources

o Client Goodwill – employers like choices and appreciate a competitive marketplace. o Statutory Protection for Compliant Plans (Title 85A, Section 204.I.)

o Contractual Protection through Insured Acknowledgements (see sample at

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BENEFIT PLAN DESIGN AND PROGRAM SUPPORT

Three Types of Benefit Plans:

1. Carrier Template – most insurance companies offering low SIR policies will supply a standardized benefit plan and “summary plan description” (SPD).

2. Enhanced – some insurance companies allow their template plan to be “enhanced” with

additional employee accountability and program management controls. Good for small and mid-size employers that desire more control and support, but ease of setup.

3. Custom – if the employer takes a high enough SIR, the insurance company may approve a

customized plan. Good for large employers seeking maximum control over a significant volume of claims.

Consider the insured’s average annual injury claim frequency: Program

Type

Carrier Template

PartnerSource

Enhanced

PartnerSource Custom

Claims/yr 0-2 3-10 11+

What is it?

• Bundled policy,

documentation, and claims administration.

• Turn-key solution from

insurance carrier.

• Qualification handled by

employer and agent.

• Bundled, but more

employee accountability and program management controls.

• Branded to your company.

• Qualification and setup

support.

• Ongoing claims support.

• Higher retention accounts.

• TPA claims administration

option.

• Fully customized

documentation & communications. • Full qualification and

project management.

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EMPLOYER QUALIFICATION

• Advance Filing. The Department requests employer applications for approval as a “Qualified Employer” be made at least 60 days in advance of the planned effective date for the Option program.

• “Qualified Employer Election Form”

o Electronic filing with the Oklahoma Insurance Department through “OPTins” o $1,500 Filing Fee – electronic funds transfer

o Employee Injury Benefit Plan satisfying statutory minimum requirements o Claims Administrator identified

o Financial Security requirements met (see below)

FINANCIAL SECURITY

Three Ways to Satisfy this Requirement:

1. Program is “Fully insured” or “Guaranteed Cost” – insurance company is obligated to pay claims from first dollar and liable for the full compensation obligation.

2. Satisfy a Financial Security “Safe Harbor” - rules are being drafted and subject to further guidance from the OK Insurance Department. As examples only:

o Low SIR Safe Harbor = SIR up to $25,000.

 Employer bears a relatively small amount of risk.

o High SIR Safe Harbor = SIR between $25,001 and $350,000.

 Employer criteria:

• workplace safety plan supported by a written safety manual,

• continuously engaged in business for at least (5) years with no change in majority control within the prior (2) years,

• average payroll of at least $1 Million in each of the preceding three (3) years,

• shareholder’s equity not less than $500,000, and • 100 or more employees.

 Determination:

• An “Approved SIR” amount will be determined based upon Department review of the employer’s financial statements and loss runs.

• Collateral may be required in a predetermined amount if the desired SIR amount is higher than the Approved SIR amount.

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CLAIMS ADMINISTRATION

Types of Claims Administration: • Insurance Carrier

• Third Party Administrator • Self-Administered

Key Issues:

• Claim Procedures

o Clarity and Accountability

 Employer, supervisor, employee, and service provider roles o Injury Form Claim Kit

 Available from insurance carrier or TPA or customize

• Provider Network and Medical Management

o Key to Option Program Success

 Holding the Best Providers Accountable and Treating them Fairly

• Payment Processes

o Reimbursement or Pay-on-Behalf

o Short-term wage replacement (TTD and TPD) on normal payroll

 Carrier reimbursement should be available within 2 or 3 days

• Claim Review Process – see Attachment #3

o Engagement by the Employer and the Employee o Review of Internal Appeals

 Independence

 Building the Administrative Record

• Ensuring Process Quality and Integrity • PartnerSource can manage this process o Access to the Courts

RESOURCES:

PartnerSource website:

http://www.partnersource.com/oklahoma-option-an-alternative-to-workers'-compensation/. Links to –

• Administrative Workers’ Comp Act and Option Act • Insurance Department rules and forms

• Workers’ Compensation Commission rules • Frequently Asked Questions

• Etc.

ATTACHMENTS:

• Attachment #1 - Benefits Comparison Chart

• Attachment #2 - Sample Insured Acknowledgement

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Attachment #1

Benefits Comparison Chart

New OK

Workers’ Comp MinimumsOK Option NonsubscriptionTypical TX Medical

- Duration 100% No limit 100% No limit

100%

120 wk duration and dollar limit

Vocational

Rehabilitation Up to 52 weeks (+52) Up to 52 weeks (+52) If specified, up to Plan dollar or duration limit Temporary Total Disability - Waiting Period - Duration Limit 70% of AWW (up to $560) 4th Day 104 wks (+52) 70% of AWW (up to $560) 4th Day 104 wks (+52) 85% to 90% of AWW No waiting period 120 wks Temporary Partial Disability - Duration 70% of difference b/w pre & post AWW up to 52 wks

70% of difference b/w pre & post AWW up to 52 wks 85% to 90% up to 120 weeks Permanent Total Disability - Duration 70% of AWW (up to $801) until longest of SS max retirement age or 15 years

70% of AWW (up to $801) until longest of SS max

retirement age or 15 years Not included Permanent Partial Disability (impairment) - Max Duration 70% of AWW (up to $323) 350 weeks max

(for body as a whole)

70% of AWW (up to $323) 350 weeks max

(for body as a whole) Not included

Dismemberment 70% of AWW (up to $323) X # of wks for scheduled member

70% of AWW (up to $323) X # of wks for scheduled member

% of max benefit limit for scheduled member

Disfigurement Up to $50,000 Up to $50,000 Not included

Death

Surviving Spouse Children

$10,000 Funeral expenses $100,000 + 70% EE’s AWW Lump Sum + % of EE’s AWW depending on # of children

$200,000

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Attachment #2

Sample Insured Acknowledgement

This will acknowledge that in presenting insurance coverage under the Oklahoma Employee Injury Benefit Act (the “Oklahoma Option”), the insurance agent named below (the “Agent”), explained to me the following about the Oklahoma Option and the Oklahoma Workers’ Compensation Act (the “WC Act”). As an employer, I am aware of the importance of these disclosures and, to my knowledge, no statements contrary to the following were made by the Agent to anyone employed by or representing our company:

Workers’ compensation insurance provides coverage that is different from insurance coverage under the Oklahoma Option. I am aware that:

1. My company has responsibilities (like notice to employees and minimum benefit commitments) that must be complied with under the Option Act and my company will adopt a benefits program compliant with the Option Act.

2. As an employer voluntarily electing to be exempt from the WC Act, I should also consider my

responsibilities to comply with the written benefit plan, employee communication, fiduciary, claims, and other rules and requirements of the Employee Retirement Income Security Act (“ERISA”).

3. Like the WC Act, the Option Act provides exposure to employers liability claims by injured employees. 4. If employees are injured while working in another state, this policy may not apply or provide the same

benefits as required for injured workers in that state, unless this policy is specifically endorsed to do so or I purchase a separate policy to cover injuries occurring in such other states.

5. A safety program could help reduce the frequency and severity of on-the-job injuries and help our company provide a reasonably safe place to work for our employees.

I acknowledge the Oklahoma Option is being elected as my company’s choice and Agent did not induce me or any representative of my company to reject workers’ compensation insurance. I have sought, or have been given the opportunity to seek, the advice of competent legal counsel and/or other experienced professional advisors on this decision and in meeting the provisions of the Oklahoma Option and other applicable laws. Signed this _____day of ___________________ 201 __

__________________________ ___________________________ Agent Name (please print) Company Name (please print) __________________________ ___________________________ Agent Signature Company Signature

___________________________ Name and Title (please print)

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t

http://www.partnersource.com/oklahoma-option-an-alternative-to-workers'-compensation/

www.gaig.com/eca

http://www.partnersource.com/oklahoma-option-an-alternative-to-workers'-compensation/