Workers’ compensation provides insurance benefits for employees injured on the job. Under South Carolina law, most businesses with four or more full-time employees must carry workers’ compensation insurance. However, a bill introduced earlier this year in the South Carolina legislature may allow certain employers to “opt out” of the state-supervised workers’ compensation system. If adopted, this legislation would significantly impact the rights of all workers (and taxpayers) in South Carolina.
What Does It Mean to “Opt Out” of Workers’ Compensation?
The proposed legislation would create a “South Carolina Employee Injury Benefit Plan Alternative.” The basic idea is employers could elect to withdraw from the traditional workers’ compensation system, which is regulated by the state, and create their own “alternative” plans. The legislation does specify some minimum requirements for any such alternative. For example, total disability benefits must equal at least 75 percent of an injured employee’s average weekly wages, which is actually higher than the 66 percent mandated under the state system. An alternative plan must also provide at least 500 weeks of injury benefits, which is the same as the state system.
Does This Mean the Alternative System Is Better for Workers?
Not necessarily. While proponents of opting out claim their goal is to provide higher benefits, it comes at the expense of important procedural safeguards for injured workers. The whole point of opting out is to replace state regulation with privately written plans. This means the employer can unilaterally dictate when and how workers receive benefits.
It should be emphasized opting out is a new and largely untested concept. Texas and Oklahoma are the only states which currently permit the practice. And according to a recent investigation published by National Public Radio and ProPublica, “The plans in both Texas and Oklahoma give employers almost complete control over the medical and legal process after workers get injured.” In many cases, employers write their plans to severely restrict who is eligible for injury benefits. Employees may also be presented with “take it or leave it” offers which can result in a total loss of benefits. And unlike traditional workers’ compensation, where employees can seek review of an adverse decision with an independent state agency, opt-out plans often permit appeals only to an internal review committee appointed by the employer.
Additionally, legislation such as the proposed South Carolina bill severely curtails the ability of state regulators to oversee alternative plans. This means there is no guarantee private plans comply with the minimum requirements set forth in the opt-out law. “In Oklahoma,” NPR and ProPublica reported, “we found that most plans blatantly violate the law, yet regulators say they are powerless to respond.”
How Else Would Opting Out Affect My Workers’ Compensation Benefits?
One often overlooked consideration is taxes. State workers’ compensation benefits are not subject to income tax. But benefits paid out under these proposed alternative plans would be. This can have a significant impact on an injured employee’s net compensation. ProPublica noted in its review of Oklahoma’s opt-out law that “80 percent of the plans actually provide lower benefits.” largely due to the differential tax treatment.
Does Opting Out Reduce Workers’ Compensation Costs?
It depends on the type of employer. Large multi-state companies—Wal-Mart, Lowe’s, Costco, et al.—usually benefit from opt-out laws because they have the time, money, and staff to administer their own workers’ compensation plans. South Carolina-based employers, particularly small businesses, lack these resources. So they will continue paying into the traditional South Carolina workers’ compensation system. However, if larger employers are able to opt out, this will reduce the total premiums paid into the state system, which means costs will eventually rise for smaller, in-state businesses. A decline in state-sponsored workers’ compensation may also lead to an increase in union activity, as aggrieved workers seek to organize against unfair opt-out plans. This would further increase labor costs for all South Carolina employers.
Opting out will also shift workers’ compensation costs from employers to South Carolina taxpayers. If employees are seriously injured and cannot receive benefits under restricted opt-out plans, they will turn to programs like Medicare, Medicaid, and Social Security Disability Insurance.
Need Help With Workers’ Compensation in SC?
You may find these potential changes to South Carolina’s workers compensation confusing. That is why, if you have been injured on the job and are unsure of your legal rights, it is important you speak with an experienced Myrtle Beach workers’ compensation lawyer. The Jebaily Law Firm can assist you with all types of workers’ compensation matters.