One of Oklahoma’s workers compensation trust funds is nearly out of money and will be forced to delay at least three weeks’ worth of payments to thousands of recipients in October, the fund’s director said Tuesday.
In an Aug. 28 letter, the state’s Multiple Injury Trust Fund, which pays workers compensation benefits to workers with pre-existing disabilities or injuries who are injured on the job, stated that it would not be able to pay weekly benefits to recipients for the three weeks between Oct. 1 and Oct. 15.
The announcement comes a little more than a year after the Legislature passed a larger worker’s compensation bill that included a provision intended to shore up the fund’s finances by increasing an assessment on workers compensation insurance premiums and restricting claims eligibility for the fund. The Legislature also appropriated $5 million to the fund in 2019 to help with the its solvency.
The Multiple Injury Trust Fund, which operates as its own agency under the Oklahoma Workers Compensation Commission, is funded mostly through a portion of workers compensation insurance premiums, as well as a portion of awards paid out by uninsured employers. Prior to 2019, up to 6 percent of the total direct written premiums would go toward the fund, though the Legislature raised the cap on those assessments to 7 percent until October 2022.
However, despite the Legislature’s efforts, the fund has continued to operate in the red, said Richard Cole, director and general counsel for the Multiple Injury Trust Fund, mostly because of the continual decline in workers compensation insurance premiums since 2013, when the Legislature made major overhauls to the state’s workers compensation system.
“We’re not gaining any traction,” Cole said. “It’s just an industry problem. This decline in premiums is a good thing for everyone but the fund. It’s less cost for Oklahoma businesses, it’s less cost for you and me who go to these businesses and use their services. It’s been an enormous success as far as comp reform goes. That’s a tremendous success. But it’s the opposite for the fund.”
“We’ve been forecasting this for several years,” Cole said. “Our forecasts have shown since 2013 premiums have been dropping dramatically, so this has been a rolling ball headed our way.”
Oklahoma’s Multiple Injury Trust Fund was established in the 1940s, and many other states created similar funds, as injured World War II veterans began to come home and look for work. The idea behind the funds, Cole said, was to provide employers with some level of liability protection to hire people who already had an injury or disability.
“Pretty much every state had a second injury fund,” Cole said. “Over time, they’ve been notoriously difficult to keep flush with revenue. Most of the funds in Oklahoma’s region have been phased out or abolished because they’re prone to abuse and difficult to keep in the black.”
Currently, there are between 3,000 and 3,500 Oklahomans who receive benefits from the fund, Cole said, and the fund pays out around $900,000 per week on average.
The Aug. 28 letter to recipients states that payments for the missed weeks will be made on Oct. 22, and that after that regular weekly payments will be made until further notice. It also states that the global economic downturn caused by the COVID-19 pandemic also played a role in decreasing the fund’s revenue.
“Many years of processing court orders have taught us the importance of consistency, and we are disappointed to not have sufficient resources to fulfill our mission,” the letter states. “The Fund practices financial transparency, evidenced by thirty (30) years of independent audits and ten (10) years of outside actuarial studies. Unfortunately industry and global economic factors are unavoidable.”
Legislative overhauls to the fund and more general worker’s compensation changes have helped somewhat to lower claims against the fund, Cole said, but the decreasing worker’s compensation premiums have also halved revenue going into the fund. In 2013, premiums totaled around $1.2 billion, while last year they totaled around $600 million, he said.
State law requires that if the fund is unable to meet its obligations to recipients, it must suspend its weekly payments until it is able to make them again and repay the amount owed for the weeks that payments were suspended.
“We are skipping payments, but we are paying them slowly,” Cole said. “So they will be delayed a few weeks.”
Cole said it’s likely that more legislation will be required to help keep the fund afloat either next session or the following one, before the 1 percent premium assessment cap expires in 2022.
“We would definitely need something this session or next before things go very bad,” Cole said. “Hopefully in time, we’ll get this giant ship corrected and on the right course.”