Beware the opt-out plan

On Behalf of | Oct 15, 2015 | Workers' Compensation |


There are many complaints about Illinois workers’ compensation insurance programs. They are expensive. They are bureaucratic. They can be confusing to workers and compliance may be difficult for employers. There is fraud, with employees attempting to cheat the system and employers who mischaracterize their employees to escape the need for insurance.

And some states have offered a solution. They have created “opt-out” plans, where employers can opt-out of the state regulated workers’ compensation system and instead create their own plan.

It is touted to be less bureaucratic and more efficient. Of course it is. And workers almost never benefit from that “efficiency.” As a recent investigation of these systems notes, the “plans generally cover fewer injuries, cut off benefits payments sooner, control access to doctors and even impose mandatory settlements.”

A woman whose husband died in a fall from a communication tower received $250,000 as a settlement. She was left to raise his 4-month-old daughter and has struggled to find jobs that pay enough. Had his employer been covered by workers’ compensation insurance, she likely would have received $1 million in benefits.

Opt-out systems are supposed to offer the potential remedy of allowing an injured employee the right to sue their employer for negligence or wrongful death, as in this case. However, this is often illusory. While she tried to sue, the employer, as many do, simply filed for bankruptcy protection.

This can completely insulate the employer from any liability. Likely they simply reopened with a new corporate identity and went merrily along their way, leaving any injured employees out of money and luck.

All employees should be very wary of any politician who is crying to “reform” workers’ comp. The reform is likely to leave their employer completely in control of the terms of their insurance, and those terms are unlikely to be favorable to any injured employee.

Source:, “Opt-Out Plans Let Companies Work Without Workers’ Comp,” Howard Berkes, October 14, 2015

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