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Can Ohio Workers Compensation Privatization Occur Without Constitutional Change?

The discussion about privatizing the Ohio workers' compensation system has surprisingly not dealt with the constitution. I hear rumors that it can be done without a constitutional amendment. Those who believe so fail to understand the history of our system and the language of the Ohio constitution.

The first workers' compensation bill was passed in Ohio in 1911. It was done so without constitutional authority but was also a voluntary plan. In other words, employers were not required to participate. In upholding the law, the Ohio Supreme Court emphasized the voluntary nature of the Act and suggested that more coercive legislation was unconstitutional. State ex rel. Yaple v. Creamer (1912), 85 Ohio St. 349, 97 NE 602.

The constitutional amendment, Section 35 of Article II, was therefore instituted in order to implement a compulsory workers' compensation system. The constitution enables the general assembly to pass laws "establishing a state fund to be created by compulsory contribution there to by employers, and administered by the state." This is the authority for a compulsory state fund system. In other words, the constitution does not provide for a private compulsory system.

As I write these words, what comes to mind is the constitutional debate over "Obamacare." Those who challenge the new health care plan as being unconstitutional should understand the inconsistency of an argument that Ohio can enforce a compulsory system which permits employers obtaining coverage through a private insurance.

I also hear that the plan will provide for neither the private insurer or self-insuring employer to be under the jurisdiction of the BWC. Again these proponents fail to understand the constitution or legal precedent. Self-insuring employers have been part of the workers' compensation system since the initial compulsory law but the provision was found constitutional only because the state WC system "retained and exercised the most complete supervision" over self-insuring employers. Turner v. United States Fidelity, 98 Ohio St. 250, 117 NE 232 (1917). This state supervision and control was also crucial in the Supreme Court finding the managed care system constitutional. State ex rel. Haylett v. Ohio Bureau of Workers' Comp., (1999), 87 Ohio St. 3d 325, 720 NE 2d 901. Permitting private insurers and self-insuring employers to be independent of the Administrator is clearly unconstitutional.

Others have previously recognized this constitutional barrier and that is why there have been past efforts to amend the constitution by initiative to permit the underwriting of workers' compensation to private insurance carriers. The first effort, in 1915, failed to gather enough votes to even pass the legislature. The second, in 1981, was soundly defeated by the electorate.

What is clear to those who look closely at the Ohio workers' compensation system is that it is a jewel, which Governor Kasich and Ohio can proudly use as a selling point for the development of jobs. But don't leave it to me to make this point.

On a visit to Ohio in October 1919, King Albert of Belgium called it one of the greatest pieces of legislation in the world and that it would make "industrial justice" a reality. More recently, then BWC Administrator James Conrad, who was the administrator under Governors Voinovich and Taft, declared "under the leadership of Governor Taft, along with the support of the Bureau of Workers' Compensation's stakeholders and the General Assembly, Ohio has become a model in workers' compensation."

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