Inadequate premium rates for benefits and the resulting expenses caused many insurers to leave the workers’ compensation line of business. The state’s Assigned Risk Pool became the largest insurer, and the losses incurred discouraged potential new insurers from stepping in.
Fortunately for businesses in Texas, legislators who drafted the first Texas Workers' Comp laws in 1913 were farsighted enough to provide an option. Texas offers all employers (other than local units at governments, such as cities, counties and school districts), the opportunity to nonsubscribe or “opt out” of the state's workers' compensation program. The ranks of nonsubscribers began to grow.
Businesses that chose not to subscribe provided their own injury benefit plan to cover occupational injuries and illnesses, and provide for legal liability defense and damage payments. As the nonsubscriber market grew through the early l990s, insurers recognized the opportunity to develop better products to insure nonsubscriber risks. Over time, those products have evolved into a form that offers broad coverage for injuries resulting from accidents, occupational disease or cumulative trauma. Injury benefits are paid under plans that must comply with the reporting, disclosure, and fiduciary duty rules of ERISA (the same federal law that regulates group health plans and retirement plans).
Employer satisfaction with nonsubscription has steadily grown. The proof is in the numbers. Approximately forty percent of Texas businesses (not involved in government contract work) today are nonsubscribers. They represent a growing community of employers that have chosen a fair and responsible way to care for injured workers. In 2003, that list (at the time of printing) included companies like:
Nonsubscribers report positive results, according to the Research and Oversight Council on Workers’ Compensation (“ROC”) study in 2002:
Nonsubscriber businesses not only reduced expenses in insurance premiums. They also:
Employees See Value
While employers realized immediate advantages with nonsubscription, employees experienced important benefits as well. Prompt medical attention and better outcomes have earned the nonsubscription plan top grades from injured employees. They report high levels of satisfaction with employer treatment, medical coverage, and income benefits paid during recovery for on-the-job injuries under nonsubscription. And contrary to statements of nonsubscription opponents who claim that injured workers clog the court system with lawsuits against nonsubscribers, the fact is that less than 1/10 of 1% of all nonsubscriber injury claims have any attorney involvement (and far fewer actually result in litigation).
A Reasonable Alternative
Workers’ comp costs are on the rise again. And, Texas employers deserve a reasonable alternative.
Almost every employer in the state has seen dramatic cost increases in workers’ compensation insurance and claims costs. According to the 2002 study conducted by the ROC:
The average cost per workers’ comp claim today is just under $5,000, which makes Texas the highest cost state in the nation, according to data from the Texas Workers’ Compensation Commission and other studies. Those figures are far higher than the average cost per claim for most nonsubscribers. In year 2000, when the Workers’ Compensation Research Institute analyzed Texas’ costs to comparable workers’ comp states, the study revealed:
In this environment, nonsubscription offers a reasonable alternative. It’s reasonable, in part, because nonsubscribers (1) are subject to Federal benefit plan regulations, and (2) injured workers employed by nonsubscribers report high levels of satisfaction with this alternative.
Freedom to Choose is Good Business
Nonsubscription gave Texas businesses a crucial advantage at a point in time when many employers could not have afforded workers' compensation insurance. In this respect, the ability to opt out of the state system may have saved Texas from the loss of hundreds of thousands of jobs in the early 1990s.
The ability to choose without interference from government mandate enabled Texans to keep jobs and survive in the last economic downturn. And with current insurance and financial market difficulties, it's crucial to the vitality of business in Texas and now New Mexico to preserve the right to choose between two proven, reasonable options to delivering care to injured workers. That freedom could be one of the keys to recovery in the days ahead.