Workers’ compensation programs have been in place for more than 100 years. Each state varies on the logistics and specific regulations of workers’ compensation claims, but Texas stands out from the rest.
It is the only state that allows private-sector employers to opt out of workers’ comp programs, instead setting their own injury compensation standards. The only exceptions are government entities and any businesses involved in construction projects for the state.
This 1913 law was revised in 1993 to state that an employer who invests in workers’ compensation insurance is protected from lawsuits, except in cases of gross negligence. About one-third of Texas employers are part of this non-subscriber group.
Non-subscribers are still required to report any injuries, illnesses and fatalities that occur on the job to the state’s Division of Workers’ Compensation (DWC). Once they choose not to participate in the state’s workers’ compensation program, they must notify the state and their employees every year or risk a penalty up to $500 per day.
Most non-subscribing businesses utilize the services of an attorney to ensure their programs are legal and comprehensive. In 2018, 30 percent of non-subscribers provided occupational injury benefits, and 80 percent stated that they pay benefits for medical necessities.
Companies that didn’t subscribe to the state’s workers’ compensation program cited a low number of workplace injuries. Their employees are still entitled to approximately the same level of compensation, but the coverages and amounts available for injury assistance vary. Non-subscribers may also compensate their injured employees by paying medical expenses, reimbursing for lost wages and providing restitution for pain and/or emotional distress.
At the beginning of 2019, the Texas Court of Appeals announced through the New Hampshire Insurance Company v. Rodriguez case that a lien for workers’ compensation can be reduced or eliminated. This applies even when a third-party suit is established by an employee and a carrier is requesting reimbursement under statutory provision § 417.001(b). The reduction is based on the percentage an employer’s fault carries in the total judgement of the case.
According to the Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, non-subscribers report a 62 percent level of satisfaction; this is compared to their state program counterparts’ 54 percent satisfaction. Comparing the value of the programs, 61 percent of non-subscribers report that they believe their occupational benefits plan is a good value, compared to only 52 percent of subscribers.
Many non-subscribers opt out as a cost savings measure. However, the average cost differs according to factors like the experience modification rate (EMR), payroll costs and the level of risk involved in the work, it’s estimated at 75 cents per $100 of payroll. Business owners can take those savings and invest it in other areas of the business. Other businesses that opt out prefer the flexibility of customizing their own injury compensation plan to remove certain benefits they might not need.
For smaller private businesses, purchasing workers’ compensation insurance through the state program can be more costly. In contrast, those businesses subscribing to Texas’s workers’ comp insurance are often able to offer medical care to their employees at a lower premium rate through the network. It also provides a more in-depth protection against injuries caused by employee fault and liability investigations.
MLS Group of Companies, LLC, and our board-certified physician reviewers are well-versed in each state’s workers’ compensation regulations and reforms including the Texas Non-Subscriber program and stand ready to serve our current and future clients IRO needs. To learn more about our workers’ compensation and disability review services offered, please check out our website and read the MLS Blog to stay updated on the latest changes in the industry