The century-old workers’ compensation laws of Texas have always included the option for private employers to opt out of the system. Texas is the only state with this truly elective option. How is private industry continuing to realize cost savings while providing quality benefits to injured employees?
First, the logistics. Traditional workers’ compensation is a state-governed system whereby employers purchase insurance (or become a certified self-insurer) to pay medical and disability benefits for occupationally injured employees. In exchange for receiving this no-fault, no-premium coverage, employees give up the right to sue the employer for tort damages. Texas’ original workers’ compensation laws in 1913 were optional for employers. Four years later, when most states made workers’ compensation mandatory, Texas maintained it as an optional program. Today, over 100,000 Texas employers do not subscribe to the state workers’ compensation system.
Texas employers who opt out, commonly referred to as “nonsubscribers,” are not legally required to furnish medical, wage or other benefits to injured employees. Responsible nonsubscribers, however, provide these benefits through privately implemented ERISA welfare benefit plans. Benefits are typically paid directly from the assets of the employer, although insurance products are also available. Since benefit plans are optional, the employer is free to customize the type and amount of benefits to offer.
Nonsubscriber benefit plans typically establish a reputable network of medical providers, and benefits are provided for treatment within the network. This differs greatly from the workers’ compensation system, which allows an employee to choose his/her medical care provider. In order to minimize an injured employee’s wage loss, many nonsubscribers offer disability payments – usually between 75 percent and 90 percent of the employee’s regular wage – beginning on day one. Workers’ comp doesn’t begin reimbursing wages until the employee has been off work for seven days.
Most of the nonsubscriber cost savings stem from the hands-on management of claims. Issues such as choosing the right medical care providers and facilitating return-to-work protocols are handled directly by the employer. In contrast, subscribers relinquish control of injury claims to an insurance company whose primary concern may not be to efficiently convalesce your employee and return him or her to work for you.
While subscribers enjoy immunity from employee tort litigation, nonsubscribers, even those who provide ERISA benefits, are subject to personal injury lawsuits with virtually no liability caps.
Many subscribers cite this lone factor as their reason for staying in the system. Practically, though, only a small percentage of occupational injury claims pit the employer and employee as adversaries. Even then, with binding arbitration becoming the norm with nonsubscribers, few claims ever see a courtroom. Insurance products are also available to limit your risk of monetary exposure.
Attorneys who specialize in representing nonsubscribers can walk you through the process of becoming a nonsubscriber, including notifying your workers’ compensation insurance company of your intent to terminate your coverage, filing the appropriate forms with the Texas Department of Insurance – Division of Workers’ Compensation, and notifying your employees of your nonsubscriber status. Some nonsubscriber attorneys will also draft your ERISA Plan and offer guidance on your selection of insurance.
Before you automatically write another premium check to your workers’ compensation carrier, explore the option to become a nonsubscriber and experience workers’ compensation – Texas style.
Nick Bettinger is a shareholder and director at the McDonald Sanders, P.C. law firm. He is writing this column for the Tarrant County Bar Association, an occasional contributor to FW Inc. Contact him at [email protected]. The Tarrant County Bar was established in 1904 and is a voluntary membership organization representing a diverse range of individuals working in the legal profession in Tarrant County.