Workers Compensation Coverage in Texas
When the other 49 states walk one way, Texas sometimes walks the other. Case in point? Regulating workers’ compensation insurance coverage.
- The only state in the country that doesn’t require most private employers to carry workers’ compensation insurance.
In other words, like other states, Texas has a state-regulated workers’ comp insurance fund, but it also offers other choices to employers.
Let’s look at some details of the Texas system:
1) Federal workers don’t count. They fall outside Texas law, as do other categories, such as offshore drillers and family ranch hands.
2) Certain employees must be covered by workers’ comp—such as public workers, building contractors, and bus drivers—but their companies aren’t required to offer the state-regulated plan, although it’s always an option. Instead, they can choose a private insurer, including a pool or a fund.
3) Many private workers are not covered at all by their employers. This is known as “going bare”.
4) Private employers can decline the state’s coverage and instead, are given the opportunity to become self-insured or to shop around and find the most economical, certified, private insurance plan.
5) An estimated 80 per cent of Texas employees carry workers’ comp. Even if an employee isn’t a U.S. citizen, he/she is entitled to it.
6) Many large employers tend to carry it, while smaller employees may not.
Why does Texas think this homegrown system is best? After all, the state has a dim medical record related to workers’ comp compared with the rest of the U.S. (please see Analysis of Medical Care in Texas Workers’ Comp System).
In a word, cost.
- The Texas model has allowed more and more companies to opt out of state-regulated workers’ comp plans and to provide their own—because it is cost saving.
Should your company consider private workers compensation insurance?
Consider the track record of some large companies. Target and Wal-Mart say this option saves them money, yet offers employees the same—or better–benefits as the state injury-care policy.
Which is the right choice for you?
Benefits of State-regulated Workers’ Comp
- Pays medical and income benefits to workers because of work-related injury, disease, or illness, thereby relieving the employer of claims for liability.
- Pays death and some burial benefits.
- Advocates say injury and income compensation is more generous than that of private insurers.
- Gives employer certain legal protections, including immunity from most injury lawsuits.
- Helps create a safe and healthy work environment, since employees know they have medical protection, should an injury or illness occur.
- System supported by major unions, such as AFL-CIO.
Advantages of Private and Self-Insured Workers’ Comp
- Offers the same medical, income, and death benefits as the state system, as well as the same legal protection.
- Allow employers the option of comparing insurance company benefits, premiums, and total costs, resulting in significant cost-savings.
- Helps employers streamline budgets.
- Advocates say competitive pressure among insurance companies helps lower premiums.
- Advocates say employee accountability is more demanding than under the state plan, with requirements to report injuries in a timely manner, to visit pre-approved physicians, etc.
The cheapest workers’ comp plan of all is choosing not to insure your workers—the “going bare” road. But it could ruin your business. You risk totally liability if you are found negligent when a worker is injured or killed on the job, and attorney fees and damages can be almost unlimited.
Another risky option is insuring employees with an unlicensed insurance carrier—often a cheaper alternative to a reputable company. However, you may find that in many accident, death, or injury cases, your non-licensed company will only pay a fraction of the total judgment.
The bottom line is: choose wisely, and watch for changes in the law.
For more information, please see: Texas Workers’ Compensation Coverage Summary