To Opt In or Out, that is the Question

As you may know, Texas is the only state that allows employers to not subscribe to the Workers’ Compensation system, which means they have chosen to not participate in Work Comp and therefore the rules/statutes managed by the DWC do not apply.  They, instead, create their own rules to best manage benefits and workplace injury prevention.  This is not the same as a self-insured employer who continues to participate in Work Comp and thereby follow the system’s rules.  Texas Association of Responsible Non-Subscribers outline the background of this option and what they consider to be best practices.  According to TXANS, some of the reasons for choosing non-subscription are cost reduction, reinvesting cost savings, improved healthcare, flexibility, improved safety and care, survival, jobs and economy, better relations and higher productivity.  They estimate 114,000 employers operate as non-subscribers.

According to a 03/15/12 workcompcentral article, Oklahoma is working towards becoming the second state to provide an avenue for opting out of the Work Comp system.  Senate Bill 1378 and House Bill 2155 have both passed and now are in the process of reconciliation to a revised bill that will be submitted to each house for a final vote (so the actual rules are still in-flux).

There are some differences between Oklahoma and Texas, according to the article.  Oklahoma will require the benefit plan to be regulated by the Federal government under ERISA to provide medical and indemnity benefits to injured workers, have at least 50 workers, and Work Comp experience factor criteria.

One downside to opting out in both states is liability – the Work Comp system limits liability and typically excludes negligence claims, whereas non-subscribers do not have that protection (but can use insurance).  Another downside is the lack of a refined dispute resolution process.  And an apparent fear in Oklahoma is that large employers will leave the Work Comp system and reduce the influence and desire to enact needed reforms in the Work Comp system.

So, which is the right approach?  The list of pros and cons is long, and this may not be a decision of black and white but shades of gray.  Obviously every employer in Texas has made a choice.  A very good point/counter-point was published by Steve Nichols of the Insurance Council of Texas and proponents of both sides offered strong arguments.  The article quotes a 2006 non-subscription survey conducted by the TDI Work Comp Research and Analysis Group that found 37% of employers were non-subscribers and 23% of all employees had opt-out employers.  An undated but assumed updated TDI survey shows that has increased to 44% of employers but decreased to 20% of employees.

If you have made the decision between Opt In and Opt Out, I would appreciate your input on how you made that decision.

So, is this approach right for other states?  There do not appear to be any states other than Oklahoma moving in this direction, but theirs is a strong and dedicated focus on making it happen.  If it passes, we will likely find out soon.

In this together – Mark

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