Friday, November 20, 2009
Texas is the only state in the union that allows employers to "opt out" of the workers' compensation system. An employer is assumed to be a subscriber to the workers' compensation system unless he/she files the appropriate form (DWC-5) with the Texas Department of Insurance that tells the state that the employer is not carrying workers' compensation insurance. The employer that has filed the DWC-5 is considered to be a nonsubscriber.
The Texas Department of Insurance periodically surveys both subscribers and nonsubscribers in regards to the health of the workers' compensation system. The latest survey (2006) found that approximately 23% of Texas Employers were nonsubscribers. This represented approximately 1.7 million workers. This is the second lowest amount of employers that were nonsubscribers since the Texas Department of Insurance started taking these surveys in 1993. It is also the second highest number of employees working for nonsubscribers since 1993. What does this mean?
Large employers (500 or more employees) are continuing to opt out of the system. These employers thought that they could do a better job than the Texas workers' compensation system providing injured workers with medical and wage benefits at a lower cost. Medical costs in the workers' compensation system were perceived as being to high. These employers either have or contract risk managers to enforce safe working conditions in the workplace. They also have alternative types of insurance to cover medical obligations to injured employees. In addition they purchase employers' liability separately to cover any legal obligations that may arise in the case of an injured employee. Recent decisions by the Texas Supreme Court have raised the bar in proving negligence. With a properly enforced safety program, negligence is very hard to prove in Texas.
Small employers (1-4 employees) were returning to the workers' compensation system in the 2006 survey. In 1995, 45 % of small employers were subscribers while in 2006, 57% were subscribers. Workers' Compensation premiums have been declining since 2004. This has brought many employers back into the system. I believe that price and not the threat of lawsuits is the driving force in determining whether or not the employer buys workers' compensation insurance. I believe that any survey conducted today would see more employers dropping out of workers' compensation. The general state of the economy would be the reason. In trying to be more competitive, employers are looking for ways to drop costs and workers' compensation is going to be one of the first costs to go.
An interesting fact found in these surveys of Texas Employers is that nonsubscribers are more satisfied with their programs than subscribers. One of the main reasons for this is the ability of the employer to manage medical and wage replacement costs more effectively than the workers' compensation system.
It must be noted that nonsubscription rates vary by industry. The Mining/Utilities /Construction industry has the lowest rate of nonsubscription. This is due to the fact that workers' compensation is required by contract. All government contracts and most general contractor contracts require workers' compensation insurance. The service and the food industry sectors continue to have the highest rate of nonsubscribers. The food services industry (restaurants) continues to have the highest nonsubscription rate at over 50%.
The Texas Department of Insurance periodically surveys both subscribers and nonsubscribers in regards to the health of the workers' compensation system. The latest survey (2006) found that approximately 23% of Texas Employers were nonsubscribers. This represented approximately 1.7 million workers. This is the second lowest amount of employers that were nonsubscribers since the Texas Department of Insurance started taking these surveys in 1993. It is also the second highest number of employees working for nonsubscribers since 1993. What does this mean?
Large employers (500 or more employees) are continuing to opt out of the system. These employers thought that they could do a better job than the Texas workers' compensation system providing injured workers with medical and wage benefits at a lower cost. Medical costs in the workers' compensation system were perceived as being to high. These employers either have or contract risk managers to enforce safe working conditions in the workplace. They also have alternative types of insurance to cover medical obligations to injured employees. In addition they purchase employers' liability separately to cover any legal obligations that may arise in the case of an injured employee. Recent decisions by the Texas Supreme Court have raised the bar in proving negligence. With a properly enforced safety program, negligence is very hard to prove in Texas.
Small employers (1-4 employees) were returning to the workers' compensation system in the 2006 survey. In 1995, 45 % of small employers were subscribers while in 2006, 57% were subscribers. Workers' Compensation premiums have been declining since 2004. This has brought many employers back into the system. I believe that price and not the threat of lawsuits is the driving force in determining whether or not the employer buys workers' compensation insurance. I believe that any survey conducted today would see more employers dropping out of workers' compensation. The general state of the economy would be the reason. In trying to be more competitive, employers are looking for ways to drop costs and workers' compensation is going to be one of the first costs to go.
An interesting fact found in these surveys of Texas Employers is that nonsubscribers are more satisfied with their programs than subscribers. One of the main reasons for this is the ability of the employer to manage medical and wage replacement costs more effectively than the workers' compensation system.
It must be noted that nonsubscription rates vary by industry. The Mining/Utilities /Construction industry has the lowest rate of nonsubscription. This is due to the fact that workers' compensation is required by contract. All government contracts and most general contractor contracts require workers' compensation insurance. The service and the food industry sectors continue to have the highest rate of nonsubscribers. The food services industry (restaurants) continues to have the highest nonsubscription rate at over 50%.
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