Former WC Commissioner: Competition is Key to System’s Success

Nancy Grover

Austin, TX (WorkersCompensation.com) – In a clear case of going from (one of the) worst-to-firsts, the Texas workers’ compensation system has become a model for other jurisdictions, according to the latest report on the system. Its just-released biennial report on the system shows nearly all positive metrics.

The report is mandated to show the health of the system since reforms were passed in 2005. Among the key findings are:

  • Workers’ Compensation Insurance Market: Since 2003, workers’ compensation insurance rates have dropped nearly 72 percent, while insurance companies writing in Texas averaged a 10 percent return on net worth.
  • Employer Participation: 71 percent of Texas private-sector employers have workers’ compensation coverage and they employ about 81 percent of the Texas workforce.
  • Injury Rates and Claims: The non-fatal injury and occupational illness rate is down 42 percent from 2005, but COVID-19 resulted in an increase in the total number of claims filed since 2019.
  • Medical Costs: Texas’ cost per claim with 12 months maturity is about 24 percent less than the median cost of 18 states analyzed.
  • Access to Care: Today on average, injured employees are waiting half as long to get their first non-emergency medical visit as they did in 2011.
  • Return to Work: More injured employees receiving income benefits are getting back to work within six months – 83 percent compared to 74 percent in 2004.

While the study points to a generally stable system, there are questions about COVID-19 claims. There’s also a question about why things are going so well.

“As I’ve stated for years, one of the major components for Texas’ success is competition,” said Ryan Brannan, who served as the Texas Commissioner of Workers’ Compensation from 2014 to 2018 and is now a Government Relations Consultant to the Association for Responsible Alternatives to Workers’ Compensation. “Employer choice has helped Texas remain the number one state to do business, and this REG report is more evidence of that fact.”

Sub/Non-Sub Rates

Texas is the only jurisdiction that does not require organizations to provide workers’ compensation coverage to their employees. Those who don’t, run the risk of facing substantial liability through the tort system. Some employers provide alternative forms of coverage for their workers.

“Non-subscription rates help measure employers’ perspectives about whether the benefits of participating in the workers’ compensation system outweigh the costs of obtaining coverage,” according to the report. “As a result, these rates are also an indicator of the relative ‘health’ of the workers’ compensation system.”

The rate of non-subscription was generally flat from the previous report to the current version, going from 28 percent to 29 percent of private-sector employers. The authors point out that the rate of subscribing employers since 2016 has been the highest since the first employer survey in 1993.

Non-subscription rates were highest for the smallest employers — those with 1 – 4 workers, and the largest. The percentage of large employers who do not subscribe has increased steadily since 2010.

The pandemic was cited as a reason for both subscribing and not subscribing to the workers’ compensation system. About one in five said they don’t subscribe due to cost cutting measures; while of those who do subscribe, 16 percent said they felt the ability to provide coverage during the pandemic “was an extremely important reason” to purchase it.

There’s also apparently some confusion among employers about the Texas workers’ compensation law, as 43 percent of those who subscribe said they did so because they thought it was required.

Companies that do not subscribe cited a variety of reasons, such as having too few workers or too few on-the-job injuries, and that insurance premiums were too high.

Among the reasons employers cited for subscribing to the system were:

  • The ability to participate in a network
  • Concerns about lawsuits
  • Lower workers’ compensation insurance rates.

COVID

The workers’ compensation system in Texas, like those of all jurisdictions, faces new challenges from COVID-19. Insurers had reported 27,308 COVID-19 claims as of Oct. 25. Those include people with a positive test or diagnoses, and claims filed for possible exposure.

“While the Labor Code provides coverage for occupational diseases, issues such as the availability and consistency of COVID-19 testing, confusion among stakeholders about when to report exposures involving employees, and legal issues about whether COVID-19 is an occupational disease have raised questions about whether certain statutory changes are needed to provide workers’ compensation benefits when injured employees contract a disease as a result of their employment,” the report says.

The authors pose the possibility of the state imposing a presumption for certain workers who contract the coronavirus.

“Some argue that a COVID-19 presumption should be created to cover various types of essential workers, who may have a higher likelihood of exposure to the disease compared to the general population,” they wrote. “Others argue that creating such a presumption would significantly increase workers’ compensation costs and unfairly shift costs from group health to workers’ compensation.”

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