Texas is the only state that allows companies to opt out of the “grand bargain,” i.e. workers’ comp. In the last two years, the number of Texas companies that opt out has dropped significantly. Why?
A report from the Texas Department of Insurance (TDI) says in 2016, 22% of year-round employers were workers’ comp non-subscribers. In 2014, 33% were non-subscribers.
Put another way, in 2014 one in three companies chose not to have workers’ comp insurance in Texas. Two years later, that number has dropped to just about one in five.
Why the change? The TDI says the decrease in non-subscribers followed two consecutive years of significant declines in workers’ comp insurance rates. Comp insurance became more affordable for Texas employers.
The report also notes that 2005 legislative reforms increased the availability of workers’ comp healthcare networks.
The majority of non-subscribing employers are small ones. But about one out of every five large companies in Texas (those with 500+ employees) also opts out because they believe they can manage their costs more effectively as non-subscribers.
About 23% of non-subscribing employers provide an alternative occupational benefit plan for their workers injured on the job.
When you add employees covered by an alternative-type plan to those covered by traditional workers’ comp insurance, 96% of private-sector employees in Texas have some form of coverage for workplace injuries. That’s a slight increase from 95% in 2014.
Non-subscribers face reporting requirements in Texas:
- They must report annually to the Texas Division of Workers’ Compensation, and
- Non-subscribers that employ at least five workers are also required to file each occupational injury and illness that results in more than one day of lost time with DWC.
Failure to comply with these reporting requirements could result in fines of up to $25,000 per day per occurrence.
Since 2009, monitoring efforts by TDI have generated most of the 2,700 complaints about non-subscribers. As a result, 450 warnings were issued to companies.
Oklahoma had been the second state to allow companies to opt out of obtaining workers’ comp insurance, but the state’s supreme court struck down the law.