Nonsubscription and Workers' Comp Remain in Competitive Balance

Friday, April 20, 2012 | 0

Recently published articles regarding Walmart’s exit from the Texas workers’ compensation system must be clarified by looking at the facts and setting aside the self-interest that seems to permeate any discussion of the subject.  Alarm bells from the AFL-CIO have droned on for over a decade as Texas employers have saved billions of dollars, mightily contributing to Texas’ economic development while delivering better medical outcomes and higher injured employee satisfaction.  As many union shops have embraced and reaped the benefits of Texas nonsubscription (for example, through union dues deductions from wage replacement benefit checks issued by employers to disabled workers), it is time for their legislative representatives to get in step with their membership on this subject.  Perhaps the frustration has mounted with the emergence of a nonsubscriber system that has matured into a highly reputable industry over the past 20 years.  The nonsubscriber service industry has reduced the size of Texas government (saving Texas taxpayers money) and employs hundreds of non-unionized Texas workers in the insurance and claims industry.

The complaint has been raised that nonsubscription puts competitive pressure on companies that remain in the workers’ compensation system to find similar savings in their budgets.  This is interesting both (1) in the attempt to make competition among employers sound like a bad thing, and (2) in having the AFL-CIO pretend to be an advocate for any employer (a departure from their normal role of pretending to be the sole advocate for employees locked in an Industrial Age economy).

We have also heard voices proclaim that “more large companies offer private and in many cases, less generous injury benefits.”  This bold statement has been made by self-interested workers' compensation insurance carriers who have lost substantial business due to the nonsubscriber option.  Such statements also rely on fuzzy math that ignores the fact that injured employee medical needs are, in fact, actually being met by nonsubscribing employers.  They also fail to take note of more generous wage replacement benefits paid by most nonsubscribers (with no waiting period, compared to the seven-day waiting period for wage replacement to begin under the Texas workers’ compensation system).

One more big kid jumping into an Olympic-size “nonsubscriber swimming pool” will not cause a ripple in either the nonsubscriber or Texas workers’ compensation insurance markets.  The nonsubscriber path has been long-traveled by over 40 major retailers in this state over the past 20 years.  It is also worth noting that thousands of employers in the manufacturing, healthcare, food service, transportation and other industries (companies we all do business with and rely on every day) have also adopted nonsubscriber programs and are well-known as responsible corporate citizens.
All evidence points to better injured employee medical outcomes and higher employee satisfaction in the nonsubscriber environment.  This is partially due to the fact that many of Texas’ best medical providers will treat injured employees of nonsubscribers, but no longer accept workers’ compensation claimants due to the combination of medical fee reimbursement rates, payment processing, paperwork and disputes in the state system.  

Also, many of the employers with the highest frequency and severity of injury claims are the ones who have nonsubscribed.  This has eased financial pressure on the Texas workers’ compensation system and supported the reduction in workers’ compensation premium rates over the past decade.

As in other states, all indications are that Texas workers’ compensation premium rates are now rising; and that the nonsubscriber option puts competitive pressure on workers’ compensation insurance carriers to keep their premiums low.  And even Texas’ largest workers’ compensation insurance carrier has acknowledged that any effort to mandate workers’ compensation insurance would not lower workers’ compensation premium rates and could cause Texas businesses to fail.
Nonsubscription is a fair and balanced approach to employee injury. When employers are considering which state to locate a call center, truck terminal, distribution center, etc. (which bring jobs) they look at the cost to do business. They know nonsubscription gives Texas an advantage and is a big part of Texas’ successful jobs growth formula.

The grave concerns expressed in recent headlines about Walmart’s exit from Texas workers’ compensation really have no substance and leave the wrong impression.  Gratefully, injured workers and the employers of more than one million Texas workers in every legislative district know better.

Bill Minick is president of PartnerSource, which provides alternative benefit plans to Texas employers that do not subscribe to the workers' compensation system.