Nonsubscriber Legislative News in the Lonestar State

Saturday, April 7, 2007 | 0

Over the past several years the Texas legislature has debated many issues impacting nonsubscribers. These have included measures mandating workers' compensation and bills to make nonsubscription, in some way, less attractive. Several bills have been introduced during the 2007 session that would directly impact nonsubscribers and an analysis of these bills is below.

Mandatory Workers' Comp

There has been little serious discussion of this subject because nonsubscription has become a commonly accepted business practice in Texas, with responsible programs run by large, "A" rated insurance carriers, national third party administrators, and tens of thousands of Texas employers (including "Mom and Pop Shops" and dozens of Fortune 500 companies).

The Insurance Council of Texas (ICT, a nonprofit trade association of property and casualty insurers writing business in Texas) published two articles in December 2006, one advocating for a mandatory Texas workers' compensation system and another explaining both the advantages of nonsubscription for the State of Texas and the current legal and regulatory framework within which this alternative system delivers higher satisfaction to injured workers.

House Bills Introduced

Nonsubscriber Arbitration Programs

House Bill 1730 seeks to prohibit any nonsubscriber contract that "affects a procedural or substantive right of the employee to recover damages for personal injury or death sustained by the employee in the course and scope of the employee's employment" unless entered into more than 10 days after the date of injury.

In other words:

No releases of liability (waivers) or other settlement agreements, pre-injury or postinjury, during the 10-day time frame.

Analysis:

This bill seems to ignore the 2001 law voiding all pre-injury waivers and the 2005 law limiting the use of post-injury waivers (and providing additional employee protections).

All voluntary OR mandatory arbitration agreements that otherwise would become effective before those 10 days have passed (i.e., virtually 100% of all nonsubscriber arbitration programs) would be void.

Analysis:

The Texas courts and legislature have, many times, expressed a clear public policy in favor of arbitration and other forms of alternative dispute resolution. This law would void a pre-injury agreement to mediate or arbitrate future injury disputes. Note that even if passed, the Federal Arbitration Act may preempt such a state law.

By ignoring Texas law currently on the books and attempting to eliminate dispute resolution processes that are firmly embedded in and favored by Texas lawmakers, we believe House Bill 1730 (or anything similar) will be difficult to pass.

Nonsubscriber Reporting

New nonsubscriber reporting requirements recommended by the "Equal Justice Center" (a nonprofit group with close ties to organized labor) appear in the form of Texas House Bill 1731 and House Bill 1772. These bills would require a nonsubscriber annual report of any injury involving lost time, modified work or medical diagnosis of a "significant injury" (a term not defined).

And for any such injury, the employer would report:

1. the total cost of medical treatment;

2. the portion of the cost of medical treatment paid for or provided by the employer;

3. the number of days the employee was absent from work;

4. the amount of any salary replacement paid by the employer; and

5. the amount of any other settlement paid by the employer.

Analysis:

For #1 and #2 above, the employer can only report what it knows about (and presumably paid itself), so those two figures will usually be equal. Any obligation to pursue medical information beyond what the employer paid for will implicate the employee's right to privacy (i.e., Protected Health Information under HIPAA).

For #3 above, a look at the employer's OSHA log would be instructive.

For #4 above, federal law may pre-empt that requirement. Also, reporting the amount paid (without other specifics on pre-injury wages, weekly benefit caps, etc.) will be meaningless.

For #5 above, this would be the death of confidentiality in settlement agreements and may raise a Constitutional "right to privacy" issue.

Even if every nonsubscriber accurately and completely reported all of this information, and it was accurately tabulated, it is unclear what (if any) meaningful information will be derived.

The Texas Department of Insurance has a research division that has conducted (directly or through its predecessors) a total of five studies of nonsubscription between 1994 and 2006. These studies have been ably executed in association with Texas A&M University.

Bill to Combine the Items Above

House Bill 2423 apparently seeks to combine the impact of the three House Bills discussed above. Combining the bills may be an attempt to make passage less difficult. The big difference between House Bill 2423 and Texas House Bills 1731/1772 is that House Bill 2423 leaves it entirely up to the Texas Department of Insurance (TDI) to prescribe the types of nonsubscriber data that would be collected. Three points merit consideration:

1. TDI already prescribes information reporting requirements for nonsubscribers via Forms DWC-5 (annual report of nonsubscriber status and location list) and DWC-7 (reporting information for all lost-time, occupational disease, and death claims). Both of these forms include data elements developed under TDI's regulatory, discretionary authority. If the data elements should be improved or the form filing requirements are not being enforced, creating new filing requirements by statute is not the solution. As mentioned above, TDI also has ample data on nonsubscription through its many research studies supported by Texas A&M University.

2. The Equal Justice Center has made its agenda clear: namely, that somehow gathering more data and increasing the regulatory burden on TDI and Texas employers will support mandating Texas workers' comp.

3. Beyond all the current regulatory requirements, employee protections, and data on injured worker satisfaction (detailed in the Insurance Council of Texas newsletter mentioned above), remember that it has only been two years since the Texas legislature studied this issue in detail. And an example of their findings is seen in the Texas House Committee On Economic Development report that included the following recommendation:

"Nonsubscription has given Texas businesses a crucial advantage in times when many employers could not have afforded workers' compensation insurance. The cost savings provided by a responsible nonsubscriber program can prove valuable to businesses that may be shopping for more cost-effective venues to expand or develop new operations. The 79th Legislature should continue to allow nonsubscription as an option."

With a massive amount of data favoring nonsubscription already within TDI's hands (and otherwise publicly available, yet seemingly ignored by organized labor), and in the absence of any other available data or public policy argument supporting the Equal Justice Center and organized labor's agenda, we believe these bills will face significant hurdles in moving through the legislative process (just as similar measures failed in 2001, 2003, 2005 and prior Texas legislative sessions).

Bill on Non-discrimination

Another bill related to nonsubscribers is House Bill 2298, would greatly expand the discrimination provisions in the Texas Labor Code that currently apply to subscribing employers. In the nonsubscriber context, this bill essentially would prohibit an employer from discharging or in any other manner "discriminating" against an employee because the employee has filed a negligence liability claim against the employer or testified in such a lawsuit against the employer. This law would also apply the related damage, injunction, and reinstatement provisions of the Texas Labor Code.

The interesting thing about House Bill 2298 is that the current Texas Labor Code provision was adopted to prevent discrimination in the filing of workers' comp benefit claims. And the counterpart to this law, that already applies to all nonsubscribers, is section 510 of ERISA (29 U.S.C. Section 1140) which prohibits such discrimination related to nonsubscriber injury benefits.

Unlike the Texas law, this federal law even allows an award of attorney fees. ERISA also provides a variety of other civil and criminal enforcement mechanisms.

So HB 2298 (1) unnecessarily goes beyond the many current state and federal laws (like ERISA and the Family and Medical Leave Act that provide important employee protections), (2) is contrary to all of Texas' tort reform efforts in recent legislative sessions, (3) represents a further encroachment on the "employment at will" principle, and (4) will require Texas nonsubscribing employers to walk on eggshells even when trying to defend a lawsuit by an adversarial employee.

This bill is not aimed at putting nonsubscribers in a comparable position to subscribers to workers' comp. Again, this is consistent with the theme of the other bills described above, ignoring relevant laws already on the books and adding an additional burden on nonsubscribing employers that is unsupported by any data or public policy.

Other Texas Senate and House Bills of Interest Include:

Create New Texas OSHA Plan -- Senate Bill 278

Impose New TPA Requirements -- House Bill 472

Eliminate "Silent PPOs" -- House Bill 839

So what should you do now?

Stay informed and get involved with:

* Texas Alliance of Nonsubscribers: The Alliance (formed and operated by many of Texas' largest companies) provides an accountable, transparent, and active voice at the Texas Capitol for nonsubscribers. Their Web site, at www.nonsubscriberalliance.org, provides membership information, as well as a variety of resources, including their "Capitol Update" newsletter (providing both Senate and House Bill filing information related to nonsubscription, plus insightful analysis and commentary). The Alliance provides several opportunities (such as committees and meetings with legislators) for employers and other interested persons to get involved.

* TAB Workers' Comp Status Report: We also encourage membership in the Texas Association of Business and participation in its Workers' Comp and Nonsubscriber Committees. An example of their many member benefits includes the latest TAB legislative status report at www.partnersource.com. Go to www.txbiz.org for more information.

* Texas Legislature Web site: Go to www.capitol.state.tx.us to find or track any Senate or House Bill or contact your legislators. This is a terrific resource.

This was reprinted with permission from the March edition of the Nonsubscriber Newsletter. It is printed by PartnerSource Inc. Its Web site is http://www.partnersource.com.

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The views and opinions expressed by the author are not necessarily those of workcompcentral.com, its editors or management.