Workers Compensation vs. Non-Subscriber Coverage for Texas Employers
As the economy continues in a downward spiral trend, employers continue to look for ways to cut costs
in non-revenue generating areas of their business. One of these key areas is insurance. As a private Texas employer, there is an option to “opt out” or non-subscribe from the workers compensation system. Instead, an employer can choose to assume the risks associated with a potential lawsuit should an employee be injured at work or purchase alternative insurance that provides a lesser benefit. Although, this may be a less expensive alternative, it is important to know the key differences between workers compensation (WC) and occupational accident (OA) in determining if this is the best area to cut costs.
Workers Compensation
Texas employers who choose to maintain workers’ compensation insurance can elect to purchase an insurance policy from a private insurance company, or self-insure. To self-insure, an employer must meet the requirements of the Texas Workers’ Compensation Act and become certified by the Texas Workers’ Compensation Commission. Self-insured employers have the same rights and responsibilities as employers who buy policies from private insurance companies, they are simply utilizing an alternative funding mechanism that includes more out-of-pocket risk vs. lower premium.
In return for an employer paying premiums toward workers’ compensation insurance, workers are guaranteed to be compensated for their injuries and lost wages in the event they suffer a work-related injury or illness, regardless of fault. WC premiums can fluctuate based upon claims experience which are measured by a regulated experience modifier. However, regardless of claim volume or risk tendency, the employer holds no personal liability for losses because WC is governed under tort law.
Benefits for Workers Compensation
- Complete Indemnity – All losses, including current and future illness/injury remain protected from employer liability.
- Sole Remedy – All employee losses are resolved and paid through the WC system, if filed properly.
Occupational Accident
Texas employers can also choose to “opt out” from subscribing to workers’ compensation. Perceived by many as a worthy alternative to WC, Occupational Accident insurance is an insurance option that provides employers and their employees a degree of protection should a work injury or accident occur.
OA insurance provides coverage for medical costs associated with the injury, disability payments for the injured worker as they are recovering from their injury, and a scheduled benefit for accidental death and dismemberment. The employer chooses a benefit period, usually two or three years, as well as a deductible that is applied to each accident.
The inherent employer risks are unlimited liability, including possible punitive damages. If they lose lawsuits arising from workplace accidents, and in the event of a lawsuit, they forfeit their right to claim one of the three common law defenses: a) The employee knew of the inherent dangers and assumed the risk; b) the employee contributed to their own injury or illness (any negligence on the employee’s part, however small, prevents the employee from collecting for injuries); or c) a fellow employee’s negligence caused the injury.
Benefits of Occupational Accident Coverage
- Cost – Typically premiums are much lower than WC. The differential between WC coverage vs. OA coverage becomes more disparate with higher compensated groups with riskier classification codes.
- Control over benefits to elect - Employers can choose deductible amounts and coverage limits based upon their perceived risk.
10 Steps to Control Your Workers Comp Premium
An employer’s experience modification factor is an important component that is used in calculating a company’s workers compensation premium. Controlling your mod will help you to control your costs. Here are a few tips to live by if you are trying to control this cost and your bottom line.
- Investigate accidents immediately and thoroughly. Take corrective action to eliminate hazards. Be aware of fraud.
- Report all claims to carrier immediately. Alert carrier to any serious, potentially serious, or suspect claims. Frequently monitor the status of the claim and communicate with the adjuster to resolve as quickly as possible.
- Take an aggressive approach to providing light duty to all injured employees upon their release from treatment. Supervise light duty employees to assure their conformance with restrictions.
- In serious cases that involve lost time, communicate with the claims adjuster so that they recognize your interest in returning the injured employee back to gainful employment.
- Set safety performance goals for persons with supervisory responsibility. Success in achieving safety goals should be used as one measure during performance appraisals.
- Develop a written safety program and train employees in their responsibilities for safety. Incorporate a disciplinary policy into the program, one that holds employees accountable for breaking the rules or rewards them for correctly following safety procedures.
- Frequently communicate with employees, on a formal and informal basis, regarding the importance of safety.
- Make safety a priority. Senior management must be visible in the safety effort and must support improvement.
- Evaluate accident history and near-misses at least monthly. Look for trends in experience and take corrective action on worst problems first, as soon as the problems manifest themselves
- If you don’t have the resources available internally to implement these suggestions, hire a third party who specializes in minimizing the risks.
Tips to Control Workers’ Compensation Costs
Regardless if employees are injured on the job due to their own careless behavior, those accidents are still covered by their employer’s workers’ compensation insurance. To reduce and/or avoid injury claims, it is crucial to continually promote safety awareness and safe work habits. To enhance workplace safety and improve employees’ quality of life, as well as the company’s bottom line, employers can consider some the these ideas:
- Provide each employee with a workplace safety manual with detailed rules and safe work practices they are expected to follow.
- Inspect the workplace on a regular basis to identify and correct hazards and monitor use of safety equipment and adherence to safety rules. Reward employees for compliance.
- ommunicate with employees to assure they understand the importance of safety guidelines and solicit their feedback with regard to safety issues and corrections.
- Develop an effective safety program and consistently enforce safety rules.
- Post safety reminders in common areas and hold workshops or safety seminars to cover specifics.
- Provide employees with ergonomic products and protective equipment, and monitor their use.
- Maintain detailed records of injuries and accidents.
- Create return-to-work programs to return injured employees to work as soon as possible, even if on a limited basis.
- Pay extra close attention to activities with high-injury rates.
