Workers Compensation vs. Non-Subscriber Coverage for Texas Employers

Worker's CompAs 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

  1. Complete Indemnity – All losses, including current and future illness/injury remain protected from employer liability.
  2. 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

  1. 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.
  2. Control over benefits to elect – Employers can choose deductible amounts and coverage limits based upon their perceived risk.
About Amy Grimmer

Amy Grimmer currently serves as President and CEO of Centripetal Consulting Group (CCG). Grimmer founded the company in 2007 with the concise mission to revolutionize the positive business impact that employers realize through HR Outsourcing. Both CCG clients and its HR services vendor network of HR look to Grimmer and CCG’s associates as a trusted, unbiased resource to understanding the complexity of HR Outsourcing. Grimmer’s vast knowledge of the HR Outsourcing space, CCG’s client focused approach, and the continued rapid growth in the HR Outsourcing industry are all contributing factors to the success of Centripetal Consulting Group.
Prior to founding CCG, Amy Grimmer served the human resource outsourcing industry in a business development capacity. Her experience spans several functional HR practice areas including HR Outsourcing Strategy, Payroll/Tax Filing, HRIS and Benefits Administration, Health & Welfare Consulting, Retirement Plans, Workers Compensation, PEO/ASO Arrangements, HR Compliance, and Recruitment Process Outsourcing. Grimmer’s prior employers include Ceridian, ADP, Aerotek, Advantec, and RSM McGladrey Employer Services.
Amy Grimmer exhibits extreme passion and dedication to the HR outsourcing industry and is an avid networker, author, and student of her profession. Amy has published several articles, whitepapers, and E-Books on various topics within the HR Outsourcing space.
Amy is a graduate of the University of Missouri and holds a BA in Communications and a BA in English. She has completed coursework for her Masters of Business Administration in Human Resource Management at Lindenwood University.

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