This article from a few years back illustrates some of the fallacies involved in defending the Texas employers who opt out of workers' compensation coverage under the state statutory scheme, opting instead for custom-crafted plans under federal ERISA law.
I don't necessarily oppose the right of employers to "go bare" without workers' compensation coverage. But they and their employees should understand what this really means. It really does mean "going bare" in essential coverage. ERISA policies do not offer the employer or the employee the same sort of protections.
A few quotes from the article and some comments:
At 33 percent, the number of nonsubscribers has increased slightly from 32 percent in 2010, according the Texas Department of Insurance – Division of Workers’ Compensation. Not all of those nonsubscribing businesses carry insurance to cover worker injuries, however.
Powell said that up to 10 years ago nonubscription probably held around 40 percent of the market, but increased competition in Texas has contributed to the decline in the number of nonsubscribers.
This is actually a good thing that workers' compensation elective coverage is going up as a result of the market pressure on workers' compensation insurance rates through nonsubscription. That's a benefit to all sides of the equation on its face.
“The types of business that generally go from workers’ comp into nonsubscription are those employers that have made the determination to be in more control of their claims and generally take better care of their employees through better medical management and better physician outcomes,” said Blake Stock, CEO of Dallas-based Combined Group.
What this really means is that the kind of employer control over claims and coverage decisions that are not possible through an independent insurance professional handling the claims, who doesn't have a personal axe to grind over the accident causing it, is what largely drives nonsubscriber incentives.
With nonsubscription, employers tend to be more “engaged in the administration of their program, which puts them much closer to their employees and allows them to be more involved with the claim and the outcome,” Stock said.
Employers have some control over whether medical providers are approved or not approved to provide services and “you tend to get much more specialization and better doctors in nonsubscription,” he said.
That has not been my experience. What I have seen is the employers and insurance carriers tend to be more focused on steering the employee toward their own hand-picked doctors, and away from more expensive options such as surgeries. They want doctors who will minimize the claim and associated costs.
On the other hand, many companies that choose to nonsubscribe may do so because they find the cost of statutory workers’ comp too high.
“The cost with nonsubscription can be significantly less than workers’ comp, depending on the SIR [self-insured retention] and the benefits,” TAGA’s Powell said.
This is largely true, because the nonsubscriber plans are written to cover a fraction of the benefits (monetary payments) both in amount and duration. They are written to exclude coverage for injuries reported outside a short window after the accident (often 24 hours or even the end of the shift). They are written to exclude aggravation of previously asymptomatic degenerative conditions. They are written to limit the types of doctors and procedures covered. They are written to exclude outside review of claims decisions (claims appeals are handled in-house within these plans). It is no wonder they cost a little less, because they cover a lot less. It should take less to make a bikini than an overcoat.
But this leaves out that in the most important sense, having a nonsubscriber ERISA plan is going bare in the sense that the employer remains vulnerable to a suit for negligence, which is much easier to win than a standard negligence case not involving an employer/employee relationship. The complicating factor is that these plans are often coupled with an arbitration provision for negligence claims brought to thwart the benefit limitations of the plan and invoke common law remedies.
The real reason for the nonsubscriber ERISA policies comes out a little later in the article though:
With nonsubscription, Powell said, the employer can talk to the medical providers, can get second opinions and even suspend benefits if injured employee doesn’t follow the requirements of the program.
“You have a lot more control, which is what the employers like about it,” he said.
It's about control. Control over the employee's compensation, treatment, recovery, and coverage. Whether to cover and how much. The employer can roll out the red carpet for an employee that really got hurt due to negligence and blow off an employee who got hurt without anyone's fault. The employer can take really good care of a catstrophic injury to a long time employee but ignore a disabling injury from chronic overwork for another. The employers tend to play the game of balancing their eagerness to help against the potential viability of a negligence lawsuit.
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