What is the role of Texas non-subscription employers and service providers?
Texas nonsubscription employers and service providers (both those operating solely in Texas and those who are proponents of expansion into other states) are working in concert to actively advance ARAWC’s two key strategic objectives:
- Protect and Promote Texas Non-subscription – this is Job #1.
- Adoption in Other States
Texas non-subscription is, unquestionably, a state and federal hybrid program that will continue to mature and advance the best interests of both injured workers and employers.
Do workers' compensation and Option programs have the same objectives?
Both pursue the same objectives of:
- Improved medical outcomes
- Benefit payments
- Payment only for workplace claims
- Return to work
Are Option programs new and untested?
- Option programs have been active in Texas since 1989, and in Oklahoma from 2014 until 2016 with excellent results.
- Today, Option injury benefit plans cover 1.5 million workers in Texas.
- They successfully resolve approximately 50,000 injury claims per year.
- Numerous independent studies validate the success of Option programs for injured workers and employers. More studies are welcome and in process.
Are there supporters of Option programs within the workers' compensation industry?
- There are thousands of workers’ compensation industry professionals who believe in and support Option programs. For example:
- Many sophisticated Fortune 500 risk managers, who are very aware of their brand value, manage Option programs covering billions of dollars in payroll;
- Many “A” rated insurance companies support the Option insurance marketplace and write approximately $100 million in annual premiums;
- Many nationally respected TPAs handle Option claims, successfully resolving tens of thousands of injury claims every year, and;
- Several nationally respected actuarial firms have confirmed Option program success.
- These professionals have openly worked together for the past two decades to deliver better results for injured workers, fewer disputes, and a better value for employers.
Is a workers' compensation "Option" the same as "Opt-Out"?
- There are three kinds of employers in Texas (those that provide workers’ compensation coverage, those that provide injury benefit plan coverage, and those who do nothing for injured workers). ARAWC does not support employers who do nothing for injured workers. Those are the employers who simply “Opt-Out.”
- Option legislation in Oklahoma and proposed in Tennessee, South Carolina and other states mandated benefit requirements, financial security controls and a formal employer qualification process.
How do Option programs compare to workers' compensation?
There are significant differences.
Hyper-regulated, government-run workers’ compensation programs can cost a state tens of millions of taxpayer dollars every year to operate and the programs often struggle with efficiency and effectiveness.
There is a need for more employer engagement, more employee accountability and more insurance market competition. An Option program operates beneath an umbrella of state and federal employee protections, similar to what workers’ compensation delivers.
Workers’ compensation systems frequently tell workers nothing about their rights or responsibilities until after they are injured, at which point workers find that their right to sue has been revoked.
Workers’ compensation frequently supports delays in injury reporting and delays in medical treatment. Injured workers bear very little personal responsibility for their care and recovery. Too often, injured workers are engaged in a system that they don’t understand and are vulnerable to less than ethical medical practitioners eager to resort to surgery and narcotics.
Seriously injured workers commonly have no choice but to hire a lawyer to navigate a highly complex workers’ compensation maze. Those lawyers then explain fundamental rights to an employee and family members, in a time of crisis, in exchange for a big cut of the payments.
In contrast, Options to workers’ compensation are about better “customer” service. All Option injury benefit plan requirements must – by law – be fully communicated to workers, in language they can understand, before an injury occurs. Employers are then allowed to further communicate and support the injured worker’s needs when an injury occurs by gaining faster access to the best medical providers (many of whom will not accept workers’ compensation claimants due to bureaucratic hassles and low-fee payments).
Options support more continuous medical care and earlier return to work. Options require workers to follow the direction of treating medical providers. As a result, Options result in fewer tragic cases for injured workers and their families, as described further below.
Is Option legislation just like workers' compensation reform legislation?
Workers’ compensation reforms tend to focus on reducing benefits, reducing physician reimbursements and narrowing compensability. Such reforms also commonly do little (if anything) to create a more competitive insurance marketplace.
Do Option programs pay "reasonable and necessary" medical expenses?
- Injury benefit plans include a promise to pay reasonable and necessary medical expenses.
- Texas injury benefit plans commonly limit medical expense payments to a significant dollar amount or duration because the employer must also pay for any economic, non-economic and punitive damage awards or settlements for employer negligence that may have caused the injury. (More detail below in Q&A on “better benefits.”)
Are exclusions and limitations on benefits only found in Option programs?
- Every workers’ compensation system relies on various exclusions and limitations on benefits, buried among hundreds of pages of statutes, rules, guidelines and court decisions within each state workers’ compensation system.
- One difference is that Option program exclusions and limitations are much more transparent and easy to find in Option plan documents and summary descriptions. These documents are readily available to every covered employee.
- Option programs use certain exclusions and limitations on benefits primarily as a means of confirming payment for work-related injury and in consideration of the employer’s unlimited negligence liability exposure in Texas. Those plan provisions should be continuously reviewed and refined for best practices, as employers and insurance carriers are doing in Texas. Many micro-limitations on benefits that have been criticized in recent years have been (or are being) removed from almost all programs.
Do Option programs focus on saving money by reducing benefits?
- Option programs have never been about reducing benefits to injured workers. Instead, they rely on better communication, accountability and medical management to achieve superior outcomes for both workers and employers.
- In Texas, Option programs deliver broad coverage through a combination of voluntary benefits and liability settlements and awards. (More detail below in Q&A on “better benefits.”)
Do Option programs remain static over time?
- Option programs are commonly reviewed on an ongoing basis, continually improving benefit entitlements and outcomes.
- Change in traditional workers’ compensation programs occurs at a glacial pace. The ability to more rapidly respond to best medical and claims handling practices are a key advantage of Option programs. They do not have to wait on enabling legislation and rules. If a need or new best practice is identified, it can be immediately acted upon in a competitive environment that requires full disclosure to all covered workers.
Are Options to workers' compensation "self-insurance?"
- Both workers’ compensation and Option programs allow employers to insure, self-fund or do a combination of insurance and self-funding. This is just a matter of how benefit claims are financed.
- Over $100 million in Option insurance premiums are paid by Texas employers every year. Virtually any deductible or self-insured retention and coverage level is available in the open market. Insurance companies vigorously compete to offer the broadest coverage at the lowest price.
Do Option programs provide protections against discrimination and retaliatory discharge of injured workers?
- Option employers are subject to federal laws that make it unlawful for any person to discriminate or retaliate against an injured worker or death benefit beneficiary for exercising any right under an injury benefit plan, including the filing of a claim.
Do injured workers have access to the courts for benefit disputes?
- Employees have extensive internal and external rights to appeal any benefit denial, including access to state and federal courts.
- Federal law prohibits mandatory, final arbitration of injury benefit disputes.
- Some Texas employers require arbitration of negligence liability claims by injured workers, but that does not apply to any dispute regarding payment of injury benefits.
- Injured workers covered by an arbitration agreement in Texas still retain all rights to sue for employer negligence and can recover the same damages allowed in a court of law. Many state and federal statutes and court decisions over the past 25 years have specified clear requirements to ensure fairness both to injured workers and employers.
Have independent studies been performed on Option programs?
- Independent studies of the “nonsubscriber” Option to Texas workers’ compensation have already been conducted by Stanford University School of Law and other prominent, national researchers, actuaries and other authorities. More independent studies are in progress now and will be most welcome. Click here for recent articles and studies.
Does the Option reduce cost shifting of occupational injury costs to government programs?
- Options to workers’ compensation are saving money for federal and state governments not costing them money.
- Cost shifting to government programs happens when employees are dissatisfied and not getting good medical outcomes. The vast majority of cost shifting relates to whether the employer or the government is paying medical and wage replacement costs on injury claims. Over two decades of experience and data on Texas Option programs and over two years of data on Oklahoma Option programs, indicate that Option programs deliver superior medical outcomes and replace more lost wages for injured workers than workers’ compensation systems. This reality is further supported by the fact that, in comparison to workers’ compensation programs, fewer injured workers covered by Option programs hire lawyers or file claim disputes.
- Public policy discussions can start with high level reviews of a few injury claims and benefit levels. But serious, objective data analysis is needed on medical outcomes for injured workers, how many claims are disputed and which system is shifting more cost to government programs. We are confident that analysis will demonstrate that Option employers and their insurance companies are bearing much more of the cost of occupational injuries than is seen in workers’ compensation systems.
If employers are more involved, how do we know they will do the right thing for injured workers?
- First, Social Responsibility: Most Option employers take social responsibility very seriously. They commonly compete to be recognized locally and nationally as a “Best Place to Work.”
- Second, Productivity and Profits: This is not the Industrial Age when workers were abundant and untrained. Employers today are highly incentivized to retain trained workers within a shrinking labor force and return injured employees to their pre-injury status and a productive job.
- Third, Fiduciary Responsibility: The law requires it. Under Option plans, the claims administrator has fiduciary responsibility to act in the best interest of employees, and is personally liable if he/she fails to do so. No such employee protections exist within workers’ compensation programs.
Why do Option programs require faster injury reporting than workers' compensation?
- This is an advantage for everyone, not a penalty.
- More immediate notice of injury has several important advantages for workers and employers.
- Prompt injury reporting leads to:
- Early medical diagnosis
- Faster, more effective medical treatment
- Better medical outcomes
- These are simple facts supported by American Medical Association guidelines and numerous medical studies.
- Prompt injury reporting also supports:
- Timely investigation of the claim and availability of witnesses
- Timely post-accident drug/alcohol testing
- Coworkers exposed to unsafe conditions for shorter periods of time
- Employers emphasize the reporting timeframe to their employees through multiple communication methods, including Summary Plan Description booklets required by law, highlights brochures, computer-based learning modules, wallet cards, posters in the workplace, communication from supervisors and periodic retraining. To paraphrase the U.S. Homeland Security mantra: “If you experience something, say something.”
- Immediate notice of injury requirements must be subject to a “good cause” exception to handle unique situations. This good cause exception, coupled with the claim administrator’s duty to act as a fiduciary in application of the benefit plan’s terms, is an important “check and balance.”
- In view of the above advantages to immediate reporting, why does workers’ compensation commonly allow 30 or more days (plus a good cause exception) to report injuries that the employee knows about? That works well for no one.
- Prompt injury reporting also supports:
- Prompt injury reporting leads to:
How has the Texas Option impacted Texas workers' compensation over the past 12 years?
- Texas has dropped from the 10th most expensive workers’ compensation system in the U.S. (in 2003) to ranking 38th in terms of expense (in 2013) AND achieved better medical outcomes for injured workers.
- These dramatic improvements in injured worker outcomes and employer costs are due to a combination of legal reforms and competition with the Option. Insurance companies must work harder to implement reforms faster and maximize the results when competing with an alternative (Option) product.
Do Option programs or workers' compensation programs pay better benefits?
- The vast majority of workers’ compensation and Option claims do not involve catastrophic injury. For these typical claims, all reasonable and necessary medical expenses are paid in full. However, most employees covered by Option injury benefit plans are eligible for wage replacement benefits that are higher than workers’ compensation benefits (even after adjusting for any applicable taxes). Option wage replacement benefits commonly start sooner, are paid at a higher percentage and with a higher (or no) weekly dollar cap.
- Texas Option programs often pay more defined levels of compensation faster in catastrophic claims. For example, death and dismemberment benefits in Texas injury benefit plans are typically paid in a lump sum or installments over three years instead of weekly payments strung out over many more years.
- In some cases, Texas injury benefit plans may pay fewer benefits for catastrophic injury claims because of the opportunity for additional recoveries due to any employer negligence that caused the injury. This Texas negligence liability exposure is very real, with over 100 identified settlements or judgments of $1 million or more involving employers that do not provide workers’ compensation insurance coverage.
What about tragic injury cases?
- The sad truth is there are tragic stories under both workers’ compensation and Option injury benefit plans. The questions everyone should be asking are: Which system has fewer claims go awry? Which system brings injured workers back to their jobs and supporting their families faster? Which system has fewer disputes? Those are true measures of employee satisfaction and tragedy.
- Texas nonsubscriber Option programs have outperformed workers’ compensation by those standards (and, at the same time, cost employers less money) for decades.
What would you want for yourself or a family member if hurt at work?
- Better understanding of injury benefit rights and responsibilities?
- Immediate medical diagnosis and treatment by the best available physician?
- Payment of higher wage replacement benefits on the employer’s normal payroll system?
- Faster return to work?
- Fewer disputes?
- Less red tape, resulting in a smoother process and lower taxpayer expense?