Nuts & Bolts

Brief History of TX Injury Benefit Plans

In 1989, insurance companies dramatically increased Texas workers’ compensation premium rates, and many exited the market because of uncontrolled medical and legal payments under the law then in effect.  Those insurance companies (and an under-capitalized state insurance fund) charged premium rates that were so high, many Texas employers were forced to drop workers’ compensation insurance to stay in business.  Suddenly, hundreds of thousands of Texas workers had no on-the-job injury coverage. So, Texas employers began to – voluntarily – develop their own, private occupational injury benefit plans to care for their most important asset.  By applying common sense to getting the best medical outcomes for injured workers, without many of the complexities found in the government-run program, these injury benefit plans quickly gained popularity. To date, these programs have successfully:

  • Provided injury benefit protection to more than one million workers every day,
  • Successfully resolved more than one million injury claims by paying billions of dollars in benefits and negligence liability settlements and judgments to injured workers and their families,
  • Generated billions of dollars in cost savings and economic development for Texas, and
  • Helped make Texas the best place to do business and raise a family.  

Texas Model: Three Choices

  • Opt-in to Workers’ Compensation – Texas innovation and competition has created one of the best-performing workers’ compensation systems in America.
  • Opt-in to a Texas Injury Benefit Plan – A responsible alternative to Texas workers’ compensation that has proven to deliver better medical outcomes, improved benefits and cost savings.
  • Opt-Out – Choose to not provide quality injury benefits. Texas workers deserve better.  ARAWC renounces and does not support Opt-Out. 

System Structure & Improvements

  • We Agree!  (insert final Pettegrew article)




  • Benefits & Negligence Liability in Balance


[RNPR insert new graphic on the three choices in Venn diagram format per chart in this “System Structure & Improvements” folder on Google Drive]


Injury Benefits.  With no workers’ compensation insurance coverage, Texas employers that pay ANY medical expenses for injured workers must comply with federal employee benefit laws described below.  [link to “ERISA Basics” section below].  Benefit adequacy has been achieved by coupling this employer discretion in benefit commitment with negligence liability exposure.  Employers are motivated to care for their most important asset (workers) AND to eliminate the employee’s primary measure of damages.  Employers can afford and commonly desire to be more generous on benefit payments to injured workers under a system that supports employee accountability, better medical outcomes, and more efficient dispute resolution.

Negligence Liability.  With no workers’ compensation insurance coverage, Texas employers are fully exposed to negligence liability claims for an injured workers actual and punitive damages.  The Texas Labor Code strips these employers of defenses based on an injured worker’s assumption of risk or contributory (or comparative) negligence, or the negligence of a fellow employee.  This liability exposure is a powerful force in motivating employer investments in job training, safety programs and injury benefits coverage. Such lawsuits have developed a deep body of case law and an experienced group of attorneys representing employers and injured workers.  These benefit and liability exposures are fully insurable within a competitive insurance market (subject to a deductible or self-insured retention that requires the employer to always have dollars at risk). Read more at:


[insert scales of justice symbol]



  • [link to “The Market” under Resources tab]


  • [link to Part 3 of Innovation Series on “Active Engagement”]
  • [link to PartnerSource’s April 2019 data release on Largest Settlements/Judgments]





  • ERISA Basics.  Every separate state workers’ compensation system relies on its own unique statutes, administrative rules and bureaucracy.  Texas injury benefit plans rely upon the same federal laws and related government oversight that has worked well for over 40 years with other forms of employer-sponsored benefit programs (like group health plans, disability programs and 401(k) plans).



Congress enacted the Employee Retirement Income Security Act of 1974 (“ERISA”) to protect “the interests of participants in employee benefit plans and their beneficiaries, by requiring the disclosure and reporting to participants and beneficiaries of financial and other information with respect thereto, by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts.”  These laws have supported the efficient processing of Texas injury benefit claims for three decades.


In brief, ERISA requires:


  • Clear Communication and Disclosure of Employee Rights and Responsibilities – through an official Plan document, a Summary Plan Description provided to every covered employee (understandable by the average employee regarding benefits provided, any exclusions and limitations, and how benefits can be obtained, including interpretive assistance, and periodic updates), and any Summary of Material Modifications.  Plan fiduciaries must provide these and all benefit claim documents within strict timeframes or face stiff penalties.


  • Employer Accountability and Fiduciary Responsibility – ERISA provides a robust system of employee protections that includes fiduciary rules, very detailed claim procedures that ensure a full and fair review of benefit claims (including discovery, separate levels of review and access to the courts), and other administrative safeguards.




State & Federal Law Hybrids are the Norm.  The application of state labor and insurance laws, as well as federal labor and employee benefit laws, to employer-sponsored benefit plans has been the norm in Texas and other states for many decades.  For example, just like Texas injury benefit programs, workers’ compensation programs must comply with federal laws like the Family and Medical Leave Act (FMLA), Americans With Disabilities Act (ADA), Occupational Safety and Health Act (OSHA), and Fair Labor Standards Act (FLSA).  


Acceptance by the Insurance Community.  Insurance markets and insurance agents are very familiar with and have relied upon ERISA as a fair system of administration for employer-sponsored group health, disability and retirement plans for over 40 years.  They have existing personnel and resources to support ERISA compliance, as well as proven, free-market insurance underwriting models.


Read more  on “The Market”. [link to this subsection under Resources tab]


Read more about public policies supported by ARAWC in this “We Agree!” blog post.  [link to Pettegrew’s first blog post April 2019 and perhaps a related image]  


  • Recent Improvements State workers’ compensation systems rely upon excruciating detail within many thousands of pages of statutes, regulations, directives, interpretations and “reforms”.  Only on occasion does more system complexity and bureaucratic cost lead to better medical outcomes and higher employee satisfaction.


On the other hand, Texas injury benefit programs have a long history (since 1989) of non-statutory-based innovation and continuous quality improvement.  For example, constructive criticisms related to the “Oklahoma Option” [link below] and Other States [link below] have resulted in widespread updates to Texas injury programs over the past three years, such as:

[insert lightbulb or other symbol of good ideas or innovation]

    1. Removing unnecessary exclusions and limitations on coverage,
    2. Adding “good cause” exceptions for late injury reporting and medical management requirements,
    3. Ensuring the injury benefit plan is the employee’s primary source of recovery (avoiding cost-shifting to government programs),
    4. Updates for new employee protections in ERISA disability claim regulations that became effective April 2, 2018, and


  • More fiduciary training on claims handling to ensure a “full and fair review” – the legal standard approved by the U.S. Supreme Court for ERISA benefit claims.



Compliance with new legal developments, as well as self-regulated improvements in the interests of injured workers and employers, will ensure the continued, long-term success of Texas injury benefit programs.

What Happened in Oklahoma?

The Oklahoma Legislature enacted the Oklahoma Employee Injury Benefit Act (the “Oklahoma Option”) in 2013, which became effective in 2014.  But the Oklahoma Supreme Court decided in September 2016 that their unique state constitution prohibits employers from having any choice in how they take care of injured workers.  Every worker must have the exact same injury benefit package, without regard to whether that package is efficient or performing well.  The Oklahoma Option also failed because it included “exclusive remedy” protection, preventing injured workers from bringing lawsuits for employer negligence. In contrast, the Texas Constitution supports innovation and competition, and employers sponsoring Texas injury benefit plans do not have exclusive remedy protection from worker lawsuits.  [link to “Negligence Liability” above]


The court case that struck down the Oklahoma Option was also interesting because it did not even involve an on-the-job injury.  And the data from this two-year experiment is impressive.  ARAWC produced an “Oklahoma Option Performance Report” in 2016 that shows:

[insert thumbnail of report]


  • A diverse group of big and small employers elected the Oklahoma Option,


  • Improved medical outcomes and return to work for injured workers,
  • Dramatically fewer employee disputes, and
  • Better benefits paid to most workers.




So, in spite of all the stories about bad things that “could or might” happen under Texas or Oklahoma injury benefit plans, the facts demonstrate very good results.  ARAWC welcomes further, independent research into program results, and supports continued innovations that deliver better medical outcomes, benefit improvements for disabled workers and cost savings.

Other States?

The success of Texas injury benefit programs for injured workers and employers has generated interest in work comp alternatives across America.  The Oklahoma Option was created by a group of local Oklahoma employers, and then ARAWC introduced and later withdrew proposals in Tennessee and South Carolina.  Other states have considered further alternatives.


ARAWC has spent the past three years carefully considering the lessons learned from all of this experience, including substantial misinformation promoting a bias in favor of traditional workers’ compensation systems, as well as many good points and ideas for improvement of injury benefit systems.  


While experience has demonstrated that ERISA federal law provides a highly-effective system for injury benefit administration, ARAWC continues to support every state’s right to determine whether to authorize a competitive alternative to traditional workers’ compensation.  


[insert Texas symbol]


ARAWC is focused on how we can further improve Texas injury benefit programs.  Protecting and promoting these programs in Texas will remain ARAWC’s top priority, and other states will do whatever they think is best for them.