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Nonsubscription decline attributed to small employers


While the number of private year-round employers in Texas that opted out of the state workers compensation system decreased by 11 percentage points from 2014 to 2016, most of those employers that chose to reenter the comp system were small companies, according to an analysis from the Texas Department of Insurance.

biennial report released by the insurance department earlier this month showed that 22% of all companies in Texas chose to opt out of the workers comp system in 2016, down from 33% in 2014. The 2016 findings represent the lowest percentage of nonsubscribers in the state since 1993, according to regulators.

The figures are important, the report states, because they “show if employers believe the benefits of participating in the workers compensation system outweigh the costs of obtaining the coverage.”

Employers that opt out of Texas’ workers comp system can either provide alternative benefit plans for injured workers or forgo providing workers comp coverage or injury benefits. Companies that fail to provide comp coverage can face tort litigation from injured workers.

Texas is the only state that allows employers to opt out of buying workers comp insurance after the Oklahoma Supreme Court struck down a similar program in September.

Despite a decrease in the number of Texas nonsubscribers, proponents of the system say the report shows that large employers still see nonsubscription as a viable alternative to traditional workers comp.

“This new report indicates that medium and large employers remain committed to (alternatives to worker comp), which in our experience is a very viable way to provide good benefits coverage and safe workplaces,” said Bill Minick, president of Dallas-based PartnerSource, an alternative workers comp consulting unit of Arthur J. Gallagher Risk Management Services Inc., in a statement to Texas lawmakers.

About 18% percent of Texas workers, or 1.8 million, worked for employers that opted out of the traditional workers comp system, down from 20% in 2014. The state insurance department said this was “primarily the result of smaller employers” choosing to buy workers comp insurance this year.

The American Insurance Association finds Texas to be “a very vibrant, competitive market” for workers comp insurers, which could be contributing to employers purchasing comp insurance, said Fred Bosse, Austin-based vice president for state affairs of the association’s Southwest region.

“Costs are down (and) medical care, closed formulary, access to medical care has improved, return to work numbers are good, prices for the product are falling,” Mr. Bosse said.

The insurance department report noted that workers comp rates have fallen in the state, “making workers compensation coverage more affordable for Texas employers.” Employers paid an average of 96 cents in workers comp premiums per $100 of payroll in 2014, down from $1 in 2013 and a high of $2.34 in 2003.




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