America should look to Texas as a model for workers compensation
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Stop me if you’ve heard this one before. Texas makes everybody better off by reducing government intervention in their lives. Because of this success, other states emulate the Lone Star state. Then proponents of big government in Washington, D.C. get nervous and start attacking Texans as impractical ideologues that don’t care about workers, the poor, or people in general.

This same scenario was playing out a few months ago with Texas’ unique system of helping injured workers. The assault on this market by the U.S. Department of Labor under the previous administration would hurt Texas workers if it is allowed to continue. As it is doing in other areas, the new Labor Department leadership should put a stop to previous efforts to take over worker compensation systems in Texas as well as in other states.

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Workers’ compensation systems were created at the beginning of the 20th century as a grand bargain. Employers agreed to pay benefits to employees injured or made sick on the job, and employees agreed not to use the tort system to sue their employers in such cases.

 

Over the years, all parties became dissatisfied with the bargain as costs increased for employers and benefits for workers declined. State legislatures tried to reform state systems, sometimes working from within, and sometimes finding solutions outside of government, like letting employers find private alternatives.

Texas offers a unique solution. Employers can opt into the state system, or not. Known as nonsubscribers, Texan employers who don’t opt in can elect instead to offer their employees a private benefit plan or to offer no plan at all, while employees have access to the courts if their injuries or illnesses are not properly dealt with.

The Texas Department of Insurance estimated that in 2016, 78 percent of Texas private-sector employers subscribed to the workers’ compensation system, while less than 5 percent of employees are not covered by a state or private plan. Better outcomes for employees covered by private plans, such as shorter periods of disability, faster return to work, and fewer claim disputes, have been reported.

Following in Texas’ footsteps, other states have considered this solution of allowing employers to look for private alternatives. This model was adopted in Oklahoma and introduced in Tennessee and South Carolina. Spurred on by the spate of activity, workers’ compensation insurance companies, trial lawyers, and federal bureaucrats launched a counteroffensive. The Oklahoma Supreme Court wound up striking down the Oklahoma plan, while the U.S. Department of Labor decided to take on not only Texas’ nonsubscription plan, but also started making the case for federal control of state workers’ compensation systems nationally.

Despite the opposition, the benefits of Texas’ approach are undeniable. The solution encourages trust, cooperation, and mutual accountability between employers and employees. Employers that choose to offer a private benefit plan are not relieved from their liability for possible negligence as they would be under the state system. The exposure creates an incentive for the employer to proactively make the workplace safer to prevent as many work-related injuries or illnesses as possible. In exchange, employees are often expected to quickly report injuries so that medical care can start early, as well as facilitate employees’ recoveries and timely returns to work.

Opting for the alternative private plan also requires employers to actively and constantly communicate with their employees about the plan. Workers can make informed decisions about whether to join or leave an employer based on the risks inherent to their professional activity and the conditions of the plan offered. These options for employees create an incentive for employers to offer the best. The more businesses can compete for employees, the more workers benefit.

Of course, employers benefit too. When employers are free to shop for benefit plans, insurance companies have to compete for employers’ business, which tends to drive prices down. Insurance companies can also offer solutions tailored to an employer’s specific activity, instead of offering an expensive one-size-fits-all solution. Lower costs mean employers can focus on better care for injured workers too and also provide a strong incentive for them to keep workers away from harm. Overall, employers and employees interact far more in nonsubscription than in the state system.

Finally, nonsubscription actually constitutes the best way to improve the state system. Faced with competition, the government-run system seeks to benefit both employers and employees by improving outcomes and reducing the burden of the system.

Federalizing control of workers’ compensation systems or any other method of eliminating the Texas option guarantees worse outcomes for injured workers. Instead, relinquishing government control benefits all parties by encouraging mutual cooperation between employees and employers. Washington should stop its efforts to increase federal oversight of state systems, while states seeking to improve outcomes for injured workers and reduce costs for employers should look in the direction of Texas.

Carine Martinez-Gouhier is a policy analyst and the managing editor of the Center for Economic Freedom at the Texas Public Policy Foundation.


The views expressed by contributors are their own and are not the views of The Hill.