Workers' Compensation Policy Options for Texas Business Owners

Whether you’re a Texas native opening a business in your hometown or the owner of a national chain, you need to understand that the Lone Star State handles things a little differently when it comes to workers’ compensation insurance. To make an informed decision about your business’s insurance needs, you’ll need to dive deep into the state’s rules and regulations for workers’ comp compliance.

What Makes Texas Unique?

Unlike the 49 other U.S. states, Texas does not require businesses to cover their employees with a workers’ compensation policy. In Texas, business owners have the freedom to purchase a plan from a private insurer or can choose to assume the liability for employee workplace injuries and occupational illnesses.

Despite Texas’ relative flexibility in business insurance requirements, roughly 72 percent of private-sector employers choose to participate in the Texas workers’ compensation system. And, outside of the workers’ compensation system, some employers provide medical, occupational injury, and wage benefits independently.

Though the state doesn’t require workers’ comp coverage, it still has reporting requirements. Employers who opt out of workers’ comp, also called non-subscribers, must inform the Division of Workers’ Compensation (DWC) and new hires of their status. Also, non-subscribing employers with five or more employees must report all workplace fatalities and injuries or illnesses that result in one day of last work to the DWC.

To make an informed decision about how or if to provide workers’ comp coverage to your employees, you need to understand Texas state laws and the resulting coverage options.

Purchasing a Policy from a Private Insurer

Unlike in monopolistic states, private companies have the right to sell workers compensation insurance for businesses in Texas. To determine fair rates, these insurers use the National Council on Compensation Insurance industry classification system. It’s also important for Texas business owners to note that the state sets a minimum and maximum benefit amount an employee can receive based on their average weekly wage.

The Insurer of Last Resort

Any business in Texas that wants to provide workers’ compensation coverage can, regardless of their previous injury and illness record or high-level risks. Businesses that can’t secure coverage elsewhere can get coverage through Texas Mutual Insurance Company, the state’s insurer of last resort.

Self-insurance

The Texas Workers’ Compensation Act allows qualifying employers to register for self-insurance or group insurance through the DWC. Registered self-insured businesses have more legal protections than non-subscribers who opt out of the state’s workers’ comp system altogether.

Non-subscriber Status

As previously discussed, Texas is unique in that it offers another option: non-subscriber status. Employers who do not offer workers’ compensation insurance must follow notice and reporting requirements, and they assume financial responsibility for employee workplace injuries and occupational diseases.

Furthermore, non-subscribers do not have the legal protections that employers with workers’ comp coverage receive. They do not have immunity from most employee lawsuits regarding injuries. If an employee sues and can prove employer negligence, the employer may have to pay for medical expenses, legal defense expenses, and punitive damages.

Advice for Texas Business Owners

Even though workers’ compensation isn’t required in Texas, it’s still highly recommended, especially for companies with a lot of employees or high occupational hazards. Having coverage helps workers in the case of a work-related injury, and it can save your business from having to pay incredibly hefty court payouts if an injury or fatality occurs.

If you’re looking for workers’ compensation insurance, take the time to shop around and weigh your options. Request quotes from multiple agencies and ask about other forms of insurance you may need as well. Shopping around can prevent you from ending up with too much or too little insurance depending on the number of employees you have, the industry you’re in, and other business-specific factors.

Workers’ Comp Insurance and Risk-benefit Analysis

While it may seem like opting out of workers’ compensation insurance means one less expense to pay, it could end up costing your business more in medical and legal expenses if just one accident occurs. If you’re a Texas business owner struggling with this decision, look at the data. Research the frequency and severity of injuries associated with your industry and how much medical care and litigation over these injuries tend to cost. With this data, you can determine if the benefits of workers’ compensation insurance are worth the monthly cost.

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