Could Your Texas Company be Large Enough to Self-Insure for Work-Related Injuries?

 

 

Texas is the only state in which an employer can choose “to go bare” when it comes to workers compensation insurance. It does eliminate the cost of workers compensation insurance, but exposes the employer to the very real possibility of being sued and having to defend from the allegations that the negligence of the employer caused the injuries to the employee. To avoid that possibility, employers in Texas who do not have workers compensation will often offer a non-subscriber plan that provides the employee with both medical coverage and disability benefits when the injury occurs within the scope of the employment.

 

 

The non-subscriber plans are often referred to as “Voluntary Employee Injury Benefit Plans” and are normally written in both English and Spanish. The plans are written to comply with federal Employee Retirement Income Security Act of 1974 (ERISA) as the non-subscriber plans are considered an employee welfare benefit plan.

 

 

1.      Full medical benefits for any work related injury.

2.      Short-term wage replacement benefits.

3.      Long-term wage replacement benefits.

4.      Death benefits.

5.      Dismemberment benefits.(WCxKit)

 

 

The plans usually have an introduction and specify who is eligible for coverage. It states the employer is a “non-subscriber” to the Texas Workers Compensation Act and advises employees there is no coverage for workers compensation, but the plan provides the benefits outlined above and will provide the benefits without regard to whose fault the accident was. The official address of the plan administrator will be given along with the telephone number for the plan administrator and the business hours of the plan administrator.

 

 

When the Texas employer with a non-subscriber benefits plan hires a new employee, they offer the employee the option to join the non-subscriber plan. If the new hire elects to join the plan, the employee is given an enrollment and waiver agreement wherein the employee joins the non-subscriber plan and is eligible for all benefits available under the plan. In addition to becoming eligible for the plan's benefits, the employee acknowledges he or she is giving up any right to benefits under the Texas Workers Compensation Act and is giving up any rights to sue the employer for any benefits not provided by the non-subscriber benefit plan.

 

 

The plan will spell out the conditions under which the employer will pay to the plan participant’s income benefits and how the income benefits would be calculated. Short-term disability benefits are usually capped at 52 weeks (one year) while long-term disability benefits are often for 156 weeks (three years). The amount of short-term disability benefits is usually calculated by taking the average weekly earnings for a set number of weeks prior to the injury and multiplying the average weekly earnings by a percentage (often 70 percent or 75 percent) to obtain a short-term disability payment amount. The weekly amount will be capped at $1,000 or some other amount regardless of the plan participant's pre-injury average weekly earnings. Long-term disability will be calculated in the same manner, but is often at a slightly lower percentage (60 percent or 65 percent). Short-term benefits normally start after a non-paid waiting period which is usually a week or a set number of “business days.”  Long term disability benefits are only paid when the plan participant has exhausted all short-term disability benefits.

 

 

The non-subscriber plans will pay 100 percent of all necessary medical care, but will limit medical care to the physician or medical facility specified by the plan administrator. The plans also allow the plan administrator to change the designated medical facility at any time. Unapproved medical providers are only paid for when emergency medical care is needed. When a plan participant receives medical care, the plan participant can be required to submit to drug and alcohol testing at the time of the medical treatment. Medical care is provided until the plan participant reaches maximum medical improvement, dies, or is terminated for cause by the employer.

 

 

Death benefits are often based on a one-size fits all approach with a stated lump-sum amount to be paid to the beneficiary(s). The lump sum will often be broken down into a set percentage (often 10 percent) being paid immediately to the beneficiary(s) and the remainder of the lump sum being paid in monthly installments over a set number of year (often 5 years).

 

 

The non-subscriber plans also have a dismemberment chart which specifies what percentage of the death benefit will be paid in the event of the loss of limbs, hands, feet, fingers, eyesight, and hearing.(WCxKit)

 

 

If the Texas non-subscriber plan sounds a lot like workers compensation coverage, that is because it is designed to mimic workers comp. The employer is basically providing free medical coverage for on-the job injuries and disability insurance for on-the-job injuries, but maintaining more control over the benefits provided. If you feel your Texas company is large enough to self-insure for work-related injuries, a Texas non-subscriber plan might be the answer, but definitely consult with your employment law attorney before starting a non-subscriber plan.

 

 

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