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More to the point, what useful lessons can employers in the other 49 states learn from the Texas experience?

About a third of Texas employers currently elect the status formally known as nonsubscriber. They employ a quarter of the state's private-sector workforce.

Deegan's experience, amplified by some observations by Len Churnetski, a New York-based managing director with Aon, can be summed up in three words: urgency, simplicity, savings.

Deegan told me that because opt-out employers are potentially liable for negligence, they may have a greater sense of urgency about safety. Employees, according to him, also are imbued with a sense of urgency, such as in their need to report injuries very promptly as a condition of receiving benefits.

In this scenario, simplicity prevails. Best Buy pays disabled workers at about their full average weekly wage (which is taxable). It uses a closed medical provider network in which all treatment needs to be performed.

This ability to pick a closed network is hailed not only by Best Buy and Aon, but also by a 2008 state-conducted survey of nonsubscribers as a principle feature.

Churnetski said that most occupational injury plans deny benefits for a specific list of reasons, such as being under the influence on the day of the injury.

"Our process and procedures around safety and return to work in Texas are not materially different than the rest of the country," Deegan told me.

He advises other employers that are thinking of opting out to use an expert consultant to design the occupational injury plan, pay attention to new employee orientation, instruct both store staff and claims adjusters, get the medical network and protocols right, and use attorneys who understand non-subscriber litigation.

The opt-out employer incurs risks, including the absence of insurance that provide unlimited cover. But the option sounds like a good deal, especially for employers with medium to low injury risk. I wonder why more employers are not using it.

A recent survey of 54 large opt-out employers, conducted by Stanford Law School professor Alison Morantz, underscores the simplicity and savings of the program. Injured workers typically begin to receive full benefits from the day of injury. Most plans have mandatory arbitration clauses. Almost all plans stop indemnity benefits after two years and cap permanent awards.

Opting-out employers were surprised by savings in claims costs, averaging more than 50 percent.

What does this mean to us in other states? Ask if your state allows for labor-management agreements, or carve-outs from the conventional system. Not the same, but close enough.

Don't expect any rush by state houses to emulate Texas, at least not until the injured workers' experience is better studied. This program has never had an in-depth evaluation of total benefits and costs.

Lower claims costs to employers are just a part of the picture. Injured workers may be taking their injuries into their health plans. And what happens with catastrophic injuries?

PETER ROUSMANIERE is an expert on the workers' compensation industry.

October 1, 2010

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