Last month Walmart pulled out the Texas state-run Worker’s Compensation system. Texas is the only state that allows companies to opt out of the system. And large companies in Texas have been taking advantage of it to put in place their own injured worker’s insurance plans to reduce costs and bring them under their own control. The negative to the scheme is that it opens such companies up to a larger exposure for expensive litigation claims on worker injury.
As of 2010, in a survey conducted by the Texas Department of Insurance, fifteen percent of Texas businesses with more than 500 employees do not carry state workers’ compensation coverage.
Daniel Morales, a spokesman for Wal-Mart, said the company is “sort of late to the game” in switching to its own program.
The Texas Tribune reported that under Wal-Mart’s in-house plan, total medical coverage is capped at $300,000 for individual injuries, compared with lifetime coverage for the injury under state workers’ compensation. The Wal-Mart plan provides 90 percent of lost wages for injured employees for up to 120 weeks, compared with 70 percent of lost wages for up to 401 weeks under the state system. That is a maximum of $54,000 in lost wages provided under Wal-Mart’s policy, and $140,350 under state workers’ compensation.
Industry watchers are wondering how this will all play out. The AFL-CIO is now lobbying the state to make the state-run worker’s compensation program mandatory. The current opt-out option, they say, is endangering the system for injured workers and not providing as good benefits. Businesses obviously wish to keep their costs lower and some analysts speculate that enforcing the state-run system may bankrupt some who can’t afford it. Also whether increased litigation exposure on injured worker claims will eventually make the private plans nonviable.