Walmart recently dropped out of the state’s workers’ compensation system to become one of Texas’ newest nonsubscribers, that is, companies that don’t “subscribe” to the state’s system.

Texas is the only state in the country that doesn’t require most employers to belong to a state-run workers’ compensation system. A 2010 study by the Texas Department of Insurance found that 15 percent of Texas businesses with 500 or more employees do not carry workers compensation insurance. Target is another company that administers its own plan.

These companies opt for the private sector because the state system, like most state-run operations, is inefficient, costs too much, and is subject to abuse. Employers find they can save money while still offering good medical coverage and benefits to injured employees. Many employers take this option even though it eliminates protection under the law from being sued by an injured worker.

A 2005 Foundation study explains more problems with the workers’ compensation system:

Employers give up rights to oversee wage replacement and medical benefits related to workplace safety in exchange for state immunity from employee health and safety lawsuits and a system that returns employees to work quickly at reasonable cost – provided the employer complies with workplace standards. Employees give up rights to sue employers for workplace injuries in exchange for a state system that provides quality medical care with quick recovery and reasonable wage replacement. …

The state system fails because it installs government as the intermediary between employer, employee, health provider, and insurer. It eliminates economic, medical, and social incentives for the system to serve the best interests of injured employees and responsible employers. The consequences are unjustifiably high utilization, uncontrolled costs, and poor medical care outcomes.

The option to have a market-driven system for dealing with employee injuries is just one more example of why Texas is the nation’s leader in job creation and economic growth.

-Bill Peacock