Stanford Law Study Provides Compelling Results from Texas Nonsubscription

By now you may have seen headlines about a preliminary release of an important study comparing Texas nonsubscription to traditional workers’ compensation (WC). The author is Alison Morantz of Stanford Law School, and her study (linked) is called Rejecting the Grand Bargain: What Happens When Large Companies Opt Out of Workers’ Compensation?

The full text of a 3/21/16 press release from Stanford summarizing the key findings of Professor Morantz' study is linked here. Highlights include the claim that "company costs drop significantly--by about 44 percent" for firms that "replace [WC] with private plans."

In stunning contrast to the dismissive tone taken by NPR and ProPublica regarding safety in the opt-out world, Morantz' study found that "exiting [WC] was associated with a 47 percent drop in the frequency of fractures, amputations, concussions and other severe, traumatic accident claims. Because these types of injuries are the least likely to be faked or disputed, such a large and significant drop raises the possibility that real safety improvements occurred following the adoption of private plans" (emphasis added).

Morantz was surprised to discover how little an impact some of the more controversial exclusions of private plans have on savings. Her study "suggests that . . . private plans could expand their coverage of conditions that have devastating and headline-grabbing effects on individual workers without too much effect on their bottom line." Of course, that realization is the perfect segue to Oklahoma, where private plans must provide the same forms of benefits as the state’s traditional WC system, including permanent partial disability settlements, occupational disease and lifetime medical (no caps).

We at (WCO) agree with her findings. However, none of this information surprises those of us experienced in alternatives to WC. Oklahoma policymakers need to be aware of this study’s results. Much focus is put on the economic benefits that Texas has reaped for decades (and Oklahoma is only just now reaping), but I continue to hang my hat on the superior medical outcomes for employees (e.g., thoughtful, conservative medical care avoiding harmful surgeries along with virtually no opioid addiction problems).

Morantz’ concludes her study with an explicit call to arms for legislators and regulators: “Overall, my findings suggest an urgent need for policymakers to examine the economic and distributional effects of converting [WC] from a cornerstone of the social welfare state into an optional program that exists alongside privately provided forms of occupational injury insurance.”