Opting out of workers’ compensation: Non-subscription in Texas and its effects

Lu Jinks, Thomas Kniesner, John Leeth and Anthony T. Lo Sasso
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Lu Jinks: University of Illinois at Chicago
John Leeth: Bentley University
Anthony T. Lo Sasso: DePaul University
Authors registered in the RePEc Author Service: Anthony Lo Sasso

Journal of Risk and Uncertainty, 2020, vol. 60, issue 1, No 3, 53-76

Abstract: Abstract Texas is the only state that does not mandate that employers carry workers’ compensation (WC) insurance coverage. In place of traditional WC, companies can choose to offer alternative “non-subscription” disability plans to workers. Little large-scale empirical research has studied the consequences of switching from traditional WC to non-subscription plans. We use a difference-in-differences estimator along with a novel machine learning approach to compare effects of switching to non-subscription plans for employees in Texas versus contemporaneously measured non-Texas-based employees for 25 large companies. Our results indicate that total medical payments dropped by roughly 40% from switching to non-subscription plans, consisting of reductions in hospital spending, physician spending, and other medical spending. Similarly, indemnity payments dropped by 70% and number of reported lost days dropped by 80%. Accumulating all sources of spending, we find that total expense associated with workplace injury fell by approximately 46% after switching to the non-subscription program.

Keywords: Workers’ compensation insurance; Non-subscription; Difference-in-differences; Triple differences; Machine learning; PDS-LASSO; C54; C55; I13; J32; J38 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Opting out of Workers' Compensation: Non-Subscription in Texas and Its Effects (2019)
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DOI: 10.1007/s11166-020-09320-x

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