Walmart is a force to be reckoned with, no matter what the topic. When Walmart enters a community, or a new market segment, people pay attention. They are the operational and economic equivalent of a 500 pound cannonballer in the kiddy pool. Whether getting in with a splash or hauling themselves out, people are going to get wet, and the water levels are going to change.
That is exactly what concerns people in Texas over the announcement that Walmart is joining hundreds of other companies in “opting out” of the workers' compensation program there. Texas is currently the only state that allows companies to opt out of comp. The Texas Department of Insurance reports that 15% of Texas businesses with more than 500 employees take that route. In exchange for being able to more directly control their costs these businesses are willing to accept the increased liability avoided under workers' comp.
Opponents say that employee benefits under these plans are reduced, and an increased burden is placed on those remaining within the workers comp system. Texas Mutual's Senior Vice President of Public Affairs, Terry Frakes, believes “the benefits for injured employees are not as good under the private plans.”
Walmart, with about a gazillion employees and a Texas sized economic mass, could certainly recognize cost savings from the economies of scale their size provides.
Walmart's in house plan caps total medical coverage at $300,000 for individual injuries. The state's workers' compensation program allows for lifetime coverage for an injury. The in house plan provides 90 percent of lost wages for injured employees for up to 120 weeks. That compares with 70 percent of lost wages for up to 401 weeks under the state system.
That could add up to a tremendous amount of price rollbacks for cost conscious consumers in the Lone Star State.
What remains to be seen of course, is the impact of the potential downside to opting out of a no fault system that provides exclusive remedy. The liability exposure from one very bad accident involving some level of neglect could wipe away much of the savings recognized in this manner. I find it ironic that companies are now looking for a way to return to the same environment that brought about the concept of workers' compensation in the first place, over 100 years ago. Increased liability in a highly litigious environment may dampen the panacea of “opting out”.
Honestly, I am not sure where all this will eventually play out. The few discussions I have had with employers who have opted out in Texas tell me they are pretty happy with their decision. Time will tell. Being a non-subscriber potentially exposes them to both increased legal costs and the risk of paying increased punitive damages. Additionally, pain and suffering claims brought forth by the injured worker could be a true game changer. The more employers who subscribe to opting out, the sooner we will see how this will end.
Walmart, a company used to being attacked because of its successes, may prove to be a highly visible test of the Texas system. All eyes will be on them to see if they wish to cannonball back into the workers' compensation pool.