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FAST FACTS · 04

The Texas Option, explained without the politics.

Texas remains the only U.S. state that lets employers choose between workers' compensation insurance and a regulated, employer-sponsored injury benefit program. Here is how it actually works — and what the evidence shows.

Reading time
8 min
Updated
May 2026
Author
ARAWC Policy

Overview

Every other state in the U.S. requires employers to participate in a single, state-administered workers' compensation system. Texas offers a second path — regulated alternatives that, when designed well, deliver better medical outcomes and faster recovery.

ARAWC represents and advocates for the responsible operation of those alternatives. We are not anti-comp; we are pro-evidence. Where the comp system serves an employer and its workforce well, we say so. Where a thoughtfully designed alternative serves both better, we say that too.

82%
of Texas nonsubscriber employees are now covered by a formal injury benefit program
8 yrs
consecutive growth in formal coverage, per REG/DWC 2025 survey
100+
Texas employers with 100+ employees operating under the Option

How the Option works

A Texas employer choosing the Option ("nonsubscribing") establishes a written injury benefit plan under federal ERISA standards. The plan defines medical benefits, indemnity benefits, dispute resolution, and communication standards — and is subject to audit, regulatory reporting, and ERISA fiduciary duties.

What the plan must cover

  • Medical care for occupational injuries, with provider quality standards
  • Wage-replacement benefits during recovery
  • Defined return-to-work coordination
  • Transparent dispute resolution and appeal procedures
  • Clear, plain-language communication with injured employees
A responsible alternative is not the absence of regulation — it is a different shape of accountability. Done well, the Option produces measurably better recovery experiences than the comp baseline.

What the evidence shows

Independent surveys from the Texas Research and Evaluation Group and the Division of Workers' Compensation have, for eight consecutive years, documented expanding formal coverage and stable outcomes for employees of nonsubscribing employers.

QCARE-qualified plans

QCARE is ARAWC's designation for plans that meet defined medical, indemnity, communication, and governance standards. It is the fastest way to tell a responsible alternative from a thin one.

We do not claim that every Texas Option plan is well-designed. Quality varies. The point of the QCARE designation — and of ARAWC's benchmarking program — is to make that variance visible.

Common misconceptions

"Nonsubscribing means no benefits."

Incorrect. A nonsubscribing employer with a qualified plan is providing benefits — often more responsive ones — under ERISA structure rather than under the state comp framework.

"The Option exists to cut costs."

Cost is one driver. The stronger driver, in our member surveys, is the design of the recovery experience: speed of medical care, integration with the employee's manager, quality of return-to-work coordination, and dignity of communication.

QCARE designation

QCARE is ARAWC's evidence-based standard for responsible injury benefit plans. Plans that earn the designation meet defined thresholds for medical quality, indemnity design, employee communication, and governance — making responsible operation visible to employees, regulators, and peers.

Further reading

Explore additional ARAWC resources on the Option, legislative developments, and operational playbooks on our Fast Facts hub and blog.