The Sedgwick Institute, in conjunction with the University of Illinois Chicago and Visiting Fellow Dr. Tony Lossaso, are finishing up research on why and to what effect, companies with Texas injury exposure, switch from the Texas statutory WC system to the Texas Non-subscriber system.

Executive Summary

Texas is the only state that does not mandate that employers carry workers’ compensation insurance (WC) coverage. A quasi-experimental empirical design is employed to examine the effects of switching from traditional workers’ compensation to a non-subscription program in Texas. Specifically, comparisons are made before and after the switch to non-subscription for employees in Texas using contemporaneously measured before and after differences for non-Texas-based employees. Importantly, the focus of the study is on large self-insured companies operating the same business in multiple states in the US; hence the non-Texas operations represent the “control” sites for the Texas “treatment” sites. The resulting difference-in-differences estimation allows for control of any companywide factors that might be confounded with switching to non-subscription. The empirical approach also controls for injury characteristics, employment characteristics, industry, and individual characteristics such as gender, age, number of dependents, and marital status. Outcomes include number of claims reported, medical expenditures, and indemnity payments. The data include 25 switcher companies between the years 2004 and 2016, yielding 846,376 injury incidents. Regression findings suggest that indemnity, medical payments, and work-loss fall substantially, while the number of injury claims filed remains unchanged

Read the full summary report: Workers Compensation and the Effects of Non-Subscription in Texas – A Lo Sasso


Substantial research indicates that the practice of physician dispensing leads to overprescribing of drugs. The analysis concludes that allowing payers to direct workers to convenient dispensing locations is the best way to counteract the strong incentives to over prescribe.

This study provides a brief overview of how states regulate the practice of physician dispensing in workers’ compensation. Second, a description of the substantial financial rewards and business model that several firms have used to market to physicians to enlist them to dispense is included. Third, the evidence from studies of the practice of physician dispensing is reviewed and shows a significant motive for dispensing too often appears to be the financial rewards. Patient care does not appear to be the primary driver of prescribing decisions for the average worker who receives physician-dispensed drugs. These financial rewards distort prescribing practices and often lead to prescriptions for unnecessary drugs, including unnecessary opioids. Fourth, the evidence on the benefits of physician dispensing alleged by its advocates is summarized and is found to be largely unsupported. Finally, the analysis concludes with a discussion of policy options for legislators and regulators.

The evidence from studies paints a clear pattern that physician dispensing is too often substantially motivated by the financial rewards to the physician, rather than quality of care for the patient. Physician dispensing adds significant costs for employers, and on average, leads to unnecessary prescriptions, including unnecessary opioids, raising the risk of poorer patient outcomes. The major alleged benefits of physician dispensing superficially sound plausible but do not withstand scrutiny when the evidence is examined.

New regulatory approaches may be needed. Increasingly, recent legislative and regulatory price-focused reforms are being evaded – yielding smaller savings than intended. Hence, one should be skeptical of the success of reforms that are exclusively price-focused.

Taking all of the above into account, one concludes that prohibiting or severely limiting the practice of physician dispensing would reduce costs to employers and not reduce the quality of care to the average injured worker who receives physician dispensed drugs.

There are several principal policy choices to address this problem:

  • Direct prohibitions of the practice
  • Permit physician dispensing but only for a short time period after the first office visit.
  • Give payers the ability to direct patients to sources of pharmaceuticals (these could be local pharmacies, mail order pharmacies, or physician’s offices).

The most effective approach gives payers the ability to direct patients to convenient locations to get prescriptions filled. While the first two approaches seem more direct, they are more likely to simulate evasion. These approaches also exclude physicians and physician organizations who dispense but do not overprescribe nor charge higher prices.