The "rising costs could drive more Texas employers to choose not to participate," said State Rep. Kenneth "Kim" Brimer, R-Fort Worth, the vice-chairman of the Research and Oversight Council on Workers' Compensation, which did the recent study.

According to the research, in 2001, 35 percent of employers were not with the system and employees with the nonsubscribing firms represented 16 percent of the 8.76 million-member fulltime Texas workforce--or about 1.4 million employees.

In 1993, the share of businesses not in the system stood at 44 percent and their employees totaled 20 percent of the workforce, according to the report.

The results were obtained through a survey of 2,808 employers between August and October 2001, following the passage of a measure that outlawed the use of pre-injury liability waivers by employees.

According to the survey, nearly 25 percent of subscribing employers would drop workers' comp coverage if the waivers were permitted. If post-injury waivers were allowed, 18 percent said they would likely drop coverage.

Of the non-subscribing firms, 56 percent were found to pay some sort of alternative occupational benefits in the event of a work-related injury. Some 280,000 employees work at businesses that pay no benefits of any sort.

The council said in a statement that an "intriguing" finding of the survey was that satisfaction levels were relatively high for both non-subscribing and subscribing employers.

When employers were asked about premium costs, 42 percent said they had experienced an increase in their latest policy. For those who absorbed rate hikes, 38 percent reported a rise of less than 10 percent, 33 percent reported an increase over 10 percent, and 29 percent saw an increase of 20 percent or more.

Rep. Brimer said the cost increase trend is "cause for concern for policymakers" because it is known that cost is the main reason employers opt out of the system.

Eighty-seven percent of the larger firms surveyed said their reason for not carrying workers' comp was they were quoted premiums that were too high. In addition, 47 percent of the larger nonsubscribing firms said workers' comp fraud was a concern.

The survey found 76 percent of the employees of non-subscribing firms had employers who directed them to health care providers or required them to choose a doctor from a company-provided list.

Among those employers that do not subscribe to workers' comp, the study found that just 3 percent had been sued for injury during the past five years. Among larger concerns, with 100 or more employees, 18 percent had been sued during the past five years, the survey found.