The Effects of Changes in Benefit Generosity: Evidence from Workers’ Compensation Coverage of Mental Health Conditions
Mental health conditions have become an increasingly important source of labor-market risk, particularly in high-stress occupations such as first responders. Despite rising rates of depression and post-traumatic stress disorder (PTSD), traditional workers' compensation (WC) systems have historically provided limited coverage for mental injuries due to strict evidentiary requirements and difficulty attributing cumulative trauma to one work-related incident. Several states have expanded WC coverage for mental-only injuries, yet empirical evidence remains limited. This paper studies Texas’ PTSD coverage reforms, which expanded WC mental health coverage for first responders. Using unique administrative data from Texas, we exploit this expansion to examine changes in mental health claiming behavior, healthcare utilization, and costs. We find a substantial increase in mental health claims and total WC spending among first responders following the 2019 reform, driven primarily by higher claim frequency rather than higher spending per claim in either medical or lost income benefits. The results suggest the reform reduced barriers to filing and access to care without generating large per-claim cost increases.