Biennial Report to the 84 LegislatureSource: Texas Department of Insurance, Division of Workers’ Compensation, 2014. Insurance Rates and Premiums Continue to Decline House Bill 7

Biennial Report to the 84th LegislatureDecember 2014

W. Ryan BrannanCommissioner of Workers’ Compensation

Texas Department of Insurance

DWC 2014 BIENNIAL REPORT

DIVISION OF WORKERS’ COMPENSATION

1

Table of Contents

Introduction...........................................................................................................................................................................2

InjuryRatesandClaimFrequencyContinuestoDecrease,butFatalitiesRemainHigh..................3

InsuranceRatesandPremiumsContinuetoDecline.......................................................................................7

EmployerParticipationandEmployeeCoverageRatesHaveImproved,butAbout5PercentofTexasEmployeesStillHaveNoCoverageforOccupationalInjuries................................11

ComplianceEffortsRegardingReportingRequirementsforNon‐subscribingEmployers...........14

MedicalCostsHaveStabilizedintheSystem,DespiteContinuedMedicalInflation........................18

PharmacyClosedFormularyProducesSignificantResults;OtherStatesLookingtoReplicateTexasFormularyModel..........................................................................................................................23

AccesstoCareHasImprovedforInjuredEmployees....................................................................................27

Return‐to‐WorkRatesContinuetoImprove,buttheRecentRecessionHasHadanImpact.................................................................................................................................................................................30

MedicalDisputesHaveSignificantlyDeclined..................................................................................................34

ClaimDenialRatesandRequestsforIndemnityDisputeResolutionDecline,butDesignatedDoctorDisputesRoseSignificantlyin2011and2012..........................................................36

ConcludingRemarks........................................................................................................................................................43

Workers’CompensationLegislativeRecommendations.................................................................................45

IncreasetheMaximumReimbursementforBurialBenefitsintheTexasWorkers’CompensationSystem.................................................................................................................................................45

EstablishaPilotSafetyReimbursementProgramforSmallEmployers...............................................46



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Introduction

Inthelastnineyearssincethe2005landmarkHouseBill(HB)7legislativereformstotheTexas

workers’compensationsystemwerepassed,theTexasDepartmentofInsurance,Divisionof

Workers’Compensation(DWC)hasspentaconsiderableamountoftimeworkingwithsystem

stakeholdersinordertoimprovetheoperationaleffectivenessoftheTexasworkers’

compensationsystem,whileensuringthatthesystemmeetsthebasiclegislativegoalsof

providingadequatebenefitstoinjuredemployeesatareasonablecosttoTexasemployers.

Overall,theTexasworkers’compensationsystemhasimprovedsignificantlyinavarietyofareas,

includinginjuryrates,employerparticipation,claimscosts,return‐to‐workoutcomes,accessto

care,medicaldisputeresolutionandinsuranceratesandpremiums.Despitethesenoteworthy

improvements,therearestillareasinthesystemthatneedfurthermonitoringandattention,

includingdecreasingthenumberofdesignateddoctordisputes,improvinginjuredemployee

educationandoutreachandreducingthehighnumbersofwork‐relatedfatalities.

Goingintotheupcoming84thlegislativesession,itisclearthatwhileadditionalimprovements

canalwaysbemade,thesystemasawholeisstable.Whileotherstatesfaceincreasingclaims

costs,risinginsurancerates,anopioidprescriptiondrugcrisis,lengthydisputeresolution

processes,andpoorreturn‐to‐workresults,Texascontinuestoserveasanexampleofhow

soundlegislativereformscombinedwithcarefulmonitoringandimplementationcanresultina

strongworkers’compensationsystemthatservestheneedsofallsystemparticipants.Infact,

manystateshaverecentlyapproachedDWCinanefforttolearnandadoptmanyofthe

componentsofthe2005legislativereformsintotheirownstateworkers’compensationsystems.

SeveralstateshavenowadoptedorareinthemidstofadoptingaTexas‐likepharmacyclosed

formulary,evidence‐basedtreatmentguidelines,anadministrativedisputeresolutionprocess,a

Texas‐stylemedicalnecessitydisputeresolutionprocessandcertificationprocessesforworkers’

compensationhealthcarenetworks.



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Itshouldbenotedthatallofthekeyprovisionsofthe2005legislativereformstotheTexas

workers’compensationsystemhavebeenimplementedbyDWC.Thesystemtrendspresentedin

thisreportallowDWC,policymakers,andsystemparticipantstogaugetherelativehealthofthe

systemandconsiderwhetherlegislativechangesarerecommendedtofine‐tunepastreform

efforts,improvemajorprogramareas,andaddresslingeringstatutoryquestionsneedingfurther

directive.

Injury Rates and Claim Frequency Continues to Decrease, but Fatalities Remain High

TheTexasworkers’compensationsystemcontinuestoexperiencemarkedreductionsinboththe

non‐fataloccupationalinjuryandillnessrateandtheoverallnumberofreportableclaimsfiled

withDWC;however,thenumberofworkplacefatalitiesinTexascontinuestobecyclical.Since

thepassageofHB7in2005,thenon‐fataloccupational

injuryandillnessrateinTexasdecreased25percentfrom

3.6to2.7injuriesper100full‐timeemployees.Workplace

injuryandillnessratesvarywidelybyindustry.However,

theincidenceratesforindustriessuchas

agriculture/forestry/fishingandhunting,construction,

transportationandwarehousing,manufacturingand

leisureandhospitalityhaveexperiencedsignificant

declinessince2005,whileindustriessuchasinformation

andretailtradehaveexperiencedincreasedinjuryratesin

recentyears.Theindustrysectorswiththehighestratesinclude:retailtrade(4.1

injuries/illnessesper100full‐timeemployees),transportationandwarehousing(3.9),

agriculture,forestry,fishingandhunting(3.9),trade/transportation/utilities(3.7),andhealth

careandsocialassistance(3.4).Comparedwiththerestofthenation,theinjuryrateinTexas

hasbeenconsistentlybelowthenationalaverage(seeFigure1).1

1ChangestothefederalOccupationalSafetyandHealthAdministrationrecordkeepinglogsin2002andthetransitionfromtheStandardIndustrialClassification(SIC)systemtotheNorthAmericanIndustryClassificationSystem(NAICS)in2003maylimitcomparabilityofpre‐2003dataseries.

Thenon‐fataloccupational

injuryandillnessratein

Texashasdecreased25

percentsince2005.Texas'

ratehasconsistentlybeen

belowthenationalaverage

sincetheearly1990's.



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Figure1:TexasandU.S.NonfatalOccupationalInjuryandIllnessRatesPer100Full‐timeEmployees(2002‐2012)

Source:TexasDepartmentofInsurance,DivisionofWorkers’CompensationandU.S.DepartmentofLabor,BureauofLaborStatistics,AnnualSurveyofOccupationalInjuriesandIllnesses,2013.

Despitetheconsistentreductioninthenon‐fataloccupationalinjuryandillnessrateinTexas

overthepastnineyears,thenumberoffataloccupationalinjuriesinTexascontinuestofluctuate

(seeFigure2).Afterseeingdecreasesin2010and2011,Texasrecordedasignificantincreasein

workplacefatalitiesin2012duetoincreasesinboththeconstructionandminingindustry

sections,includingoilandgasextractionactivities.Workplacefatalitiesdeclined8percentin

2013to493fataloccupationalinjuries.Transportationincidentscontinuetobetheleading

causeofwork‐relatedfatalitiesinTexas.Followingtransportationincidents,contactwith

objects(76fatalities),falls/slips/trips(73fatalities)andviolenceandotherinjuriesbypersons

oranimals(66fatalities)werethemostfrequentcausesofworkplacefatalitiesin2013.In2013,

theindustrysubsectorsinTexasthatexperiencedthehighestnumberoffataloccupational

injuriesincludedtrucktransportation,specialtytradecontractors,supportactivitiesformining,

heavyandcivilengineeringconstruction,andjustice/publicorder/safetyactivities.Halfofthe

fatalitiesin2013involvedWhite,non‐Hispanicemployees;38percentinvolvedHispanicor



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Latinoemployees;9percentinvolvedBlackorAfrican‐Americanemployees;and3percentwere

AsianorNativeHawaiian/PacificIslander.

Figure2:NumberofFatalInjuriesandIllnessesinTexasbyYear,2001‐2013

Source:TexasDepartmentofInsurance,DivisionofWorkers’CompensationandU.S.DepartmentofLabor,BureauofLaborStatistics,CensusofFatalOccupationalInjuries,2013.

RecentEffortsbyDWCtoImproveWorkplaceSafety.Inanefforttoincreasetheimportanceof

workplacesafetyandtoreducethenumberofworkplacefatalitiesinTexas,DWChasrecently

embarkedonanewsafetyoutreachinitiativeaimedathighlightingbestpracticesforemployers

whoconsistentlymaintainasafeworkplacefortheiremployees.Thisinitiativeincludes

highlightingthoseemployerswhohaveachievedtheSafetyandHealthRecognitionProgram

(SHARP)awardsponsoredbytheU.S.DepartmentofLaborand/ortheDWCPeerReviewSafety

Award,designedtorecognizeTexasemployerswithexemplarysafetyprograms,whichcanserve

asmodelsforotheremployers.DWCrecentlyfocuseditsattentiontowardraisingsafety

awarenessbypubliclyrecognizingemployerswithexemplaryworkplacesafetyprogramsand

lowratesofwork‐relatedinjuriesandillnessesattheironsitefacilitiesthroughlocalmedia

outreachandDWC’sannualsafetyandhealthconference.WhileDWChasstatutorymandatesto

promotesafetyawarenessandoutreach,aswellasregulateinsurancecarrierloss‐prevention

activities,OccupationalSafetyandHealthAdministration(OSHA)isprimarilyresponsibleforthe

regulationofworkplacesafetyissuesinTexas.



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DWCisalsofocusingitseffortstoraisetransportationsafetyawarenessinTexasthroughsocial

mediacampaigns,presentationsattransportationassociationconferencesandfreesafety

publicationsandDVDs,aswellasmeetingswithinsurancecarrierlosscontrolspecialiststo

highlightinnovativewaystheinsuranceindustryisusingtopromotetransportationsafety

issues.Inadditiontomeetingswithinsurancecarriers'losscontrolspecialists,DWCisalso

planningroundtablediscussionswithemployergroups,aswellasotherstateagenciestoidentify

bestpracticesforsafetyandtoidentifypotentialbarriersforimplementingthesebestpractices.

DWCwillcontinuetolookforwaystopartnerwithotherstateagenciestofacilitatereductionof

transportation‐relatedworkplacefatalitiesinTexas.

Similartothenon‐fataloccupationalinjuryandillnessratesseeninFigure1,thenumberof

workers’compensationclaimsreportedtoDWChasdeclinedsince2003(31percentreduction);

however,thepercentageofdeclinesofreportedclaimshasbeguntoslowdowninrecentyears

(seeFigure3).Thereasonsforthosedeclinesinreportedclaims,bothnationallyandinTexas,

stemfromavarietyoffactors,includingincreasedsafetyawarenessamongemployersand

employees,enhancedhealthandsafetyoutreachandmonitoringeffortsatthefederalandstate

level,improvementsintechnology,globalization,increaseduseofindependentcontractors,and

thepossibilityofunder‐reportingworkplaceinjuriesandillnesses.Atthenationallevel,states

havebeguntoseeincreasesinclaimfrequencyasaresultoftheeconomicrecovery.However,

additionalmonitoringbyDWCisneededtodeterminewhetherclaimfrequencyinTexashas

beguntoplateauorwhetherincreasesinthenumberofemployeesinTexas,evenwithdeclining

injuryrates,willresultinincreasedclaimfrequencyinthefuture.



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Figure3:NumberofWorkers’CompensationClaimsReportedtoDWC,InjuryYears2003‐2013

Note:DataupdatedthroughAugust2014.ThesenumbersincludetheclaimsthatarerequiredtobereportedtoDWC,includingfatalities,occupationaldiseases,andinjurieswithatleastonedayoflosttime.Medical‐onlyclaimsarenotrequiredtobereportedtoDWC.*Datafor2013shouldbeviewedwithcautionsincethenumberofclaimspercalendaryearwillcontinuetogrowasinjuriesforthatcalendaryeararereportedoras“medicalonly”injuriesbegintolosetimeawayfromwork.Source:TexasDepartmentofInsurance,DivisionofWorkers’Compensation,2014.

Insurance Rates and Premiums Continue to Decline

HouseBill7requirestheCommissionerofInsurancetoreportontheaffordabilityand

availabilityofworkers’compensationinsuranceforTexasemployers.ThePropertyandCasualty

ActuarialOfficeoftheTexasDepartmentofInsurance(TDI)monitorsinsuranceratefilingsand

reportsworkers’compensationinsurancemetricsaspartofabiennialreporttotheTexas

LegislatureontheimpactofHB7oninsuranceratesandpremiums.2In2013,nearly290

insurancecompanieshadpositivedirectwrittenpremiumforworkers’compensationinsurance

inTexasandthetotaldirectwrittenpremiumfortheTexasworkers’compensationinsurance

marketwasabout$2.66billion.

2Foradditionalinformationontheeffectofthereformsontheworkers’compensationinsurancemarket,seeSettingtheStandard:AnAnalysisoftheImpactofthe2005LegislativeReformsontheTexasWorkers’CompensationSystem,2014Results.



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Intermsofmarketshare,teninsurancecompanygroupswriteapproximately79.2percentofthe

market,andthetopwriter,TexasMutualInsuranceCompany,has38.6percentofthemarket

basedonits2013directwrittenpremiuminTexas.TheLegislaturecreatedTexasMutual

(formerlyTexasWorkers’CompensationInsuranceFund)in1991toserveasacompetitiveforce

inthemarketplace,toguaranteetheavailabilityofworkers’compensationinsuranceinTexas,

andtoserveastheinsureroflastresort.WhileTexasMutualistheinsureroflastresort,it

predominatelywritesvoluntarybusiness,competingwiththerestoftheworkers’compensation

market.Theinvoluntary(residual)marketmakesuplessthanaquarterofonepercentofthe

workers’compensationinsurancemarket.

TwoimportantmeasuresofthefinancialhealthoftheTexasworkers’compensationinsurance

marketarethelossratioandthecombinedratio.Thelossratioistherelationshipbetween

premiumcollectedandthelossesincurred(i.e.,amountsalreadypaidoutplusamountssetaside

tocoverfuturepayments)byinsurancecompanies.Thecombinedratioissimilartotheloss

ratio,exceptthatitcomparesthepremiumscollectedwithboththelossesandexpensesincurred

bytheinsurancecompany.Acombinedratiooflessthan100percentindicatesthataninsurance

companyearnedaprofitonitsinsuranceoperations(alsoknownasanunderwritingprofit).A

ratioofover100percentindicatesalossoninsuranceoperations,althoughthislossmaybe

morethanoffsetbyearningsoninvestments.Forexample,iftheprojectedultimatecombined

ratiois110.0percent,thenforevery$1.00inpremiumthatiscollectedbytheinsurance

companyitisprojectedthat$1.10willbeusedtopaylossesandexpensesincurredbythe

insurancecompany.Theinsurancecompanywillneedtofindothersourcestopaythe10cents

thatisnotcoveredbythepremium.Thismaycomefrominvestmentsorevenadirectcharge

againsttheinsurancecompany’ssurplus.

In2013,theprojectedaccidentyearcombinedratiowas89.6percent.Thismeansthatforevery

dollarcollectedbytheinsurancecompany,itwillpayanestimated89.6centstocoverlossesand

expensesandkeeptheremainingamountasprofit.Table1showsthelossratioandthe

combinedratio,bothofwhichreflectthatthelastsevenyearshavebeenveryprofitablefor

workers’compensationinsurancecompanies.Thecombinedratioaveraged74.5%from2003to



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2007.In2008,concurrentwiththerecession,thisratiodeterioratedandcontinuedtodosountil

2010whenitstartedtorebound.

Table1:ProjectedUltimateCalendarYear/AccidentYearLossandCombinedRatios

AccidentYear

DirectEarnedPremium

UltimateLosses

LossRatio

CombinedRatio

2007 $2,199,889,123 $860,742,498 39.1% 74.3%

2008 $2,210,268,795 $967,884,307 43.8% 84.5%

2009 $1,945,668,267 $808,876,095 41.6% 83.1%

2010 $1,724,553,041 $866,200,706 50.2% 93.6%

2011 $1,809,776,728 $943,756,300 52.1% 96.3%

2012 $2,028,964,954 $1,030,843,040 50.8% 93.0%

2013 $2,212,617,271 $1,051,085,244 47.5% 89.6%

Source:NCCIWorkers’CompensationFinancialDataCall(ValuationYear2013),2013TexasCompilationofStatutoryPage14,2013TexasCompilationoftheInsuranceExpenseExhibit.LossdevelopmentfactorsusedindeterminingtheultimatelossesarefromtheNCCIAnnualStatisticalBulletin,2014edition.

Since2003,workers’compensationinsurancerateshavecomedown

justover50percent.Thisdeclineincludeschangesininsurance

companies’owndeviationsaswellasoverallchangestotheworkers’

compensationclassificationrelativitiesestablishedbyTDI.This

declinealsoincludeschangesincompanies’deviationsaswellas

overallchangesintheclassificationrelativitiesestablishedbyTDI.

Thisdecreasealsoincludestheimpactfromcompaniesusing

NationalCouncilonCompensationInsurance(NCCI)losscostsalong

withanychangestothesecompanies’losscostmultipliers.

Since2003,

workers'

compensation

insurancerates

havedeclined

over50percent.



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Inpreparationforthe2014biennialratehearingonworkers’compensationinsurance,

insurancecompanieswererequiredtosubmitratefilingsinAugust2014,whichweretoinclude

thecompany’s“rateindication.”Acompany’srateindicationistheactuarialdeterminationof

howitsrateorpremiumlevelshouldchangegoingforward.Theseindicationsarebasedonthe

insurancecompanies’owncalculationsanddonotreflectanyjudgmentsorassumptionsmade

byTDI.Forthe234companiesthatfiledrateindicationswithTDI,theaveragepremium‐

weightedindicationis‐3.5percent.Thissuggeststhattheindustryestimatestheneedfora3.5

percentdecreaseincurrentpremiumlevelstocoverlossesandexpensesandproducethe

targetedprofit.Eventhoughthecompanies’indicationssuggestasmalldecreaseinpremium

levelsonaverage,nocompaniesproposedaratechangewiththeirfiling.

Whiletheratechangesfiledbytheinsurancecompaniesinthelastfewyearsshowhowmuch

rateshavecomedown,theseratesarejustthestartoftheworkers’compensationinsurance

pricingprocess.Whatemployersactuallypay,thepremium,reflectsnotonlyratesbutalso

mandatedratingprogramssuchasexperienceratingandpremiumdiscounts,aswellasoptional

ratingtoolssuchasscheduleratingplansandnegotiatedexperiencemodifierstorecognize

individualriskvariations.Insurancecompaniesusetheseratingtoolstomodifyratechangesto

achievedesiredpremiumlevels.

Figure4showstheaveragepremiumper$100ofpayrollforpolicyyears2003‐2012,reflecting

yeartoyearchangesinpremiumscharged.Beginningwithpolicyyear2004,theaverage

premiumper$100ofpayrollbegantodecreasesteadilyasinsurancecompaniesloweredtheir

ratesandincreasedtheuseofratingtools,suchasschedulerating.Asof2012,theaverage

premiumper$100ofpayrollwasdownto$1.02.Thisoverallsteadydecreasecoincideswiththe

averageratereductionsthathavetakenplace,resultinginemployersseeingthebenefitsofthe

insurancecompanies’filedratedecreases.



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Figure4:AveragePremiumper$100ofPayrollbyPolicyYear

Source:TheTexasWorkers’CompensationFinancialDataCallanddatacompiledbytheNationalCouncilonCompensationInsurance.

Employer Participation and Employee Coverage Rates Have Improved, but About 5 Percent of Texas Employees Still Have No Coverage for Occupational Injuries

Texasistheonlystatewhereprivate‐sectoremployers(regardlessofemployersizeorindustry)

areallowedtheoptionofobtainingworkers’compensationcoverageorbecoming“non‐

subscribers”totheworkers’compensationsystem.3Employerswhochoosetonotobtain

workers’compensationcoverage(eitherthroughpurchasingacommercialpolicy,becominga

certifiedself‐insuredemployeroramemberofacertifiedgroupofself‐insuredemployers)lose

theprotectionofstatutorylimitsonliabilityundertheLaborCodeandmaybesuedfor

negligencebytheirinjuredemployees.

3InNewJerseyallemployersarerequiredtohavecoverageorbeself‐insured.Non‐compliantemployersarefinedandtheirinjuredemployeesreceiveincomeandmedicalbenefitsthroughtheUninsuredEmployers’Fund(UEF).Recently,Oklahomapassedlegislativereformsthatallowcertainemployerstoopt‐outoftheworkers’compensationsystemiftheymeetcertainfinancialrequirementsandofferbenefitsthataresimilartothosefoundintheworkers’compensationsystem.



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Non‐subscriptionratesremainanimportantperformancemeasureintheworkers’

compensationsystemsinceitgenerallymeasuresemployers’perspectivesregardingwhether

thebenefitsofparticipatingintheworkers’compensationsystemaregreaterthanthecostsof

obtainingthecoverage.ThepercentageofTexasemployersthatarenon‐subscriberstothe

workers’compensationsystemremainedat33percentin

2014–thesecondlowestpercentagesince1993(anestimated

119,000employersin2014).However,anestimated20

percentofTexasemployees(representingapproximately1.9

millionemployeesin2014)workedfornon‐subscribing

employers–thethirdlowestpercentageinthepasttenyears.

Conversely,80percentofTexasprivate‐sectoremployees(an

estimated7.7millionemployees)areemployedbythe67

percentofemployers(anestimated238,000employers)that

aresubscriberstotheworkers’compensationsystem(see

Figure5).

Althoughnon‐subscribingemployershaveoptednottoprovideworkers’compensationcoverage

totheiremployees,someoftheseemployers(approximately33percentin2014)providean

alternativeoccupationalbenefitplan.Itisimportanttonotethatthesenon‐subscriberbenefit

plansarenotregulatedbyDWCandthebenefitsofferedintheseplansvarybyemployer.

Approximately75percentofthenon‐subscriberemployeepopulationiscoveredbysomeform

ofanalternateoccupationalbenefitplan.Asaresult,anestimated95percentofprivate‐sector

employeesinTexashavesomeformofcoverageinthecaseofawork‐relatedinjuryinTexas

(eitherworkers’compensationcoverageorcoveragefromanon‐subscriberoccupationalbenefit

plan).Thismeansthatapproximately5percent(approximately470,000private‐sector

employees)donothaveanycoverageinthecaseofawork‐relatedinjuryin2014.In2012,it

wasestimatedthatapproximately5percentofprivate‐sectoremployees(approximately

500,000employees)didnothaveworkers'compensationcoveragethroughanon‐subscriber

benefitplan.

Approximately67

percentofprivate,year‐

roundemployershave

workers'compensation,

andtheyemployabout

80percentoftheprivate

workforceinTexas.



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Figure5:PercentageofTexasEmployersThatAreNon‐subscribersandthePercentageofTexasEmployeesThatAreEmployedbyNon‐subscribers,1993‐2014

Source:SurveyofEmployerParticipationintheTexasWorkers’CompensationSystem,1993and1995estimatesfromtheTexasWorkers’CompensationResearchCenterandthePublicPolicyResearchInstitute(PPRI)atTexasA&MUniversity;1996and2001estimatesfromtheResearchandOversightCouncilonWorkers’CompensationandPPRI;and2004,2006,2008,2010,2012and2014estimatesfromtheTexasDepartmentofInsurance,Workers’CompensationResearchandEvaluationGroupandPPRI.

ThepercentageofTexasemployerswhohaveworkers’compensationcoveragehasincreased

sincethepassageofHB7in2005(from62percentofTexasemployersin2004to67percentof

Texasemployersin2014),dueprimarilytolowerinsurancepremiumsandtheincreased

availabilityofworkers’compensationhealthcarenetworks.Althoughthemajorityofnon‐

subscribingemployersaresmallemployers,resultsfromthe2004‐2014employersurveys

highlightedthetrendoflargeremployerschoosingtooptoutoftheTexasworkers’

compensationsystemforreasonsthatcenteredprimarilyontheabilitytoadequatelycontrol

medicalcostsfortheirinjuredemployees.

However,thistrendforlargeemployersreversedfrom2008to2010,whensteepinsurancerate

reductionsandaneconomicdownturnledtoanincreasedpercentageoflargeemployers,

especiallythosewithmorethan500employees,purchasingworkers’compensationcoverage.It

ispossiblethattighteconomicconditionsplayaninfluentialroleinlargeemployers’decisionsto

purchasecoverageintheTexasworkers’compensationsystemsinceworkers’compensation

coverageprovidesadditionalprotectionforemployersfromemployeelawsuitsthatmayresult



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fromawork‐relatedinjury.Despitelowerworkers’compensationinsuranceratesinrecent

years,itappearsthatanincreasingnumberofthelargestemployersinTexashavebeguntoopt

outoftheworkers’compensationsystemsince2010,whileanincreasingnumberofsmalland

mid‐sizedemployershaveincreasedtheirworkers’compensationcoveragerates(seeTable2).

Theindustrieswiththehighestnon‐subscriptionrates

(Arts/Entertainment/Accommodation/FoodServices,Finance/RealEstate/Professional

Services,HealthCare/EducationalServicesandWholesaleTrade/Retail

Trade/Transportation)havenotchangedsignificantlyovertime,butcertainindustriessuchas

Manufacturing,Agriculture/Forestry/Fishing/Hunting,Mining/Utilities/Constructionhaveseen

recentdecreasesinthenon‐subscriptionratesinrecentyears.

Table2:PercentageofTexasEmployersThatAreNon‐subscribers,byEmploymentSize

EmploymentSize 1995 1996 2001 2004 2006 2008 2010 2012 2014

1‐4Employees 55% 44% 47% 46% 43% 40% 41% 41% 43%

5‐9Employees 37% 39% 29% 37% 36% 31% 30% 29% 27%

10‐49Employees 28% 28% 19% 25% 26% 23% 20% 19% 21%

50‐99Employees 24% 23% 16% 20% 19% 18% 16% 19% 18%

100‐499Employees

20% 17% 13% 16% 17% 16% 13% 12% 14%

500+Employees 18% 14% 14% 20% 21% 26% 15% 17% 19%

Source:SurveyofEmployerParticipationintheTexasWorkers’CompensationSystem,1993and1995estimatesfromtheTexasWorkers’CompensationResearchCenterandthePublicPolicyResearchInstitute(PPRI)atTexasA&MUniversity;1996and2001estimatesfromtheResearchandOversightCouncilonWorkers’CompensationandPPRI;and2004,2006,2008,2010,2012and2014estimatesfromtheTexasDepartmentofInsurance,Workers’CompensationResearchandEvaluationGroupandPPRI.

Compliance Efforts Regarding Reporting Requirements for Non‐subscribing Employers

Whilethetypesandamountsofbenefitsprovidedtoinjuredemployeeswhoworkfornon‐

subscribingemployersaswellastheadministrationofthosebenefitprogramsfalloutsideofthe

jurisdictionofTDI’sandDWC’sregulation,non‐subscribersarestillsubjecttocertainreporting

requirementsundertheWorkers’CompensationActandDWCrules.Non‐subscribersare



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requiredtoreportannuallytoDWCthattheyhaveelectednottoobtainworkers’compensation

coveragebyfilingtheDWCForm‐005,EmployerNoticeofNoCoverageorTerminationof

CoveragewithDWC.4Additionally,non‐subscriberswhoemployatleastfiveemployeesare

requiredtofileanoticewithDWC(usingtheDWCForm‐007,Employer'sReportofNon‐covered

Employee'sOccupationalInjuryorDisease)foreachoccupationaldiseaseandon‐the‐jobinjury

thatresultsinmorethanonedayoflosttime.5Failuretocomplywiththesereporting

requirementsmayresultinenforcementactionandadministrativepenaltiesleviedupto

$25,000perdayperoccurrence.

Foursessionsagothe80thLegislatureaddedanappropriationridertoTDI’sbudget,which

requiresDWCtosubmit,aspartofitsbiennialreporttothelegislature,areportregardingthe

complianceofnon‐subscribingemployerswiththesereportingrequirementsaswellasany

administrativepenaltiesleviedagainstnon‐complyingemployers.Priortothe2007legislative

session,non‐subscriberreportingcomplianceeffortsonbehalfoftheagencywereprimarily

complaintdriven;however,historically,DWC(anditspredecessortheTexasWorkers’

CompensationCommission)hasonlyreceivedarelativelysmallnumberofcomplaintsregarding

non‐subscriberreportingcompliance.Since2009,therehavebeenover2,400complaintson

non‐subscriberreportingcompliance,resultinginover250warninglettersissuedtoemployers

andnearly$80,000inpenaltiesissuedagainstnon‐subscribersforfailingtorespondtorequests

andfilingrequiredforms.ComplianceeffortshaveincreasedinrecentyearsasDWChas

increasedemployereducationeffortsaboutthesereportingrequirements–almosthalfofthe

penaltiesleviedagainstnon‐subscribershavebeenassessedinthelasttwoyears.

Absentexternalcomplaintsfromsystemparticipants,identifyingpotentialnon‐complying

employershasproventobechallengingfortheagencyforseveralreasons,includingthe

completeness,accuracyandtimelinessofworkers’compensationpolicydataandemployer

identifyingdatasubmittedtoDWCandotherTexasstateagencies.Forexample,anemployer

mayhavefiledforunemploymentinsurancepurposeswiththeTexasWorkforceCommission

4SeeSection406.004,LaborCode.5SeeSection411.032,LaborCode.



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usingtheFederalEmploymentIdentificationNumber(FEIN)oftheparentorganization,butmay

havedifferentworkers’compensationinsurancepoliciesundervariousFEIN’sandnamesof

subsidiariesoftheparentorganization.Asaresult,itissomewhatdifficultforDWCtoidentify

individualemployersthatmaybenon‐subscribersandtocheckfortheseemployers’compliance

withreportingrequirements.

RecentEffortsbyDWCtoImproveNon‐subscriberReportingCompliance.Inanefforttomakeit

easierforTexasemployerstoreporttheirnon‐subscriberstatus,DWCadoptedamendmentsto

clarifyexistingrulesregardingreportingrequirementsfornon‐subscribingemployersinJanuary

2013;developedanonlineversionoftheDWCForm‐005toallowemployerstodirectlyenter

theirinformationandobtainaverificationofsubmissionatnocharge;andprovidedanonline

bulk‐filingoptionforlargeremployerswithmultiplelocationsorthirdpartyadministrators

submittingformsonbehalfofmultipleemployers.DWCisalsocurrentlyintheprocessoftesting

anewautomatedSMARTformversionoftheDWCForm‐005andDWCForm‐007thatwould

allowanemployertofillouttheformonceonline,submitittoDWCandsaveitlocallytoenable

resubmissionoramendmentsforfuturefilings.DWCanticipateshavingbothSMARTforms

availableforimplementationbyearly2015.

DWChasalsore‐organizeditsemployerresourceswebsitetobetterassistemployersinlocating

pertinentworkers’compensationinformation.Theemployerresourceswebsite(see

www.tdi.state.tx.us/wc/employer/index.html)nowfeaturesadirectlinktotheautomatedDWC

Form‐005formaswellasOnlineReportingHelpandFrequentlyAskedQuestions.DWChasalso

distributedinformationaboutthesereportingrequirementsandtheadoptionofnewrulesto

statebusinessandnon‐subscriberassociationsandcoordinatedwithotherstateagenciestoadd

thesereportingrequirementsontheirwebsitesinordertoincreaseemployerawarenessof

thesenon‐subscriberreportingrequirementsandtomoreeffectivelyenforcethese

requirements.

DespiteDWC’srecentcomplianceandeducationeffortsregardingemployerreporting

requirements,anddespiteprovidingemployerstheoptiontofiletheDWCForm‐005formonline

andthroughelectronicbulk‐filingoptions,overallnon‐subscribercompliancewithexisting



17

reportingrequirementsremainslow.ThevolumeofDWCForm‐005filingsdid,however,

increaseaftertheadoptionofnewrulesinJanuary2013,whichclarifiedthetimeframefor

employerstoreporttheDWCForm‐005andDWCForm‐007forms(seeFigure6).

Approximately12percentofnon‐subscribers(anestimated119,000privateemployersarenon‐

subscribersin2014)areestimatedtobeincompliancewiththeDWCForm‐005formfiling

requirement.

Figure6:TotalNumberofDWC‐005andDWC‐007FormsReceivedbyFiscalYear

Source:TexasDepartmentofInsurance,DivisionofWorkers’Compensation,2014.

WhilefilingsoftheDWCForm‐005didincreaseaftertheadoptionoftheJanuary2013rules,

filingsofthenon‐subscriberinjuryreport(theDWCForm‐007)didnotincreaseproportionately.

Infact,filingsoftheseinjuryreportsactuallydecreasedafterFY2011andhavebeenslowlyon

theriseinrecentyears.Somelargenon‐subscribershavereportedthattheybelieveonlythose

injuriesthattheyhaveacceptedliabilityforasawork‐relatedinjurymustbereportedtoDWC.

Thismayhelpexplainwhyinjuryreportsfromnon‐subscriberstendtobelowercomparedto

thenumberofworkers’compensationclaimsreportedbysubscribingemployers.

DWCurgesallemployers,regardlessofwhethertheyhaveworkers’compensationcoverageor

not,tocomplywithstatutoryandregulatoryinjuryreportingrequirements.Thismeans

employersmustreportallpotentiallywork‐relatedfatalities,occupationaldiseases,andinjuries

thatresultinatleastone‐dayoflosttimefromwork,regardlessofwhethertheemployerhas

acceptedcompensabilityorliabilityfortheclaim.Employersthatdonotcomplywiththese

requirementsfacepossibleenforcementactions,includingmonetarypenalties.Employerswho



18

havefailedtoreporteithertheDWCForm‐005orDWCForm‐007formsareencouragedtoself‐

reporttoDWCbecauseself‐reportingisamitigatingfactorthatwillbetakenintoaccountwhen

determiningwhetherenforcementactionisneeded.

Medical Costs Have Stabilized in the System, Despite Continued Medical Inflation

Overthepast14years,asignificantamountofattentionhasbeenplacedontheissueoflowering

medicalcoststhroughareductionintheutilizationofmedicalservicesprovidedtoinjured

employees.Theissueofreducingmedicalcostsandimprovingthequalityofmedicalcare

providedtoinjuredemployeeswasalsoakeycomponentdrivingthepassageofanewhealth

caredeliverymodelinHB7–workers’compensationhealthcarenetworks.

Figures7and8illustratethemedicalcosttrendsthatthesystemwasexperiencingpriortoand

aftertheimplementationofthe2005legislativereforms.AsFigure7illustrates,whentotal

medicalpaymentsforprofessionalservicesareanalyzedwithouttakingintoaccountinflationary

changes,itappearsthattotalpaymentshavestabilizedintheTexasworkers’compensation

system(from$1.1billionin2005to$1.2billionin2013).

Figure7:TotalMedicalPayments,ServiceYears2005‐2013

Source:TexasDepartmentofInsurance,Workers’CompensationResearchandEvaluationGroup,2014.



19

LookingatFigure8,itappearsthattheaveragemedicalcostperclaimisstillrelativelystable

comparedtothedouble‐digitincreasesinmedicalcoststhatthesystemwasexperiencinginthe

late1990’sandearly2000’spriortothepassageofHB7.6Recentcostincreasesaremainlydue

tothe2008DWCMedicalFeeGuideline,whichcontainsanannualinflationfactor–theMedicare

EconomicIndex.

Figure8:AverageMedicalCostperClaim,UnadjustedInjuryYears2000‐2013,ProfessionalServices


Whencomparedwithotherstates,Texashasexperiencedsignificantreductionsinmedicalcosts

perclaimasaresultoflegislativereformstotheTexasworkers’compensationsystemin2005.

Accordingtoa16‐statecomparisonbytheWorkers’CompensationResearchInstitute,in2001,

Texaswasamongthehighestnationallyintermsofmedicalcostsperclaim.By2010,Texaswas

almost23percentbelowthemediancostofthosesame16states,includingFlorida,

Pennsylvania,LouisianaandIllinois.EvenwithrecentmedicalpriceincreasesinTexas,Texas

medicalcostsperclaimremainlowerthanmostofthestudystatesasaresultofchangesmade

6OnAugust1,2003,thesystem’sfirstMedicare‐basedprofessionalservicefeeguidelinetookeffect.Whilethisfeeguidelineincreasedreimbursementforsomecategoriesofservices,includingprimarycare,reimbursementsforspecialtysurgeryservicesweresignificantlyreduced.Onthewhole,thereimbursementratesforprofessionalmedicalservicesintheTexasworkers’compensationsystemwentfromapproximately140percentofMedicaretoapproximately125percentofMedicare.



20

bytheadoptionof2008DWCMedicalFeeGuidelines,Texasmedicalcostsperclaimremain

lowerthanmostofthestudystates(seeFigure9).

Figure9:AverageMedicalCostforClaimswithMoreThan7DaysofLostTime(AllServices),12Monthsand36MonthsAverageMaturity

Source:Workers’CompensationResearchInstitute,MonitoringtheImpactofReformsinTexas:CompScope™MedicalBenchmarks,15thEdition,2014.

Informationfromtheannualworkers’compensationnetworkreportcardproducedbytheTexas

DepartmentofInsurance,Workers’CompensationResearchandEvaluationGroup(REG)in

September2014providessomeinsightintotheongoingimplementationofcertifiedhealthcare

networks.7Ingeneral,differencesbegantoemergeamongindividualnetworks.AsFigure10

7Formoreinformationabouthowindividualnetworkscomparewitheachotherandwithnon‐networkclaimsonavarietyofcost,utilization,accesstocare,satisfactionwithcare,return‐to‐work,andhealthoutcomesmeasurements,see“2014Workers’CompensationNetworkReportCardResults”byTexasDepartmentofInsurance,Workers’CompensationResearchandEvaluationGroup,availableonlineat(www.tdi.texas.gov/reports/report14.html).



21

shows,atsixmonthspostinjury,theaveragemedicalcostperclaimforthenetworkswashigher

thannon‐networkclaims,butthisgapinmedicalcostshasbeenreducedovertime.Overall,most

networksexperiencedeithercostreductionsorlowerincreasesthannon‐networkclaims.When

medicalcostsarefurtherbrokendownintoprofessional,hospital,andpharmacyservices,the

averagemedicalcostperclaimforprofessionalserviceswashigherfornetworkclaimsthannon‐

networkclaimsatsixmonthspostinjury.However,networkclaimstypicallyhadlowerhospital

andpharmacycostsperclaim.

Figure10.AverageMedicalCostperClaim,NetworkandNon‐NetworkClaims,SixMonthsPost‐Injury




22

Basedontheanalysisavailabletodate,thereductionin

thetotalamountofmedicalpaymentsmadeinthe

systembetween2002and2006canbeattributed

mostlytofewerclaimsbeingfiled,aswellaslower

utilizationofspecifictypesofservices.Greaterscrutiny

oncertaintypesofservicesthroughthemandatory

preauthorizationofphysicalandoccupationaltherapy

services(requiredbyHB7in2005),aswellasthe

implementationoftheDWCadoptedtreatment

guideline–theOfficialDisabilityGuidelines:Treatment

intheWorkers’Comp,publishedbytheLossData

Institute(adoptedin2007)haveresultedinfewer

overallprofessionalserviceperclaimandservicespervisit(particularlyforofficevisits,physical

medicineservicesandspinalsurgeryservices).Theimpactofcertifiedhealthcarenetworkson

medicalcostsremainsmixed,butdifferencesamongindividualnetworkshavebeguntoemerge

andthegapincostsbetweennetworkandnon‐networkclaimshasbeguntotighten.Claim

frequencyappearstobeflatteningoutinrecentyearsandmedicalcostincreasessince2007

appeartobemoreprice‐driventhanutilizationdriven,whichmaysignalincreasedmedicalcosts

inthefutureunlessadditionalutilizationreductionscanbeachievedorpricescontrolled.8

Twoareasinparticular,needclosemonitoringbyDWCinthefuture–thepercentageofinjured

employeesreceivingdurablemedicalequipment(DME)servicesandthepercentageofmedical‐

onlyclaimsreceivingimpairmentratingexaminationsandspecialreports.Thepercentageof

medical‐onlyclaimsreceivingimpairmentratingexaminationshasincreasedsubstantially(from

65percentoflost‐timeclaimsreceivingtheseservicesin2005to72percentin2012).

8TheWorkers’CompensationResearchInstitutehasalsomainlyattributedrecentincreasesinmedicalpaymentsperclaiminTexastofeeschedulechangesin2008.SeeWorkers’CompensationResearchInstitute,MonitoringtheImpactofReformsinTexas:CompScope™MedicalBenchmarks,15thedition,2014.

Accordingtoa16‐state

comparisonbytheWorkers'

CompensationResearch

Institute,in2001Texaswas

thehighestnationallyin

termsofmedicalcostsper

claim.By2010,Texaswas23

percentbelowthemedian

costofthesesamestates.



23

Pharmacy Closed Formulary Produces Significant Results; Other States Looking to Replicate Texas Formulary Model

Thelastcomponentofthe2005legislativereformsimplementedbyDWCwastheadoptionofa

pharmacyclosedformularyforTexasworkers’compensationclaims,whichtookeffectfornew

workers’compensationclaimswithdatesofinjuryonorafterSeptember1,2011andforolder

(legacy)claimsonSeptember1,2013.9TheclosedpharmacyformularyincludesallFDA‐

approveddrugs,exceptforinvestigationalandexperimentaldrugsandexcludesdrugslistedas

“N”drugs(or“notrecommended”drugs)inAppendixAofDWC’sadoptedtreatmentguidelines‐

theOfficialDisabilityGuidelines:TreatmentinWorkers’Comp,publishedbytheWorkLossData

Institute.Underthisformulary,prescriptionsfordrugsthatareexcludedfromtheformulary

requirepre‐approvalfromtheinsurancecarrierbeforetheycanbedispensed.

DWC’seffortsoverthepasttwoyearshavebeenfocusedprimarilyonfacilitatingthesmooth

transitionoflegacyclaimstotheformularyandrespondingtorequestsforMedicalInterlocutory

Orders(MIOs)insituationswhereaprescribingdoctorisconcernedthatapre‐authorization

denialofadrugthatisexcludedfromtheclosedformularywillresultinamedicalemergencyfor

theinjuredemployee.10Theseeffortshaveplacedgreateremphasisontheneedforcloser

monitoringofprescriptiondrugusagebybothprescribingdoctorsandinsurancecarriersto

ensurethatinjuredemployeesgetthemedicalcaretheyneedtogetbacktoworkquicklyand

safely.Toassistwiththetransitionoftheseolderclaims,DWC:

Heldmultiplestakeholdermeetingsandformedastakeholderworkinggrouptogetinputon

thestatusofthetransitionprocessinordertoidentifyanypotentialbarrierstosecuring

treatmentagreementsfortheseclaims;

Developedtemplatecommunicationlettersforinsurancecarrierstousetoinform

prescribingdoctors,injuredemployeesandpharmaciesoftheapplicationoftheclosed

9Legacyclaimsincludethoseworkers’compensationclaimswithdatesofinjurypriortoSeptember1,2011.

10AsofOctober31,2014,DWCreceivedfewerthan100requestsforMIOsandapprovedabouthalfoftheserequests.ThemostfrequentlyrequestedandapproveddrugwasOxycontin.



24

pharmacyformularyandtoinitiateclaim‐leveldiscussionstodeterminetheappropriate

courseoftreatmentfortheseclaims;

Conductedseveraloutreachpresentationstodoctorgroupsandothersystemstakeholdersto

informthemontherequirementsoftheformularyandtheMIOprocess;

Publishednumerousformularyimplementationremindersandconductedseveralmail‐outs

withprescribingdoctorsandinsurancecarriers;

Initiatedphonecallswiththetopprescribingdoctorsandselectedinsurancecarriersto

encouragecommunicationamongthesepartiesregardingthebestcourseofcareforinjured

employees;

Conductedthreedatacallswithselectedinsurancecarrierstomonitorthenumberoflegacy

claimsandtomonitorinsurancecarriers’progresswithinitiatingcommunicationswith

injuredemployees,prescribingdoctorsandpharmaciestofacilitatetreatmentagreements

forindividualclaims;and

Publishedquarterlydataassessmentsontheimpactoftheformularyonclaimfrequency,cost

andutilizationofdrugsexcludedfromtheclosedformulary.

NewresearchbytheREGin2014showsthatthepharmacyclosedformularyadoptedbyDWC

hashadasignificantimpactonnewinjuries.11Thestudycomparedinjuriesthatoccurredin

2011(September–August)withinjuriesthatoccurredduringthesametimeframein2010and

in2009.Toensurecomparability,bothsetsofclaimswereanalyzedateighteenmonthspost‐

injurytoaccountfordifferencesinclaimmaturity.Thestudyfoundthatundertheclosed

formularythetotalnumberofclaimsreceiving“N”drugswasreducedby65percentbetween

2010and2011(seeFigure11).

11Formoreinformation,seeTexasDepartmentofInsurance,Workers’CompensationResearchandEvaluationGroup,ImpactoftheTexasPharmacyClosedFormulary,APreliminaryReport,2014.



25

Figure11:FrequencyofClaimsReceiving“N”Drugs,InjuryYears2009‐2011


TheclosedpharmacyformularyhadasignificantimpactonprescriptiondrugcostsintheTexas

workers’compensationsystem.Overall,totalpharmacycostsfor2011werereducedby15

percent(approximately$6million)whencomparedto2010claims.Thesecostreductionswere

evenmoresignificantfor“N”drugs.Prescriptiondrugcostsattributedtonot‐recommended(

“N”)drugsfor2011claimswerereducedby82percentwhencomparedto2010andtheaverage

“N”drugcostperclaimwasreducedbyalmosthalf(seeTable3).

Table3:ImpactofClosedFormularyonPharmacyCosts,InjuryYears2009‐2011

InjuryYear 2009 2010 20112010‐2011PercentageChange

Totalpharmacycosts

$40,001,352

$38,436,372

$32,823,107

-15%

TotalcostofN‐drugprescriptions

8,287,773

$6,474,477

$1,152,152

-82%

AverageN‐drugcostperclaim

$401

$328

$168

-49%




26

Thepharmacyclosedformularyhasalsosignificantlyimpacted

prescribingpatternsforTexasphysicianstreatingworkers’

compensationclaims(seeTable4).Thefrequencyof“N”drug

prescriptionsbeingdispensedtoinjuredemployeeswasreduced

by75percentfrom2010to2011,whilethenumberof“N”drug

prescriptionsperclaimthatreceivedan“N”drugwasreducedby

29percent.Thereductionis“N”drugprescriptionsdidnotresult

inanoverallincreaseinothertypesofprescriptions.Infact,there

wereslightdecreasesinthenumberof“otherdrug”prescriptions

toinjuredemployeesduringthistime.Inadditiontoreductions

intheusageof“N”drugs,therewerealsoreductionsintheuseof

opioidpainkillers(includingopioidsinthe“N”drugandotherdrugscategories)forclaims

subjecttotheclosedformulary.Thefrequencyofallopioidprescriptionswasreducedby11

percentandthefrequencyof“N”drugopioidswasreducedby64percentbetween2010and

2011.

Table4:ImpactofClosedFormularyonPrescriptionPatterns,InjuryYears2009‐2011

InjuryYear 2009 2010 20112010‐2011PercentageChange

N‐Drugs

Numberofprescriptions 67,002 57,369 14,195 ‐75%

Numberofprescriptionsperclaim

3.24 2.90 2.07 ‐29%

OtherDrugs

Numberofprescriptions 575,865 595,126 575,062 ‐3%

Numberofprescriptionsperclaim 5.57 5.61 5.47 ‐2%


DWC'spharmacy

closedformularyhas

reducedthenumber

ofprescriptionsfor

"notrecommended"

or"Ndrugs"by75

percentandcostsfor

thesedrugsby82

percent.



27

Additionaldataisneededtodeterminethelong‐termeffectsoftheclosedpharmacyformulary

ontheutilizationandcostsof“N”drugsintheTexasworkers’compensationsystem.However,

recentdataindicatesthattheformularyhashadasignificantimpactonboththeutilizationand

costsassociatedwiththese“notrecommended”drugs,aswellasanimpactontheoverall

utilizationofopioids.Futuremonitoringisneededtodetermineifthesereductionsintheuseof

“N”drugswillalsoreducethenumberofinjuredemployeeswhobecomeaddictedtocertain

opioidprescriptiondrugsandwhethertheformularywillhaveapositiveimpactontheabilityof

injuredemployeestogobacktowork.

Access to Care Has Improved for Injured Employees

Ensuringthatinjuredemployeeshaveadequateaccesstomedicalcareisanimportantfunction

oftheworkers’compensationsystem.Withoutsufficientaccesstocare,necessarymedicalcare

isdelayed,whichexacerbatestotalmedicalandincomebenefitcostsandunnecessarilyprolongs

timeoffofwork.Systemparticipantshaveraisedconcernsinthepastthattheworkers’

compensationsystemwasexperiencingan“accesstocareproblem”andthatmanyhealthcare

providers,particularlyphysicians,wereconcernedwiththe“hasslefactor”associatedwith

treatinginjuredemployeesandthecompensationratesthataccompaniedthatmedicalcare.

Indeed,thepassageofthefirstMedicare‐basedprofessionalservicesfeeguidelinein2002(the

guidelinebecameeffectiveinAugust2003afteracourtbattle)spurredcontroversywhenthe

compensationrateforworkers’compensationprofessionalserviceswassetat125percentof

Medicare.Forsomespecialtyproviders,suchassurgeons,thiswasasignificantcutin

compensationandmanyprovidersstatedthattheywouldnolongeracceptinjuredemployeesas

patients.

AnanalysisofthemedicalbillingandpaymentdatacollectedbyDWCcombinedwiththe

licensinginformationfromtheTexasMedicalBoardindicatesthatbetween2002and2005there

wasadeclineinthenumberofactivephysicians(i.e.,thosephysiciansthathadanactivelicense

andwerepracticing)whotreatedworkers’compensationclaims,eventhoughthetotalnumber

ofactivephysiciansinTexascontinuedtoincrease(seeFigure12).Withthepassageoftort

reformlegislationin2003,morephysicianshavesetupactivepracticesinTexas.Thisinfluxof



28

newphysiciansresultedinanincreaseinthenumberofphysicianstreatingworkers’

compensationclaimsfrom2005–2012(from17,219physicianstreatingworkers’compensation

claimsin2005to18,063physicianstreatingworkers’compensationclaimsin2012).The

numberofphysicianstreatinginjuredemployeesdeclinedin2013,butthismaybetheresultof

immaturedatasoadditionalmonitoringisneededtodetermineifthisdeclineistrulyatrendor

whetheritissimplytheresultoflowerclaimfrequencynecessitatingfewertreatingphysicians.

Figure12:TotalNumberofActivePhysiciansWhoTreatedWorkers’CompensationClaims,ServiceYears2000‐2013

Source:TexasDepartmentofInsurance,Workers’CompensationResearchandEvaluationGroup,2014.*2004showsanaverageof2003and2005duetoincompletedata.

Withtheconsistentdeclineofinjuryratesandreportedworkers’compensationclaimsalong

withastablenumberofphysiciansparticipatingintheTexasworkers’compensationsystem

sincethepassageofHB7,theaverageworkers’compensationcaseloadforeachparticipating

physicianhasdeclined,resultinginfewerinjuredemployeescompetingforthesamephysician

(seeFigure13).In2005,therewereapproximately19.3workers’compensationclaimsper

treatingphysiciancomparedto16.1claimsin2012and16.5in2013–a15percentdecrease.



29

Figure13:AverageNumberofClaimsperWorkers’CompensationParticipatingPhysician,2000‐2013


Workers’compensationparticipationratesvarybymedicalspecialtyandgeographicregion.

Althoughthe2003and2008MedicalGeeGuidelinesraisedfeesforEvaluation&Management

services,thenumberofprimarycarephysicianstreatinginjuredemployeeshascontinuedto

decline,indicatingthatprimarycarephysicianshortageissuesthatexistacrossTexasalsoexist

intheTexasworkers’compensationsystem.Overall,about40percentofTexasphysicians

participateintheTexasworkers’compensationsystem

and73percentofthesephysiciansarelocatedinthefive

largestmetroareas:Houston,Dallas,SanAntonio,

Austin,andFortWorth.

Approximately81percentofinjuredemployeesreceived

initialmedicalcareeitheronthesamedayofinjuryor

within7daysin2013,upfrom74percentin2000.The

percentageof‘sameday’treatmentgroupincreased

steadilyreaching41percentin2009.Thelargest

decreaseinthetimeframefromthedateofinjurytothe

firstnon‐emergencymedicaltreatmentwasseeninthe

shareofclaimswithextremedelays(29daysormore),

whichdecreasedfrom11percentin2000to6percentin2013.Thisdelayedgroupconsists

Overall,about40percentof

activeTexasphysicians

participateintheTexas

workers'compensation

system.Approximately81

percentofinjured

employeesreceivenon‐

emergencymedicalcare

eitherthesamedayor

within7daysoftheinjury.



30

largelyofdisputedand/ordeniedclaims,whichneverthelessshowedasignificantimprovement

inaccesstocare(seeFigure14).Itshouldbenoted,thatseveralstudieshaveshownthat

delayedaccesstoinitialmedicaltreatmentsincreaseoverallclaimcostsandreducethe

likelihoodofinjuredemployeesreturningtoproductiveemployment.

Figure14:PercentageofClaimsbyNumberofDaysbetweenInjuryandtheFirstNon‐EmergencyService,2000‐2013


Additionally,theintroductionofcertifiednetworksappearstohaveimprovedthetimelinessof

medicalcareforinjuredemployees.Non‐networkclaimsaveragedapproximately8daysfrom

thedateofinjurytofirstnon‐emergencymedicaltreatmentin2013,comparedto5‐6daysfor

mostcertifiednetworks.

Inanefforttoimproveinjuredemployeeeducationabouttheirrightsandresponsibilities,

includingtheirabilitytochooseatreatingdoctor,DWChasrecentlyinitiatedapilotprogramto

conductface‐to‐faceoutreachandprovideplainlanguageinformationtoinjuredemployees.

Return‐to‐Work Rates Continue to Improve, but the Recent Recession Has Had an Impact

OneofthemostbasicobjectivesoftheTexasworkers’compensationsystemistoreturninjured

employeestosafeandproductiveemployment.Effectivereturn‐to‐workprogramscannotonly



31

helpreducetheeconomicandpsychologicalimpactofawork‐relatedinjuryonaninjured

employee,butitcanalsoreduceincomebenefitcostsandcurbproductivitylossesforTexas

employers.

PreviousstudiesbyboththeResearchandOversight

CouncilonWorkers’Compensation(ROC)andtheWorkers’

CompensationResearchInstitute(WCRI)indicatedthat

comparedtosimilarlyinjuredemployeesinotherstates,

Texasinjuredemployeesweregenerallyoffworkforlonger

periodsoftimeandweremorelikelytoreportthattheir

take‐homepaywaslessthantheirpre‐injurypay.12Armed

withthesestudyfindings,policymakersandsystem

participantshaveplacedconsiderableattentionon

improvingreturn‐to‐workoutcomesinrecentyears.

Severalcomponentsofthe2005legislativereformstotheTexasworkers'compensationsystem

placedsignificantfocusontheimportanceofemployeesreturningtowork,includinga

requirementforDWCtoadoptreturn‐to‐workguidelines;theinstitutionofareturn‐to‐work

reimbursementprogramforemployers;greatercoordinationofvocationalrehabilitation

referralsbetweenDWC,theOfficeofInjuredEmployeeCounselandtheDepartmentofAssistive

andRehabilitationServices(DARS);improvementsinreturn‐to‐workoutreachefforts;and

DWC’sadoptionofrulestoimplementchangesinthework‐searchrequirementsforinjured

employeeswhoqualifyforSupplementalIncomeBenefits(SIBs).

SincethepassageofHB2600in2001andthepassageofHB7in2005,therehasbeenasteady

increaseinthepercentageofinjuredemployeesreceivingTemporaryIncomeBenefits(TIBs)

(i.e.,injuredemployeeswithmorethansevendaysoflosttime)whohaveinitiallyreturnedto

12SeeResearchandOversightCouncilonWorkers’Compensation,ReturningtoWork:AnExaminationofExistingDisabilityDurationGuidelinesandTheirApplicationtotheTexasWorkers’CompensationSystem:AReporttothe77thLegislature,2001;andWorkers’CompensationResearchInstitute,CompScopeBenchmarksforTexas,6thEdition,2006.

Despitetheeconomic

downturninlate2009‐

2012,77percentof

employeesinjuredin

2012wentbacktowork

within6monthsfrom

thedateofinjury.



32

workpost‐injury.Infact,the2005legislativereformstotheTexasworkers'compensation

systemappearedtohavehelpedtempertheeffectsoftheeconomicdownturninTexas.Despite

theeconomicdeclineinlate2009‐2012,ahigherpercentageofinjuredemployeesreceiving

incomebenefitswentbacktoworkwithinsixmonthsin2012(77percent),comparedto2004

(74percent)(seeFigure15).Since2001,thepercentageofinjuredemployeesreturningtowork

withinsixmonthsoftheirinjuryhasincreasedbysevenpercent.

Figure15:PercentageofInjuredEmployeesReceivingTIBsWhoHaveInitiallyReturnedtoWorkwithin6MonthsPost‐Injury


Whilethepercentageofinjuredemployeeswhoinitiallyreturntoworkisanimportant

benchmarkofsystemperformance,whethertheseinjuredemployeesremainemployedonce

theygobacktoworkisamoreaccuratemeasureofthesystem’sabilitytopromote“successful”

return‐to‐workinitiatives.AsTable5indicates,thepercentageofinjuredemployeesreceiving

TIBswhohaveinitiallyreturnedtoworkandremainedemployedforatleastthreesuccessive

quarters(orninemonths)alsocontinuestoimprove.Roughly74percentofemployeesinjured

in2012whoinitiallyreturnedtoworkwithinthefirstsixmonthsoftheirinjuriesremained

employedforthreeconsecutivequarters,comparedtoonly66percentin2004.Liketheinitial

return‐to‐workratesinFigure15,thepercentageofTIBsrecipientswhoreturnedtoworkand

remainedemployeddeclinedfrom2009to2011duetotheimpactoftheU.S.recessionand



33

continuinghigherunemploymentrates.DWCwillcontinuetomonitortheimpactofthe

recessionandthesubsequenteconomicrecoveryonreturn‐to‐workratesforworkers’

compensationclaimsinfuturereports.

Table5:PercentageofInjuredEmployeesReceivingTIBsWhoHaveInitiallyReturnedtoWorkandRemainedEmployedforThreeSuccessiveQuarters

(6Monthsto3YearsPost‐injury)

InjuryYear

Within6MonthsPostInjury

Within1Year

PostInjury

Within1.5YearsPostInjury

Within2Years

PostInjury

Within3years

PostInjury

2008 72% 75% 77% 80% 83%

2009 68% 75% 78% 81% 84%

2010 69% 76% 79% 82% 85%

2011 68% 76% 79% 81%

2012 74%

Source:TexasDepartmentofInsurance,Workers’CompensationResearchandEvaluationGroup,2014.Note1:Thestudypopulationconsistsof294,732employeesinjuredin2008‐2012whoalsoreceivedTemporaryIncomeBenefits(TIBs).).Note2:Thethirdyearof2011,andthe1.5,second,andthirdyearsof2012areexcludedduetoinsufficientdata.Note3:Sustainedreturn‐to‐workratesfor2012injuriesaresubjecttochange,asmorewagedataismadeavailableforinjuriesoccurringinthelatterquartersof2012.

Notonlyhavethepercentageofinjuredemployeeswhoreturnedtoworkandremained

employedimprovedsincethe2005legislativereformstotheTexasworkers'compensation

systeminHB7,buttheamountoftimetheaverageinjuredemployeewhoreceivedTIBsisoff

workafteraninjuryhasalsodecreasedfromamedianof28‐29daysin2004‐2005to20‐21days

in2012‐2013.Additionally,resultsfromthe2014Workers’CompensationNetworkReportCard

producedbytheWorkers’CompensationResearchandEvaluationGroupindicatethatwithtwo



34

exceptions,injuredemployeesfromseventeennetworkentitieshadhigherorsameinitial

return‐to‐workratesthannon‐networkclaims.Theimprovedperformanceofmostnetworks

overnon‐networkclaimsmaybetheresultofcoordinationbetweensystemparticipants,

includingemployerstoreturninjuredemployeestowork.

DWCwillcontinuetomonitorthesereturn‐to‐workmeasuresonacontinuousbasistotrackthe

impactoftheimplementationoftreatmentandreturn‐to‐workguidelinesandtheimpactof

workers’compensationhealthcarenetworksonreturn‐to‐workoutcomesinTexas.

Medical Disputes Have Significantly Declined

Inadditiontohighcostsandpooroutcomes,the2001and2005legislativereformstotheTexas

workers'compensationsystemalsofocusedonreducingfrictionforhealthcareproviders,

injuredemployeesandinsurancecarriersbyrequiringmedicalnecessitydisputestoberesolved

byIndependentReviewOrganizations(i.e.,panelsofdoctorscertifiedbyTDI),aswellas

implementingtheuseofstandardizedmedicalbillingforms/documentation

requirements/codingrequirements,certifiedhealthcarenetworksandevidence‐based

treatmentguidelines.Generally,therearethreetypesofmedicaldisputesraisedintheworkers’

compensationsystem:

feedisputes(whichmayincludeadisputeovertheapplicationoftheDWC’sfeeguidelines

aswellasbillingrequirements);

preauthorizationdisputes13(i.e.,disputesregardingthemedicalnecessityofcertain

medicaltreatmentsthatweredeniedprospectivelybytheinsurancecarrier);and

13LaborCode,Section413.014and28TexasAdministrativeCode(TAC)§134.600includealistofmedicaltreatmentsandservicesthatrequirepreauthorizationbytheinsurancecarrierbeforetheycanbeprovidedtoaninjuredemployee.Networksarenotsubjecttothesepreauthorizationrequirementsandmayestablishtheirownlistsofmedicaltreatmentsandservicesthatrequirepreauthorization.SeeTexasInsuranceCode,Section1305.351.



35

retrospectivemedicalnecessitydisputes(i.e.,disputesregardingthemedicalnecessityof

medicaltreatmentsandservicesthathavealreadybeenrenderedandbilledbythehealth

careprovider).

AsTable6indicates,therehasbeenasignificantreductioninthenumberofmedicaldisputes

filedwithDWCasaresultofthe2005legislativereformstotheTexasworkers'compensation

system.In2003,DWC’spredecessor,theTexasWorkers’

CompensationCommission,receivedapproximately17,433

medicaldisputes,butby2013thatnumberhadfallenbyabout70

percentto5,187.Thedeclineindisputesisrelatedtoseveral

factors,suchasfewerclaimsfiled,thecreationofhealthcare

networksin2006,theadoptionofDWC’smedicaltreatment

guidelinesin2007,andDWC’sadoptionofnewprofessional,

inpatientandoutpatienthospitalandambulatorysurgicalcenter

feeguidelinesin2008.

TherehasalsobeenashiftovertimeinthedistributionofmedicaldisputesintheTexas

workers’compensationsystem.PriortotheHB7legislativereformstotheTexasworkers'

compensationsystem,ahighershareofmedicaldisputesinvolvedmedicaltreatmentsthatwere

deniedretrospectivelyasnotmedicallynecessarybytheinsurancecarrier.Withtheincreased

emphasisonpre‐authorizationinHB72005,mostretrospectivemedicalnecessitydisputes

disappearedfromthesystemandthepercentageofpre‐authorizationdisputesincreasedfrom

13to26percent.

Medicaldisputes

havedeclined70

percentfrom

2003to2013.



36

Table6:NumberandDistributionofMedicalDisputesSubmittedtoDWC,byTypeofMedicalDispute(asofAugust2014)14

YearDisputeReceived Pre‐authorization FeeDisputes

RetrospectiveMedicalNecessity

DisputesTotal

2003 11% 70% 19% 17,433

2004 13% 60% 27% 14,291

2005 13% 68% 19% 13,257

2006 16% 70% 14% 9,706

2007 27% 72% 1% 8,810

2008 22% 75% 3% 12,244

2009 24% 74% 2% 12,293

2010 41% 58% 1% 7,596

2011 35% 63% 2% 7,795

2012 37% 62% 1% 5,643

2013 26% 73% 1% 5,187Source:TexasDepartmentofInsurance:DivisionofWorkers’CompensationandWorkers’CompensationResearchandEvaluationGroup,2014.

Claim Denial Rates and Requests for Indemnity Dispute Resolution Decline, but Designated Doctor Disputes Rose Significantly in 2011 and 2012

Thenumberofworkers’compensationclaimsinitiallydeniedordisputedbytheinsurance

carrierasnotbeingwork‐relateddecreasedby43percentinrecentyearsfrommorethan

18,000in2005toapproximately10,500in2013.Asapercentageofallreportableclaims,these

whole‐claimdenialsdeclinedfrom16to13percentoverthesameduration(seeFigure16).

Thesenumbersreflectinitialcompensability(i.e.,whetheraninjuryiswork‐relatedornot)and

liabilitydenialsanddonotaccountfordeniedclaimsthatwereeventuallyapprovedeither

14FromAugust2008toAugust2009,onehealthcareproviderfiledapproximately6,000pharmacyfeedisputesagainstoneinsurancecarrier.DWCupheldagreatmajorityofthesedisputesinfavoroftheinsurancecarrier(approximately60percentofallfeedisputesdecisionsmadeduringthoseyears),andtherequestoreventuallywithdrewallofthedisputesduringtheappealprocess.



37

throughamutualagreementbetweentheinjured

employeeandtheinsurancecarrierordeterminedto

be“work‐related”duringDWCdisputeproceedings.

Calculatingpartialclaimdenialratesforworkers’

compensationclaimsismorecomplicatedbecause

manyoftheseextent‐of‐injury(theextentofthe

compensableinjury)denialsoccuratlaterpointsin

theclaimprocess.Althoughinsurancecarriersarerequiredtoprovidenoticeofthesedenialsto

injuredemployeesusingtheplainlanguagenoticepromulgatedbyDWC(i.e.,PLN‐11form),this

formisusedformultiplepurposes,includingdisputesoverdisabilityandeligibilitytodeath

benefits.DWChasrecentlyproposedchangestothePLN‐11form,whichwouldallowadditional

datatobecollectedsothatextent‐of‐injurydenialtrendscanbemoreaccuratelymonitored.

Figure16:PercentageofReportableClaimsThatAreInitiallyDenied/Disputed,byInjuryYear


Insurancecarriersdenied

fewerclaimsin2013.About

13percentofreportable

claimsweredeniedin2013,

comparedtoabout16

percentin2005.



38

Althoughmuchofthesystem’sfocus,energyandresourcesare

spentonthoseworkers’compensationclaimsthathaveadispute

betweentheinsurancecarrierandtheinjuredemployee,itis

importanttounderstandthatonlyaverysmallpercentageof

workers’compensationclaimseverendupinadisputeatDWC

(seeTable7).Thismeansthatthevastmajority(92‐98percent)of

workers’compensationclaimsarehandledwithouttheneedfor

disputeresolutionbyDWC.

Table7:PercentageofReportableClaimswithaWorkers’CompensationDisputeProceedingatDWCbyCalendarYearofInjury

CalendarYearofInjury PercentageofClaims

2008 7%

2009 7%

2010 7%

2011 8%

2012 7%

2013 5%*

Source:TexasDepartmentofInsurance,DivisionofWorkers’Compensation,SystemDataReport,2014,datathroughDecember2013.Note:*Thepercentageofclaimswithadisputeproceedingmaycontinuetoincreaseasissuesariseonmorerecentinjuryclaims.

Alongwithreductionsinthenumberofworkers’compensationclaimsfiledwithDWCovertime,

thenumberofBenefitReviewConferences(BRC)requestshasalsodecreasedsteadilyoverthe

pasttenyears.ABRCisaninformalmeetingwiththeinjuredemployee,aninsurancecarrier

representative,andaDWCBenefitReviewOfficertodiscussandattempttoresolvedisputed

issues.AninjuredemployeeoraninsurancecarriermayrequestaBRC.In2003,system

participantsrequestedatotalof57,609BRCs.By2013,thatnumberfellto14,070requests,a76

percentdecreasesince2003(seeFigure17).SomeofthedecreasesinthenumberofBRC

Thevastmajorityof

claims,92‐98

percent,are

handledwithoutthe

needfordispute

resolutionbyDWC.



39

requestscanbeattributedtothedeclineinthenumberofreportableclaimsbetween2003and

2013;however,thenumberofBRCrequestsfellby76

percentoverthesameperiod,whichisdoubletherate

ofthedecreaseexperiencedbyreportableclaims.

InadditiontothelowernumberofBRCrequests,the

numberofconcludedBRCsalsodeclinedsteadilyfrom

2003to2010by61percent(SeeFigure18).However,

thetrendchangedcourseafter2010,increasingby40

percentin2012,followedbyaslightdecrease(4

percent)in2013.Despitethemorethan10,000BRCs

concludedin2013,thatnumberwasstill47percent

lowerthanthenumberofconcludedBRCsin2003.

Further,the4percentdecreaseinBRCsconcluded

during2013raisesdoubtthatthe2012increaseisindicativeofalong‐termincreasingtrend.

Figure17:NumberofBenefitReviewConferenceRequestsReceived,2003‐2013

Source: Texas Department of Insurance, Division of Workers’ Compensation, System Data Report, and Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2014.

ThenumberofBenefit

ReviewConferences

concludedonworkers'

compensationdisputeshas

declined47percentsince

2003,butDesignated

Doctordisputesaccount

foralmost60percentof

disputedissues.



40

Figure18:NumberofBenefitReviewConferencesConcludedbyDWC,2003‐2013


GiventhedecreaseinthenumberofconcludedBRCsin2013,itseemsmorelikelythatthe

increasesin2011andin2012weretemporaryresponsestonewsystemrequirements.15In

2011,DWCadoptedamendmentstoBRCrulesinaccordancewiththeTexasWorkers’

CompensationAct.TheserulesclarifiedthatdisputingpartiesmustrequestaBRCtostopthe

90‐dayfinalityofthefirstimpairmentratinganddateofMaximumMedicalImprovement(MMI)

andfollowthroughonthedisputerequest.ThedateofMMIistheearliestof:1)thedatea

doctordeterminesaninjuredemployeehasrecoveredfromthework‐relatedinjuryasmuchas

canbeanticipatedor2)104weeksafterincomebenefitsbegantoaccruewithexceptionsfor

spinalsurgery.Theimpairmentratingisthepercentageofpermanentimpairmenttothewhole

bodyresultingfromacompensableinjury.Priortothe2011ruleadoption,injuredemployees

andinsurancecarrierswouldtrytostopthestatutory90‐dayfinalityofthefirstimpairment

ratingordateofMMIbysubmittingaBRCrequesttoDWCandthenwritingonthatrequestthat

thepartydidnotwantaBRC,whichwasinconsistentwiththestatutoryintenttodisputethe

15LaborCode,Section408.0041statesthataninjuredemployee’sfirstimpairmentratingordateofMMIbecomesfinalifitisnotdisputedafter90daysfromthedateitwasassignedtotheinjuredemployee.



41

firstimpairmentratingordateofMMIbythe90thdayoritwouldbecomefinal.16Alsoin2011,

the82ndLegislaturepassedHB2605,whichrequiredpartiestodemonstrateeffortstoresolve

disputespriortorequestingaBRC,aswellasrequiredpartiestoshow“goodcause”tocancelor

rescheduleaBRC,instituteddeadlinesforreschedulingBRCsandrequiredDWCtoholdaBRCif

apartyfailstoappearunlessthepartydemonstrates“goodcause.”

In2011and2012,thenumberofrequestsbypartiestorescheduleBRCsincreasedsignificantly

(46percentincreasefrom2010to2011),butthoserequestssubsequentlydeclined15percent

in2013.Theprimaryreasonsforthesereschedulerequestsindicatethatmanyoftheparties

whorequestedtheseBRCswerenotadequatelypreparedtoresolvethedispute(abouthalfof

therequeststoreschedule),whichindicatesthattheywerelikelyrequestingtheBRCsfor

proceduralreasons.

Theincreaseindisputesduring2011and2012primarilyinvolvethreeprimarydisputeissues

thataregenerallybroughtuptogetherinthesamedispute(i.e.,disputesoverDesignated

Doctors’impairmentratings,disputesoverDesignatedDoctors’MMIdates,anddisputes

regardingextent‐of‐injury).DesignateddoctorsaredoctorsappointedbyDWCtorecommenda

resolutionofdisputeoverthemedicalconditionofaninjuredemployee.Thesethreedisputed

issuescomprised86percentoftheincreasednumberofdisputedissuesfrom2011to2012.The

combinedshareofthesethreedisputedissuesincreasedgraduallybetween2008and2010

(from28percentto34percent).However,by2013,theirshareofalldisputeissueshadjumped

tonearly60percent(seeFigure19).

IncreasesinthesedisputedissuescoincidewiththepassageofnewBRCrulesclarifyingthata

BRCmustberequestedandscheduledinordertostopthe90‐dayfinalityofthefirstimpairment

rating/dateofMMI.Additionally,bystatuteinsurancecarriersmustfirstrequestanevaluation

byaDWC‐assignedDesignatedDoctortodetermineiftheemployeeisatMMI,andifso,whatthe

impairmentratingisbeforetheycanrequestanevaluationbyadoctoroftheirchoice.Asa

1628TAC§130.12(b),whichbecameeffectiveinMarch2004,alsolaysouttherequirementstodisputethefirstcertificationofMMIortheimpairmentratingbyrequestingadesignateddoctororbyrequestingaBRCunder28TAC§141.1.



42

result,therearemanyinstanceswheretheDWC‐assignedDesignatedDoctoristhefirstdoctorto

determinewhetheraninjuredemployeehasreachedMMIorhasanimpairmentrating.

Therefore,itisoftentheDesignatedDoctor’sfirstMMIdateorimpairmentratingthatmay

becomefinalifitisnotdisputedwithin90daysbyeithertheinsurancecarrierortheinjured

employee,whichiswhydisputesregardingDesignatedDoctorreportsincreasedin2011and

2012.

Figure19:PercentageShareofTotalBRCIssues,Extent‐of‐Injury,DesignatedDoctorImpairmentRating,andDesignatedDoctorMMIDate


DisputeoutcomeshavealsochangedwiththeinfluxofnewDesignatedDoctordisputesin2011

and2012.Bystatute,DWC‐assignedDesignatedDoctorshavepresumptiveweightinDWC

administrativedisputeproceedings17sincethesedoctorsareindependentlyassignedbyDWCto

17InTexas,workers’compensationdisputesareresolvedthroughamulti‐leveladministrativedisputeprocess.Thefirstlevel,theBRC,isaninformalmediationbetweenthepartiesheldatalocalDWCfieldoffice.UnresolveddisputesattheBRCarethenheardataformalContestedCaseHearingorCCH,whichisalsoheldinalocalDWCfieldoffice.Ifthepartiesarestilldissatisfied,theCCHdecisioncanbeappealedtotheAppealsPanel,apanelofadministrativelawjudges,whoreviewtheCCHdecisionandeitherupholdit,overturnitorremanditbacktotheCCH.Ifthepartiesarestilldissatisfiedwiththedispute,theymayappealtheAppealsPaneldecisiontodistrictcourt.



43

resolvecertainissues,suchasMMIandimpairmentratings,andreceivespecialtrainingand

testing.Assuch,partiesthatdisputeaDesignatedDoctorreportmustovercomethisstatutory

presumptiveweightthroughapreponderanceoftheevidenceinordertoprevailinthedispute.

InFY2010,priortotheinfluxoftheseDesignatedDoctordisputes,approximately52percentof

disputedissuesattheContestedCaseHearing(CCH)leveloftheadministrativedispute

resolutionprocesswereresolvedinfavoroftheinjuredemployeeorbymutualagreement.A

CCHisaformalhearingwhereaDWCHearingOfficermakesadecision,inwriting,aboutthe

disputedissue(s)thatwerenotresolvedattheBRC.Thisnumberdroppedtoapproximately42

percentinFiscalYear2012becauseinthevastmajorityofDesignatedDoctordisputes,the

DesignatedDoctorreportisupheld.DWCwillcontinuetomonitorthesedisputetrendsto

determineifanystatutoryorregulatorychangesareneededinthefutureandtoascertainifthe

trendsin2011and2012weresimplyshort‐termreactionstonewrequirementsoramore

permanenttrend.Despitetherecentincreases,overalldisputesdecreasedbyalmosthalfinthe

lasttenyears.

Concluding Remarks

TheTexasworkers’compensationsystemhaschangedsignificantlyovertimeasaresultof

significantlegislativereformsin2001and2005andcontinuestoshowsignsofprogress.Early

indicationsshowthatthesereformshavehelpedtostabilizeclaimscosts,improvereturn‐to‐

workrates,andimproveinjuredemployees’accesstomedicalcare.Thenumberofmedicalfee

andincomebenefitdisputesfiledwithDWCisdownoverallandnon‐fataloccupationalinjury

andillnessratesalsoreducedasworkers’compensationclaimfrequencycontinuestodecline.

Theseimprovementsinsystemoutcomeshavehelpedreduceworkers’compensationinsurance

costsinTexassince2005,whichhasresultedinlowerworkers’compensationinsurance

premiumsresultinginmoreemployersmakingthedecisiontoprovideworkers’compensation

coveragefortheiremployees.Certifiedhealthcarenetworks,animportantcomponentofthe

2005legislativereforms,havenowbeguntoshowtheirabilitytoimprovereturn‐to‐work

outcomes,aswellasimprovetimelinessofcareforinjuredemployees.



44

Giventhemagnitudeofthelegislativereformsthatwerepassedin2001and2005andthe

resultsofthosereforms,significantlegislativechangestotheTexasworkers’compensation

systemarenotrecommendedatthistime.DWC’sfocusoverthenexttwoyearswillbeto

continuemonitoringtheimplementationofpreviouslegislativereforms;worktowards

improvingelectroniccommunicationswithsystemparticipants;enforceexistinglawsandrules;

encourageemployerstoprovidesafeworkplacesfortheiremployees;ensurethatinsurance

carriershandletheirclaimstimelyandfairly;improvedatacollection;finetunedispute

resolutionprocesses;andreviewoutdatedrulesandformstoimprovesystemefficiency.

AlthoughOSHAhastheprimaryresponsibilityforregulatingworkplacesafetyissuesinTexas,

reducingworkplacefatalitiesandencouragingemployerstoprovidesafeworkplacesfortheir

employeesmustbeapriorityforallsystemparticipants,includingDWC.DWCwillbelookingfor

waysinthenextbienniumtoleveragerelationshipswithindustryexpertsandotheragenciesto

identifyandeducateemployersonbestpracticesforsafety.DWCalsoseestheneedtobetter

educateinjuredemployeesabouttheirrightsandresponsibilitieswithintheworkers'

compensationsystemandtoprovidetheoutreachnecessarytoensurethatinjuredemployees

cansuccessfullynavigatethesystem.Assuch,DWCplanstoenhanceitscoordinationwiththe

OfficeofInjuredEmployeeCounsel,thestateagencydedicatedtoassistingandadvocatingfor

injuredemployees,sothatbothagenciescanmaximizetheirresourcestoimprove

communicationstoinjuredemployees.DWCisalsointheprocessofpilotingnewplainlanguage

educationalmaterialsandhostingface‐to‐faceoutreachsessionsinlocalfieldofficesinan

attempttohelpinjuredemployeesbetterunderstandthebasicsaboutworkers’compensation.

DWCwillcontinuetolookforwaystoreducedisputesandencouragesystemparticipantstobe

morepreparedfordisputeproceedings.Lastfiscalyear,DWCpilotedanewschedulingorderat

theBRCleveltoidentifyareaswheredisputingpartiesneededtogatheradditionalinformation

orevidencepriortoschedulingasecondBRConaclaim‐specificdispute.Tosupportthenew

schedulingorder,DWChasalsobeenmakingfollow‐upphonecallstosystemparticipantsto

monitortheirprogressingatheringtheadditionalinformationneededfortheirdisputes,aswell

astoassistpartiestoobtainmissinginformationasnecessary.Becauseoftheincreasein

DesignatedDoctordisputesinvolvingextent‐of‐injuryissues,ithasbecomeclearthatinjured



45

employeesneedbetteraccesstoinjurycausationanalysesfromtheirtreatingdoctors.In

response,DWCistheprocessofcreatingnewtrainingmaterialsfortreatingdoctorstohelpthem

understandtheimportanceoftheseanalysesandtoeducatethemonwhatinformationisneeded

byDWCinthecaseofadispute.AllofthesenewDWCinitiativesaretoonewtofullyevaluate

theireffectiveness,buttheydemonstrateacommitmentbytheagencytocontinuetoidentify

systemissuesandlookforsolutions.

WORKERS’ COMPENSATION LEGISLATIVE RECOMMENDATIONS

Increase the Maximum Reimbursement for Burial Benefits in the Texas Workers’ Compensation System

BACKGROUND:TheTexasWorkers’CompensationActprovidesforvarioustypesofindemnity

benefitspayabletoinjuredemployeesandtheirbeneficiariesinthecaseofacompensable

occupationalinjury,illnessordeath.Oneofthesetypesofindemnitybenefits,burialbenefits,is

designedtocompensatetheperson(i.e.,afamilymember,friend,etc.)whopaysforthecostsof

burialforthedeceasedemployee.

Currently,thestatuteallowsforthecompensationofburialexpensesupto$6,000perworkers’

compensationclaim,ortheactualcostsincurredforreasonableburialexpenses,whicheveris

less.ThisburialbenefithasnotincreasedsincethepassageofHouseBill2510,76thLegislature,

RegularSession,effectiveSeptember1,1999,whentheburialbenefitwasincreasedfrom$2,500

to$6,000.

ISSUE:AccordingtotheNationalFuneralDirectorsAssociation,thenationalmediancostofan

adultfuneralin2012was$8,343(mostcurrentdataavailable).Thiscostestimatedoesnottake

intoaccountcrematoryfees,cemetery,obituaries,andmonumentormarkercosts.Twenty‐nine

statescurrentlyprovideburialbenefitsinamountsthatexceed$6,000andsixteenstates



46

currentlyprovideatleast$10,000ormoreinburialbenefitsinthecaseofacompensable

death.18

Asaresult,currentcompensationofburialbenefitshavenotkeptupwithincreasedcosts

associatedwithburialexpensesintoday’smarket,whichplacesundueeconomicpressureon

familyandfriendsofdeceasedemployeestomakecertainburialdecisionstostaywithinthe

burialbenefitamountdesignatedbystatuteorpaytheremainingburialexpensesoutoftheir

ownpocket.Overthepastdecade,themediancostofanadultfuneralintheUnitedStateshas

increasedapproximately35.2percent.19

RECOMMENDATION:AmendSection408.186(a),LaborCodetoincreasethemaximum

reimbursementforburialbenefitspayableundertheWorkers’CompensationActfrom$6,000to

$10,000.

Establish a Pilot Safety Reimbursement Program for Small Employers

BACKGROUND:Section402.021,LaborCode,outlinesthelegislativeintentfortheTexas

workers’compensationsystemandincludes,aspartofthatintent,thattheworkers’

compensationsystem“mustpromotesafeandhealthyworkplacesthroughappropriate

incentives,educationandotheractions.”ThebestpossibleoutcomeforTexasemployersand

employeesistopreventunnecessaryworkplaceinjuriesandillnesses,andto“reduce,andto

everyreasonableextenteliminatethecausesoflossofproduction,reductionofworkhours,

temporaryandpermanentincapacityofworkers,andincreasesincertaininsurancerates.”20

Aspartofitsstatutorydutytoadministertheworkers’compensationsystem,theDWCprovides

numerousfreesafetyresourcesforTexasemployers,includingcustomizedonsiteworkplace

18Workers’CompensationResearchInstituteandInternationalAssociationofIndustrialAccidentBoardsandCommissions,Workers’CompensationLawsasofJanuary1,2014,availableathttp://www.wcrinet.org/studies/public/books/wclaws_2014_book.html.

19NationalFuneralDirectorsAssociation,FuneralServiceTrendsandStatistics,(April12,2013)availableathttp://nfda.org/about‐funeral‐service‐/trends‐and‐statistics.html.

20SeeSection411.101,LaborCode.



47

safetyandhealthtraining,theOccupationalSafetyandHealthConsultation(OSHCON)Program,

anextensivelibraryofsafetypublicationsandsafetyDVDsforemployeruse,theUSDepartment

ofLabor’sOccupationalSafetyandHealthAdministration(OSHA)10‐hourconstructionclasses,

andsafetyandhealthnewsletters.DWCalsohostsanannualsafetyandhealthconferencefor

Texasemployers,whichfocusesonaccidentpreventionissuessuchastransportationsafety,

workplaceviolenceprevention,effectivesafetymanagementprocesses,andregulatory

compliance.

BuildingontheexistingsafetyresourcesforTexasemployers,DWChasrecentlyexpandedits

effortstopromoteworkplacesafetyandhealthissues.Theseeffortsincludepubliclyrecognizing

employerswithexemplarysafetyprogramswhoqualifyfortheDWCPeerReviewSafetyaward

andtheDWCOSHCONSafetyandHealthRecognitionProgram(SHARP)award.Additionally,

DWCisfocusingmoreattentionontransportationsafetyissuesthroughindustryroundtables

andeducationaloutreach,becausetransportationincidentsremaintheleadingcauseof

workplacefatalitiesinTexas.

ISSUE:WhileTexashasconsistentlyseenlowernon‐fataloccupationalinjuryandillnessrates

comparedtothenationalaverageforyears,Texashasahighernumberofworkplacefatalities

thanmoststates,primarilyduetothesizeofthestateandthestate’sindustrymix.Generally

speaking,smalleremployers(i.e.,employerswithfewerthan50employees)oftendonothave

theresourcesavailabletopurchasenecessarysafetyequipmentorprovideadditionalsafety

trainingtoreduceoreliminateworkplacehazards.Asaresult,thesesmalleremployersareata

disadvantagecomparedtolargeremployerswhocanemployriskmanagementorlosscontrol

personnelforthispurpose.

AlthoughDWCprovidesnumeroussafetyresourcestoTexasemployers,recognizesthatsmall

employersandemployersincertainhighriskindustriescouldbenefitfromasafety

reimbursementprogram;similartoanexistingprogramforreturn‐to‐workissuesunderSection

413.022,LaborCode.Otherstates,includingWyoming,Ohio,Minnesota,andWashingtonoffer

similaremployersafetyreimbursementprogramstotheiremployers.



48

RECOMMENDATION:AmendChapter411oftheLaborCodetoaddanewSection411.111,to

establishapilotsafetyreimbursementprogramforsmallemployers(i.e,employerswithfewer

than50employees)andemployersincertainhigh‐riskindustriesthroughFiscalYear2019.This

programwouldprovidereimbursementstoemployerswithworkers’compensationcoverage

whoincurallowableexpensestoimproveworkplacesafety(e.g.,workplacemodifications,

purchasesafetyequipment,provideadditionalsafetytraining).Reimbursementswouldbe

availableonafirstcome‐firstservebasisuptoamaximumamountperyear($100,000).

Individualemployerreimbursementswouldnotexceed$5,000peryear.

ByDecember1,2018,DWCwouldinclude,aspartofitsbiennialreporttotheLegislature,an

analysisdetailingtheresultsofthepilotsafetyreimbursementprogramwitharecommendation

ofwhethertheLegislatureshouldcontinuethesafetyreimbursementprogrambeyondFiscal

Year2019.

Documents

Biennial Report to the 84 LegislatureSource: Texas Department of Insurance, Division of Workers’ Compensation, 2014. Insurance Rates and Premiums Continue to Decline House Bill 7