Texas Moves To Cut Soaring WC Costs

Bill Hammond, president of the Austin-based Texas Association of Businesses, looks forward to a reduction in medical costs that have caused some of his members to leave the state.

"I think all the issues will be worked out," he said. "The only thing left is deciding who will run the program."

Joe Woods, regional manager for the Property Casualty Insurers Association of America, said almost all of the interested parties are staying out of the dispute over how government will administer the revised operation, and the two chambers will settle the remaining differences. "I am pretty certain we are going to have a bill," he said.

The House measure would transfer the administrative functions of the program to the Texas Department of Insurance. "This allows the agency that holds the license of many of the system's participants to regulate the system," said Rep. Burt Solomons, R-Carrollton, sponsor of the bill.

However, the Senate measure would create a new Department of Workers' Compensation to administer the program. Sen. Todd Staples, R-Palestine, said the creation of a department with a single commissioner "would make the system more flexible and able to respond to market changes."

Neither measure would resuscitate the Texas Workers' Compensation Commission, which the Sunset Advisory Commission found should not be renewed. The agency did not go down without a fight, as TWCC Director Mike Hachtman likened the administrative change to "replacing the crew of the Titanic but not changing course."

One point on which virtually all parties agree is that Texas is an expensive place to provide workers' comp coverage.

Indeed, the average cost per claim in Texas ($5,938) was 76 percent above the median in a study of 12 large states conducted annually by the Cambridge, Mass.-based Workers' Compensation Research Institute. At $3,301, medical payments per claim were the highest among the 12 states, and 21 percent higher than the next state, Illinois.

Some of the factors leading to the higher costs, according to the study, were a greater use of medical care from non-hospital providers, with chiropractors singled out for special mention as a cost driver.

To combat these costs, the reform legislation allows for workers' comp medical networks and applies group health laws to the workers' comp system.

"It's time we eliminate the separate and different medical systems for our employees and doctors," Rep. Solomons said.

David Henkes, an M.D. who chairs the Texas Medical Association's ad hoc committee on workers' comp, said that networks were not the "silver bullet" to fully reform the comp system.

However, he favored abolishing the TWCC in favor of the Texas Department of Insurance, as in the House version, calling it a step in the right direction. "Existing TDI regulations include the right for patients and their physicians to request an independent review of an insurance company's denial of medical care, as well as prompt-pay laws to penalize insurance carriers who duck contractual requirements to pay claims in a timely manner," Mr. Henkes noted.

The TMA was among the organizations supporting an amendment that would have opened the networks to so-called "any willing providers" who kept within the program's cost guidelines. However, that amendment, backed primarily by chiropractors, was defeated by an 85-55 vote.

"Adopting the any-willing-provider amendment would have cut the heart and soul out of this legislation," said Mr. Woods of the Des Plaines, Ill.-based PCI.

According to WCRI, about 18,000 doctors are in the workers' comp system, compared to 30,000 just two years ago.

Texas remains unique in that employers' participation in the state's workers' comp system is not mandatory, with about 38 percent of the market choosing to opt out. However, that does not mean these businesses do not provide coverage, according to Steven Bent, executive director of the Texas Association of Responsible Non-Subscribers.

So-called non-subscribers obtain comparable workers' comp coverage for their businesses at 40 percent of the cost, Mr. Bent said, "and they provide some positive pressure to keep the system honest and help motivate the legislators to reform the system."

The non-subscriber alternative could also account for a relatively small percentage of employers in the residual market, said a spokesperson for the Texas Mutual Insurance Company–the privatized successor to the state fund. Only about 1 percent of the premium of that company is part of the residual market.

Amy Lee, team leader at the Workers' Compensation Research Group for the Texas Department of Insurance, said that high costs and low patient satisfaction have characterized the comp system for the past six or seven years, "and also fewer people are going back to work, and those that do are out longer."

To increase patient satisfaction, Sen. Staples' measure increases the weekly benefits cap and shortens the waiting period before injured workers can apply for benefits from four weeks to two.

The Texas workers' comp system has faced numerous overhauls and tinkering since its formation in 1913, according to a report of the state Senate Select Committee on Workers' Compensation.

The most recent structural reform, which came in 1989, created the TWCC and "provided a more structured administrative dispute resolution system with access to the courts only as a last resort," according to the committee report.

The reforms succeeded in bringing down expenses in what was then the costliest state system. But as the new century approached it became apparent that soaring medical costs had to be dealt with, so the legislature ordered a series of studies that backed up earlier reports and ultimately resulted in the reforms drafted this year.

All that is left now, under the unique Texas system, is for either the House to approve the Senate measure, or vice versa, so the real negotiations can begin that will lead to final passage and the governor's signature, "and that comes down to primarily whose name is on the bill," said one lobbyist.