Inside the Eye of the 2007 Texas Legislative Session

Saturday, August 25, 2007 | 0

By Jay A. Thompson

When the 80th Legislature adjourned "sine die" on May 28, 2007, there had been 4140 House bills and 2058 Senate bills filed during the 140-day session. There were 953 House bills passed into law and 525 Senate bills were passed.

Thompson Coe monitored 271 bills for its property and casualty insurance clients, 63 of which became law.

Every session is a reminder to insurers that the legislative process is fraught with perils. The governor described the session as the "Good, the Bad and the Ugly." The perils include good bills that die, and bad or ugly bills that could become law.

There was not as much of the usual inflammatory rhetoric about insurance as seen in the past when "insurance reform" has been high on the legislative agenda. As a result, there were fewer really bad bills that had any chance of passage. However, there were still some bills, including some suggested by the Texas Department of Insurance, that could have had a negative impact on this industry.

Fortunately, most of the bad and ugly insurance bills did not become law.

Legislative sessions have sometimes been compared to storms. Considering the acrimonious, highly publicized battles over issues such as the speakership; House rules; transportation; HPV vaccines; the scandals at the Texas Youth Commission; funding for education; tax relief; voter identification; Medicaid funding (Frew settlement); cancer research; water legislation; the death penalty for certain child predators (Jessica's law); border security; religious expression in schools; parks funding; changes in retail electric regulation (TXU); religious expression in schools; and passing a record budget, it is little wonder why insurance was on the fringe of the political storms this session.

In the eye of a hurricane, where it is supposed to be relatively calm, should sit the leadership. This gives you some idea of which way the storm will move.

Speaker Tom Craddick survived challenges to his leadership that started on day one and continued through the 140th day of the session. A historic attempt to unseat a sitting speaker was attempted by House members in the waning days of the session.

Whether the damage from this political firestorm will be to Craddick or to those that so fervently challenged him during the session, remains to be seen. The battles over the power of the speaker will continue much like a dark cloud hanging over the interim until the next session in 2009.

At this time, there are as many as eight House members, including Craddick, who have filed papers to run for speaker in 2009. The House spent considerable time on bills dealing with religious expression in schools, voter identification, Jessica's Law, pre-marital counseling, electric utility reform, barking dogs, and the budget.

Fortunately, and unfortunately, insurance was not high on the agenda for the House.

Lt. Governor David Dewhurst was proud of the session and cited delivering the largest tax cut in history, increased funding for education at all levels, cracking down on child predators, and maintaining a "budget consistent with the growth of the state."

Early in the session, Gov. Rick Perry found himself being battered in the legislative halls on his positions on his executive order on the HPV vaccine; selling the lottery; appraisal caps; spending limits; and the use of toll roads to build new roads. Perry vetoed more than 50 bills. Only Gov. Perry has publicly lamented the failure to adequately fund TWIA.

After 2005, it was thought that workers' compensation legislation would involve only "clean up" issues in order to give the Texas Department of Insurance and the new Division of Workers Compensation Insurance (DWC) some breathing room. While this was generally true, there were a large number of bills filed especially those relating to provider compensation.

The following are the workers' compensation bills that passed this session:

Regulation of Third Party Administrators. HB 472.

Third party administrators are entities to which insurance companies delegate authority for claim adjusting, processing, and bill payment. When the Insurance Department was charged with the responsibilities of regulating networks, the department became concerned that administrators could create, adopt, or lease networks, treatment guidelines, and formularies for their respective client insurance companies. Prior to HB 472, only administrators for health insurers were regulated by the Insurance Department under the Texas Third Party Administrator Act. However, workers' compensation administrators were exempted from such regulation.

HB 472 was an Insurance Department-initiated bill to provide for the regulation of third-party administrators aimed primarily at administrators with delegated duties in the workers' compensation system by the Insurance Department. The final version of HB 472 was the result of negotiations between Representative Solomons and various stakeholders. HB 472 provides that the following are not third party administrators:

* an employer, other than a certified workers' compensation self-insurer administering an employee benefit plan or the plan of an affiliated employer under common management and control;

* a union administering a benefit plan on behalf of its members;

* a licensed agent;

* a person who adjusts or settles claims in the normal course of the person's practice or employment as a licensed attorney and who does not collect any premium or charge in connection with workers' compensation benefits;

* a licensed adjuster who is engaged in the performance of the individual's powers and duties as an adjuster in the scope of the individual's license; or

* a certified self-insurer.

HB 472 allows the Insurance Department to regulate third-party administrators in the workers' compensation system. The bill requires insurance companies to perform semi-annual audits of the third party administrators. On-site audits by insurers are not required unless the third party administrator administers more than 100 certificate holders, injured employees, plan participants, or policy-holders on behalf of the insurer. The on-site audits would be required biennially

. HB 472 prohibits an insurer from providing things of value to an administrator based on savings accruing to the insurer because of adverse determinations regarding claims for benefits.

The Insurance Department can issue certificates of authority to applicants under Tex. Ins. Code Section 4151.052, as amended by HB 472, beginning Sept. 1. The sections of HB 472 requiring certificates do not take effect until Jan. 1, 2008. The remainder of HB 472 is effective Sept. 1.

Fee Schedules for health care provided under certain networks in the workers' compensation system. HB 473.

Under the workers' compensation regulation that took place in 2005, a provision allowing insurance carriers to pay a fee less than the network fee schedule led to insurers developing "voluntary" or "informal" networks.

These networks were not certified by the the Insurance Department and were generally used in areas where certified networks would not currently be possible. However, these networks were not regulated by the Insurance Department the same as the certified networks.

HB 473 amended the Labor Code to address the use of "informal" or "voluntary" workers' compensation networks. This bill is the result of negotiations between Representative Burt Solomons and the stakeholders. The original version of HB 473 would have eliminated "voluntary" and "informal" networks completely.

Under the final version of HB 473, "voluntary" and "informal" networks would be allowed until Jan. 1, 2011 but would be regulated by the TDI Division of Workers' Compensation (DWC).

After Jan. 1, 2011, the insurer would be required to have the "voluntary" or "informal" network certified by the Insurance Department. HB 473 would require insurance carriers using "voluntary" or "informal" networks to enter into certain contractual arrangements, notify the health care provider whether any other party has had access to the "voluntary" or "informal" network contract or fee schedule, provide copies of the contract to the DWC, and allow the insurance carrier to contract with a health care provider for fees that exceed the fees adopted by the DWC.

HB 473 also requires an insurer using an "voluntary" or "informal" network to provide certain information regarding the network to the DWC on a yearly basis.

The Section of HB 473 amending Tex. Lab. Code 413.011(d)(4) takes effect Jan. 1, 2011. The remainder of the bill is effective Sept. 1.

Dispute resolution in workers' compensation claims for medical benefits. HB 724.

Prior to the reforms in 2005, medical necessity disputes were decided by the State Office of Administrative Hearings (SOAH). In 2005, the Legislature abolished TWCC and the requirement that SOAH conduct hearings for medical necessity disputes. The Legislature anticipated that there should be few disputes because of their approval of the use of networks and required instead that the Division of Workers' Compensation conduct hearings. The hearings conducted by the Division require submissions in writing and did not provide many of the protections required for contested cases under the Administrative Procedure Act. A district court in Travis County held that the 2005 procedure for medical dispute resolution failed to afford due process and held that portion of the 2005 Legislation unconstitutional.

SB 724 was designed to institute a procedure that would comply with the court's directive and is applicable only to the resolution of medical disputes under the workers' compensation system. SB 724 allows for hearings at the State Office of Administrative Hearings (SOAH) for certain workers' compensation disputes. However, certain disputes involving small amounts of money remain at the DWC as contested case hearings.

Contested case hearings would be used for medical dispute resolutions with less than $2,000 in controversy and appeals from Independent Review Organization decisions where the billed amount is less than $3,000. Contested case hearings would also be used for appeals from Independent Review Organization decisions involving medical necessity. All other medical disputes, other than a medical dispute regarding spinal surgery subject to Subsection (l) and a dispute subject to Section 413.0311, will be heard at SOAH.

This act takes effect Sept. 1. The commissioner shall adopt rules pursuant to this act by Dec. 1.

Licensing requirements for independent review of certain medical decisions regarding workers' compensation claims. HB 1003.

HB 1003 is intended to address the alleged problem that out-of-state independent review organization doctors were not subjected to any disciplinary penalties for their actions relating to workers' compensation medical reviews in Texas. HB 1003 requires an independent review organization that uses doctors to perform reviews of health care services in workers' compensation cases to use only doctors licensed to practice in Texas. This Act is effective Sept. 1.

Timely submission of a claim for payment by a workers' compensation health care provider. HB 1005.

Prior to this legislation, a health care provider who erroneously submitted a workers' compensation medical bill to either a health insurer or to the wrong workers' compensation insurer forfeited their rights to recover if the bill was not submitted to the proper workers' compensation carrier in a timely manner.

HB 1005 allows a health care provider to be compensated for services provided to an injured worker, even if the provider does not file the claim in a timely manner with the proper workers' compensation carrier. The health care provider has 95 days after the provider is notified of the erroneous submission of the claim to file the claim with the correct workers' compensation carrier. This Act takes effect Sept. 1.

Physician licensing requirements for utilization review of medical decisions regarding workers' compensation claims. HB 1006.

HB 1006 requires an insurer or utilization review agent using doctors to perform reviews of health care services in the workers' compensation system, including utilization review, retrospective review, and peer review, may use only doctors licensed in Texas.

This bill was a response to reports from the Insurance Department and the Division of Workers' Compensation that reviews done by in-state doctors are more favorable to the employee more often than reviews done by out-of-state doctors. There were concerns that out-of state doctors were not subject to discipline in Texas for their actions relating to the review.

This act takes effect Sept. 1.

Certifications in a professional specialty on medical reviews in a workers' compensation case. HB 2004.

HB 2004 requires a doctor that performs a peer review, utilization review, independent review, serves as a designated doctor, performing a required medical examination, or serves as a member of the medical quality review panel be certified in a professional specialty appropriate to the care received by the injured worker. Dental services must be reviewed by a dentist licensed to practice in Texas and chiropractic services must be reviewed by a person licensed in chiropractic services.

There may be some ambiguity relating to the review of chiropractic services The first section of the bill would require a doctor, other than a chiropractor or dentist, who performs reviews of workers' compensation cases to hold a professional certification in a health care specialty appropriate to the type of health care that the injured employee is receiving.

This would presumably allow a doctor who holds a health care specialty in a type of health care involving a higher level of specialty than a chiropractor, such as an orthopedic surgeon, to review chiropractic services.

Although this seems to be the most logical interpretation of this legislation, it is possible, and should be anticipated, that an argument will be made that HB 2004 allows only chiropractors to perform the specified reviews in workers' compensation cases involving chiropractic services. This act takes effect Sept. 1.

Relating to the cost of copies of medical records for use by an ombudsman. HB 888.

After the Workers' Compensation reform in 2005, the Texas Workers' Compensation Commission (TWCC) was abolished in favor of the DWC. Ombudsmen who represented injured employees were separated from the DWC into the Office of Injured Employee Counsel. Because the ombudsmen were separated from the DWC, they were no longer able to obtain injured employees' medical records free of charge.

HB 888 requires health care providers to provide copies of an injured employee's medical records to the ombudsman at no cost to the ombudsman. During the committee process, an amendment was added to HB 888 that requires workers' compensation carriers to pay for the cost of providing the records pursuant to guidelines set out in the bill. This act took effect June 15.

Benefits for certain prosthetic or orthotic devices. SB 458.

SB 458 was filed because it was believed that some workers' compensation carriers were not treating artificial limbs as a physical structure of the body. Therefore, an accident resulting in a broken leg would be treatable under workers' compensation, but the same accident causing injury to an artificial leg would not cover repair or replacement of the artificial leg.

Senate Bill 458 is designed to ensure that workers' compensation carriers treat artificial limbs as natural limbs for injuries that are compensable under the act. Definitions were added to the Labor Code under health care for prosthetic and orthotic devices. This act takes effect Sept. 1.

Reporting requirements regarding workers' compensation claims. SB 471.

Under current law, the data elements required to be reported on each workers' compensation claim are established in statute. SB 471 requires the collection of workers' compensation data through rules adopted by the commissioner instead of statute and removes specific data elements and reporting requirements in the statute. This act takes effect Sept. 1.

Reimbursement of an insurance carrier for the overpayment of certain workers' compensation benefits. SB 1169.

SB 1169 requires the subsequent injury fund to reimburse an insurance carrier for any overpayment of benefits made by the carrier based on the opinion of a designated doctor if that opinion was reversed or modified by a final arbitration award or a final order or decision of the commissioner or a court. The commissioner is required to adopt rules to provide for a periodic reimbursement schedule, providing reimbursement at least annually. For certain benefits paid to a part-time employee or an employee with multiple employment, the bill would allow an insurer to be reimbursed for death benefits in addition to income benefits. The bill takes effect Sept. 1, and applies only to a final arbitration award, order, or decision rendered on of after that date. Additionally, the House added amendments that would allow a benefit review officer to issue interlocutory orders as they were prior to the 2005 workers' compensation reforms. This act is effective Sept. 1.

Workers' compensation insurance fraud. SB 1627.

Under current law, the maximum level of offense for an act of workers' compensation fraud is a state jail felony. This does not parallel the provisions of the Penal Code, which follow the standard ladder for committing insurance fraud or other similar financial crimes and in which punishment is dependent on the value of the claim.

SB 1627 amends the Labor Code to provide that a person who commits an offense of fraud under Chapter 418 of the Labor Code may be prosecuted under that chapter or any other applicable state law. This brings fraud committed in the workers' compensation system to the same level as other types of insurance fraud. This act is effective June 15.

Application of open meetings and open records laws to the Texas Mutual Insurance Co. SB 192.

SB 192 makes it clear that Texas Mutual Insurance Company is not a state agency or an executive agency or governmental entity for any purposes. This Bill reaffirms that the Open Meetings Law and Open Records Law of Chapters 551 and 552 of Government Code do not apply to Texas Mutual Insurance Co.

Furthermore, the Open Meetings Law and Open Records Law will not be applicable to the company's confidential investigation files. The Open Meetings Law and Open Records Law will not be applicable to require the company to provide insurance agent information obtained from another insurance agent. The effective date of this act was May 4.

Prompt payment penalties and relating to liability for and calculation of underpayment penalties under certain provisions regarding prompt payment of physicians and providers under certain managed care plans. SB 1884.

In 2003, the legislature enacted the Texas Prompt Pay Act, which created a graduated penalties scale for late payments of "clean claims." The prompt pay law is applied to networks using preferred providers. The most severe penalty for a late-pay of a clean claim is the total of billed charges plus 18%. SB 1884 amends the Insurance Code by changing the calculation for underpaid claims. Under the amended formula, the penalty increases as the under payment amount increases. The maximum penalty for under payments would be the same as the late payments. This bill increases the period of time that providers have to identify and notify health plans of under payments from the current 180 days to 170 days. Finally, SB 1884 decreases the amount of time from the current 45 days to 30 days that health plans have to correct an underpayment after notification without being penalized.

The change in law has been made prospective in nature and would apply to payment of claims on or after the effective date of the act. The effective date is Sept. 1.

The following are the workers' compensation bills that failed to pass this session:

Workers' Compensation Fee Guidelines. HB 1911 and HB 1970.

HB 1911 would have prohibited workers' compensation fee guidelines for medical services from providing for a fee in excess of the fee charged for similar treatment of an injured employed individual of an equivalent standard of living and paid by that individual or someone acting on that individual's behalf. The bill would eliminate the directive for the Commissioner to consider the increased security of payment afforded by the workers' compensation system in establishing the fee guidelines. Although this was a very short bill, the change would have been significant because it would change the method by which fee guidelines are established from the Medicare payment standard to a more general standard of an employed individual. Currently, TDI's Division of Workers' Compensation has the ability to set fee guidelines lower or higher than Medicare guidelines, depending on various factors including injuries that are specific to the workers' compensation claims.

HB 1970 was an attempt to set workers' compensation fee guidelines by statute. This bill would have significantly increased the cost of workers' compensation insurance in Texas. Currently, Commissioner Betts is in the process of adopting workers' compensation fee guidelines. HB 1970 would have amended Section 413.011 of the Texas Labor Code to provide that the Commissioner of Workers' Compensation must adopt health care reimbursement policies and guidelines that reflect the standardized reimbursement structures found in other health care delivery systems, including group health insurance plans, with minimal modifications to those reimbursement methodologies as necessary to meet occupational injury requirements. The bill would have required the Commissioner of Workers' Compensation to adopt the following payment adjustment factors to the Medicare-based hospital fee guidelines:

(1) 165% of Medicare for inpatient care;

(2) 250% of Medicare for outpatient care;

(3) a stop-loss threshold of $50,000; and

(4) a special carve out of cost plus 10% for the following services: (a) blood; (b) hyperbaric oxygen; (c) high-cost pharmaceuticals; (d) air ambulance services; (e) implantables; and (f) orthotics and prosthetics.

Payment of Attorney Fees on Appeals. SB 287.

SB 287 would have authorized a court to appoint an attorney to represent an injured employee who prevailed in the administrative process to represent the claimant before the court. SB 287 would not have changed the requirement that the insurance carrier must pay for reasonable and necessary attorney fees if the injured employee prevails in court. However, if the claimant lost at the district court level on any issue, attorney's fees would have been paid through the subsequent injury fund. The fee guidelines for attorney's fees would not have applied to the attorney's fees charged at the district court level. In many cases, the fees charged at the district court level are two to three times the fee guideline levels. This bill would have put a severe strain on the resources in the subsequent injury fund.

Conclusion

There have been many words to describe the results from the 80th Legislature. Good, Bad, Ugly, Contentious, Successful, Disappointing, Controversial, Historic, Rudderless, Productive, and Lucrative are only a few words that have been used.

A record budget was passed which increased funding for education, property tax cuts, CHIP, and other programs. Battles between the legislature and the Governor started early; the House started with a contentious, contested Speaker's race and ended with an even more contentious debate about whether the House rules, or lack of rules, permit a vote on the removal of the Speaker from office. The Senate had its share of contention. It was amazing that as many important bills passed on important statewide issues.

For the insurance industry, any session where insurance is not the primary focus is usually good. There were many bad and ugly bills that died that could have adversely impacted the property/casualty insurance industry. The most important bill for property insurers was reform of the method of financing of TWIA, which died, and prospects for the future are unclear.

The interim will be busy for several reasons. First, there is always a flurry of new rules to implement legislation. Most importantly, the TDI will be undergoing a Sunset Review, which may occupy a great deal of time and attention.

Insurance is a vital part of the economy in Texas. As a result it will continue to draw a lot of attention. Insurance issues, including the methods of funding catastrophes of all types, will continue to be in the political arena for many years to come. Political solutions to difficult problems are rarely solved quickly or by money alone. I hope the disappointments of the 80th Legislature will reinvigorate this industry to find new ways to work within itself, develop better relationships with government and the insurance buying public in order to find new ways to reach solutions, compromises, and mutual concessions on the important political and economic issues facing insurance in Texas.

This article was written by Jay Thompson, a partner with the law firm of Thompson, Coe, Cousins & Irons, LLP. Thompson, a partner in the Governmental and Legislative Advocacy and the Insurance Law practice groups of Thompson, Coe, Cousins & Irons, LLP, represents insurance companies and trade associations in legislative, regulatory, and litigation matters. This article was reprinted with permission from the Insurance Council of Texas.

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The views and opinions expressed by the author are not necessarily those of workcompcentral.com, its editors or management.