What's Next for Networks?

Saturday, January 13, 2007 | 0

By David T. Weber

One of the key provisions of House Bill 7 implementing workers' compensation reforms was the creation of certified workers' compensation health care networks ("certified networks"). This provision in the law was seen as an opportunity in the Texas workers' compensation system to control costs, bring medical professionals back into the workers' compensation system, and help injured employees return to work.

Legislative Fixes?

Almost one year after the effective date for network rules, there have been some issues that have impeded the implementation of certified networks. As of the writing of this article there were only 16 networks certified by the Texas Department of Insurance (TDI) though many more applications are still being considered. Some stakeholders have taken a "wait and see" approach to submitting network applications by allowing any problems to be discovered in the process by the entities filing early. Additionally, some stakeholders are not familiar with the procedures and regulatory environment at the TDI, and there is a learning curve for these entities resulting in delays on applications. The staff reviewing these applications have extensive knowledge in group health PPO networks, and this was their first experience in the workers' compensation arena. TDI has implemented certified networks by carefully following the legislative intent of HB 7 and basing the creation of certified networks on a group health model.

The preference from legislative leaders was to implement HB 7, provide time for system changes to occur, and wait until 2009 for amendments to be discussed in concert with the Legislative Sunset Review of both the TDI and its Division of Workers' Compensation. However, with the success of certified networks being an important indicator of how successful the reforms of HB 7 will be evaluated, it may be necessary to assist new networks and future networks by passing legislation to address some of the issues that have caused problems in their implementation and certification.

The Informal Network Question

Chapter 1305 of the Texas Insurance Code requires the TDI to certify workers' compensation health care networks and allows insurance carriers to contract with or establish certified networks. The TDI describes the certification process in Bulletin No. B-0021-06 as follows:

"the legislature set forth an elaborate regulatory scheme for certified networks. This scheme contemplates that all networks will be certified by the TDI in accordance with network application and certification requirements; detailed participatory and notice requirements; specified powers and duties; contracting requirements; financial requirements; and health care service and quality improvement requirements, among other specific requirements. In addition, this scheme calls for issuance of consumer report cards that compare and evaluate certified networks based upon objective criteria."

On the eve of accepting network applications, the TDI issued Bulletin No. B-0071-05 on Dec. 7, 2005, to address the question of informal networks. Some carriers believed informal networks could still exist after the passage of HB 7. However, HB 7 repealed section 408.0223, Labor Code, which had defined informal networks and clarified that the regulations of the Healthcare Network Advisory Committee ("HNAC") did not apply to informal networks. Section 408.0223 required informal networks to comply with the PPO standards set out in Article 3.70-3C, Insurance Code, and allowed the HNAC to recommend additional standards for voluntary networks as long as those standards were not more stringent than the standards set up for the HNAC regional networks.

Section 1305.051 of the Texas Insurance Code states a person cannot operate or perform the acts of a network unless the network is certified in accordance with Chapter 1305, Insurance Code, and TDI rules. There was little discussion regarding informal networks during the HB 7 legislative debates or committee hearings. It was perceived by some that the informal networks would simply apply as networks under the new certified network system. Some policymakers were unaware of the prevalence of these informal networks in the current system, how they operated with employers, and how health care was delivered by providers to injured employees. One may assume that the entities operating as workers' compensation informal networks simply wanted to keep under the radar during legislative consideration and be left alone. However, the end result was a new system that created a certification process under the authority of the TDI that could not accept "informal networks" as a certified workers' compensation network unless they met the requirements for networks in statute and rules.

The Loophole?

Section 413.011(d) of the Texas Labor Code, allows an insurance carrier to contract with a health care provider for fees either above or below the division's medical fee guideline for the treatment of injured employees as long as the contract includes a specific fee schedule. Some stakeholders saw this as an opportunity to continue the existence of informal networks through this exception. More times than not, these arrangements were seen as one-time arrangements or for only a few injured employees. The key determining factor under Section 413.011(d), Labor Code, was whether the arrangement attempted to manage the delivery of health care services. Any direction of care would subject these arrangements to network standards. Many times, the arrangements were not clear and providers were unaware they were required to treat injured employees for workers' compensation claims at specific fees schedules. The arrangements also included delegations to third party administrators. TDI tried to clarify these arrangements by issuing Bulletin No. B-0005-06 on Feb. 27, 2006.

Under this bulletin, TDI stated Section 413.011(d) of the Texas Labor Code allowed an insurance carrier to utilize a third party as its authorized agent to obtain a contractual fee arrangement that is different from the Division's fee guidelines. However, if the carrier chose to use a third party as its authorized agent to obtain a contractual fee arrangement, there should be:

* a contract between the carrier and the third party that authorizes the third party to contract with health care providers on the carrier's behalf; and

* a contract or contract amendment between the third party, as authorized agent for the carrier, and the provider that names the carrier and clearly states the fee arrangement is between the health care provider and the third party as an authorized agent on the carrier's behalf.

Transparency to the parties of the contract and to the regulator was a goal of this bulletin. The TDI has received, and does investigate, complaints about informal network contractual arrangements and may pursue a compliance action if TDI determines that an informal network is managing the delivery of health care services or performing the acts of a network as defined by Chapter 1305 of the Texas Insurance Code. Bulletin No. B-0005-06 also states in a medical fee dispute, the division may order an insurance carrier to pay a provider in accordance with the division's fee guideline if the requested informal network contract:

* is not provided;

* does not include a specific fee schedule; or

* does not clearly state that the contractual fee arrangement is between the health care provider and the named insurance carrier or the named insurance carrier's authorized agent.

Hospitals in Metropolitan Areas

Many stakeholders have been unhappy with the time needed to obtain network certification. One factor that has prevented some networks from being certified has been the inclusion of certain hospital providers in proposed network applications. The lack of successful negotiations between proposed networks and hospitals has resulted in certain metropolitan areas lacking community hospitals in the service area. Some proposed networks would note that another hospital in a nearby county has been contracted under the proposed network to treat injured employers and that hospital is within the radius required for non-rural counties under the statute.

The TDI made a policy decision to not "approve a network certification in a non-rural county without a network hospital." Some stakeholders view this as TDI making a determination not allowed under the current law. Others argue that it was the legislative intent of HB 7 to not allow "doughnut-holes" without coverage in metropolitan areas which would force injured employees to travel to other cities and not have medical services available within their communities. Adequate Networks

The hospital issue may result in a closer examination of an "adequate network." Is a hospital in one county allowed to cover four counties under network certification? Does the fact one hospital have certain specialties while another does not allow for its inclusion into a certified network? Should a specific number of providers or types of providers be mandated in statute for certified networks? Has TDI only certified adequate networks and left others pending until they can achieve some imaginary number?

Some stakeholders have been concerned about the lack of providers in the current certified networks. They have posed the question of whether a specific number of providers and specialties must be included in the certified networks. Some of these same stakeholders believe there should be more freedom for an injured employee's personal physician to treat an injured employee instead of a provider from a certified network. TDI has reached out to stakeholders individually, held conference calls for network applicants, and communicated to all stakeholders with their working group meetings.

Legislative Solutions

It is obvious that networks will need more time to work before the reforms in the Texas workers' compensation system can be considered a success or failure. However, there are certainly "tweaks" that might be considered both by stakeholders and legislators to address some of the issues outlined here. Will there be a massive overhaul of certified networks? Of course not. It is important to begin considering amendments that could remedy any problems perceived in the current system. Stakeholders and trade groups should focus on "doable" changes that can be agreed upon by TDI, other stakeholders, and legislators. Any changes to the current system should ensure the Texas workers' compensation system is affordable to Texas businesses, profitable for insurers, fairly reimburses providers, and most importantly allows injured employees to receive the health care necessary to return to work after an injury.

David T. Weber is a senior attorney in the Austin office of Gardere Wynne Sewell LLP. Weber's experience includes serving as a Public Analyst for Tom Craddick, Speaker of the Texas House of Representatives, on insurance, economic development, financial institutions, workers' compensation and state and federal issues. He also served as a legislative aide to two members of the Texas House of Representatives and worked during six legislative sessions and five special sessions. This article was republished with the permission of the Insurance Council of Texas, www.insurancecouncil.org

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