Reforming the Texas Workers' Compensation System: One Year Later

Saturday, October 7, 2006 | 0

By Steven W. Nichols

In 2005, the Texas Legislature passed House Bill 7, reform legislation that brought about what its author -- Rep. Burt Solomons, R-Carrollton, -- called radical change to the Texas workers' compensation system.

The last time reform legislation was passed that represented "radical change" was when Senate Bill 1 was passed after several special sessions in 1989. SB 1 brought about system changes that fixed a broken workers' compensation system that faced endless litigation in the state's courts. HB 7 represented an attempt at changing the face, heart, and soul of the Texas workers' compensation system.

HB 7's reforms included health care networks from which injured employers must obtain their workers' compensation health care treatment if their employer and insurance company contract with a network, a disability management program that relies upon the use of treatment/return-to-work guidelines and medical case management to get non-network injured employees proper and quality health care, return-to-work initiatives aimed at improving the Texas system's dismal return-to-work outcomes, and performance based oversight.

HB 7 also abolished the Texas Workers' Compensation Commission and replaced it with a Texas Department of Insurance Division of Workers' Compensation headed by a single, full-time commissioner appointed by the state's governor.

These and other provisions of the reform legislation were said by many stakeholders to offer great promise in improving the performance of the Texas workers' compensation system while reducing unnecessary system costs. Other stakeholders, to include labor, have taken a "wait and see" posture and hope for the best.

One year has passed since the effective date of the reforms ushered in by HB 7. As such, it is appropriate to examine the impact of the HB 7 reforms to date and answer the following questions:

What has changed? How well are the reforms being implemented? How do system stakeholders view the current state of the Texas workers' compensation system?

What has changed?

All change takes time. Change does not occur overnight. A significant number of system stakeholders expected immediate change in how the system was regulated and functioned. Suffice it to say that they were disappointed that there were not immediate, overnight changes made to the system.

That does not mean that there have been no visible changes made to the Texas workers' compensation system. In fact, a quick look at the system's "landscape" reveals that there have been many, significant changes to the system that have occurred over the past year. Those changes include:

* The TWCC is no longer in existence. The Division of Workers' Compensation (DWC) replaced TWCC on Sept. 1, 2005.

* The six part-time commissioner governing board of the now defunct TWCC has given away to a single, full-time commissioner at the DWC.

* On Sept. 1, 2005, Texas Gov. Rick Perry appointed Albert Betts to the position of Workers' Compensation Commissioner. Commissioner Betts "rolled up his sleeves" and got to work upon taking office.

* Betts reorganized the DWC into what he believes is a more functional and efficient organizational structure.

* On Dec. 8, 2005, Perry appointed trial lawyer Norman Darwin as the state's first Injured Employee Counsel. Darwin also heads the Office of Injured Employee Counsel.

* Insurance Commissioner Mike Geeslin adopted workers' compensation health care networks rules. The certification of network applicants is in full swing.

* On Nov. 3, 2005, Betts adopted emergency medical billing rules. Permanent medical billing rules were adopted on April 10, 2006. On the same day, Betts adopted an emergency preauthorization rule. A permanent preauthorization rule was adopted on April 10, 2006.

* On Feb. 2, 2006, Betts adopted a return-to-work pilot program rule that provides for the reimbursement of small employers for workplace modifications. The rule was effective Feb. 22.

* On June 16, Commissioner Betts adopted a rule that provides for treating doctor examinations of injured employees to determine compensable injury. The authority to adopt the rule is provided for by Section 408.0042 of the Texas Labor Code.

* On June 23, DWC staff proposed new medical dispute resolution rules. The rules are currently scheduled for adoption by Betts on Oct. 12, 2006.

* On July 21, Betts adopted a rule that provides for the billing and payment of medical bills electronically.

* On July 27, Betts adopted new required medical examination and designated doctor rules required by changes made to Sections 408.004 and 408.0041 of the Texas Labor Code under HB 7. HB 7 expanded the scope of designated doctors and limited the scope of required medical examiners.

* On July 27, Betts adopted rules that establish peer review doctor standards.

* On Aug. 14, Betts adopted a new rule regarding requests for interlocutory orders. The rule was adopted in response to HB 7 changes made to the interlocutory order process set out in Section 410.032 of the Texas Labor Code.

* On Sept. 1, DWC staff proposed a rule that provides for treatment planning which is a part of the disability management process provided for by HB 7.

* On Sept. 1, DWC staff proposed a rule that proposes adopting the most current edition of Workloss Data Institutes's Official Disability Guidelines -- Treatment in Workers' Comp as the state's workers' compensation treatment guidelines and the most current edition of the Reed Group's The Medical Disability Advisor - Workplace Guidelines for Disability Duration. The rules are open for public comment until 5 p.m. Central Standard Time on Oct. 2.

* On Aug. 25, DWC staff distributed pre-proposal draft hospital inpatient and outpatient rules to system stakeholders. A stakeholder meeting was held on Sept. 14, 2006 and the DWC's stakeholder hospital fee guidelines work group met to draft the final rules. The rule is tentatively scheduled to be adopted by Betts on Jan. 18, 2007.

* DWC staff are currently drafting pre-proposal draft rules regarding the initiation of lifetime income benefits and injured employee rights and responsibilities.

* DWC staff are in the process of drafting a concept paper regarding the implementation of Section 480.1415 as it applies to supplemental income benefits.

* DWC staff are in the process of drafting a pre-proposal draft performance based oversight rule.

* On Aug. 9, 2006, Betts issued a call for insurance industry peer review data from September and October of 2006. The data call was made in response to both legislative concerns about how peer reviews are being used and to provide data that will allow the DWC to determine how peer reviews are being used in the Texas system.

* DWC staff are in the early stages of reviewing the medical fee guideline as required by statute. A stakeholder meeting was held on Sept. 21 to discuss concepts and issues related to the review and amendment, if applicable, of the Medical Fee Guideline.

The rulemaking activities of the DWC illustrate how change is in the making. Commissioner Betts and his staff have many more rulemaking projects ahead as they continue their efforts to implement HB 7. Stakeholders are expected to remain fully engaged with Commissioner Betts and his staff as the rule-making process continues.

How well are the reforms being implemented?

Stakeholders are in general agreement that Betts and Geeslin and their respective staffs are working with system stakeholders as they evaluate and implement the system reforms made to the Texas workers' compensation system under HB 7. However, some concerns do exist about how HB 7 is being implemented.

Insurers and several workers' compensation network applicants have expressed concern about the slowness of TDI's network certification process.

TDI initially certified two networks -- Concentra HCN and Texas Star Network/ Concentra -- with a significant gap in time between the certification of the first two networks and other network certifications that subsequently followed. The application review process has slowed the certification process. Several networks have experienced repeated requests for additional information and application corrections.

Another issue of concern to the insurance industry and several network applicants is TDI's policy-making process as it applies to the certification and regulation of workers' compensation networks.

An example of a policy-making decision involves TDI staff's determination that all networks must contract with a hospital in every non-rural county that provides inpatient services. This policy decision was made and implemented outside of the required rulemaking process and is contrary to clear statutory language that provide that an injured employee may not be required to travel beyond the specified distances in non-rural and rural counties. The TDI policy determination ignored the statutory standard and adopted network rules. Additionally, system stakeholders were not provided with an opportunity to comment on the policy as provided for by the rulemaking provisions of the Texas Administrative Procedures Act.

While the insurance industry recognizes the fact that the delays and questionable policy-making practices have been the result of good intentions on the part of TDI staff that want to certify only those networks that provide adequate access to health care for injured employees, insurers are concerned about the pace of the certification of networks and public policy-making efforts that exceed TDI's statutory authority.

The insurance industry is not alone in having concerns about how the HB 7 reforms are being implemented.

Labor and health care providers also have concerns. The concern most often voiced by labor and health care providers deals with the access to health care within the network setting.

The Texas AFL-CIO repeatedly asked for the TDI to set adequacy standards for networks, e.g. the number of specific types of specialists, doctors, hospitals, and so forth. TDI has been wrestling with this issue since the network certification process was initiated. This issue is not expected to "go away" anytime soon.

During the course of the July 12 meeting of TDI's Workers' Compensation Working Group, Texas AFL-CIO's Rick Levy expressed concerns about there being no real choice of doctors for injured employees within the networks. He said the workers' compensation networks do not look like group health networks and that access to care is the primary issue of concern for Texas employees.

The business community is also keeping a watchful eye on TDI and the DWC as these two regulatory agencies implement the HB 7 reforms.

One of the main concerns that the business community has is the adoption of rules that unnecessarily add costs to the Texas workers' compensation system. Employers are counting on TDI and the DWC to implement HB 7 in a manner that reduces system costs, improves the quality of health care provided to injured employees, and improves return-to-work outcomes in Texas.

How do system stakeholders view the current state of the Texas workers' compensation system?

The Texas business community views the current state of the Texas workers' compensation as "on the way" to being fixed.

"Texas employers worked hard for the passage of House Bill 7 and reforms that included health care networks," said Bill Hammond, president and chief executive officer of the Texas Association of Business. "The future growth of the Texas economy depends on a workers' compensation system that works well and is not as costly as it was during the past several years."

Hammond said the success or failure of the HB 7 reforms is dependent on how well the Texas Department of Insurance and Division of Workers' Compensation implement the new law.

"Employers who left the Texas workers' compensation system over the past years due to high system costs will go back into the system if the reforms passed by HB 7 are properly implemented and result in system cost savings," Hammond said. "The reforms will fail if the implementation of the new law is mishandled and does not track with the clear language of the statute."

Hammond said Texas employers would be keeping a watchful eye on the implementation of the HB 7 reforms.

Labor views the current state of the Texas workers' compensation with guarded optimism.

"Texas employees want access to good doctors and specialists who will provide them with quality health care and assist them with returning to work," said Levy, legal director for the Texas AFL-CIO. "We do have some concerns about access to a significant number of high quality doctors in the workers' compensation networks that have been approved."

Levy said the Texas AFL-CIO would be closely monitoring the approved networks and access to health care issue as TDI moves ahead with the certification of more workers' compensation networks.

The insurance industry views the state of the Texas workers' compensation system as improving.

"We are hopeful that once all of the network applications are approved, the networks will reduce system medical costs that were out of control during the past few years and improve Texas' return-to-work outcomes dramatically," said Steve Nichols, manager of Workers' Compensation Services at the Insurance Council of Texas. "The Texas Department of Insurance and Division of Workers' Compensation need to implement the HB 7 system reforms in a manner that does not impose unnecessary costs and duties on system stakeholders."

Nichols said that the insurance industry is keeping a watchful eye on TDI's and the DWC's rulemaking efforts and on the development of the performance-based oversight process.

In general, health care providers are taking a "wait and see" approach on how they view the current state of the Texas workers' compensation system. Many doctors and specialists are still concerned about the amount the current Medical Fee Guideline provides as payment for medical services provided to injured employees.

"The 125% reimbursement rate of the Medical Fee Guideline is keeping a lot of good doctors and specialists from participating in the Texas workers' compensation system," said Michael Reed, director of managed care delivery systems at the Texas Medical Association. Reed said Texas doctors would be keeping a close eye on the upcoming review and re-adoption of the medical fee guidelines.

Legislators speak out about the ongoing implementation of House Bill 7

In February of this year, Sen. Todd Staples, R-Palestine, the author of a similar Senate bill, Senate Bill 5, that was folded into House Bill 7, said House Bill 7 had been crafted to accommodate interests of all stakeholders in the system, including employers, injured workers, providers and insurers. Staples said Betts appear to be following the intent of lawmakers in implementing the reforms, but encouraged business leaders to "watch the rulemaking process closely."

"Good legislation can turn into bad legislation if it's not rolled out right," Staples said. "Stakeholders should pay close attention to the development of medical provider networks and return-to-work programs as those are key elements of the reform legislation."

The author of HB 7, Rep. Burt Solomons (R-Carrollton) said he believed that the implementation of House Bill 7 is on track.

"In general I am very pleased with the implementation of HB 7," Solomons said. "I think that the governor gave us some great appointments in Commissioners Geeslin and Betts, as well as Public Counsel Darwin at the Office of Injured Employee Counsel. Rules on networks, e-billing, prompt pay, and exams to determine compensability have all been adopted."

He noted that fee guidelines on hospitals, outpatient facilities, performance-based oversight and treatment guidelines are currently being discussed and this demonstrates progress is being made.

Solomons said, "Some people think that it has taken too long already, but a reform the size of HB 7 is going to take some time and I am pleased with the speed that the agencies are tackling the issues. Each new reform is getting due diligence and true stakeholder input, without delaying the implementation."

On Aug. 24, 2006, Sen. Robert Duncan, R-Lubbock, participated in a lunchtime panel discussion that was part of the Texas State Bar's annual workers' compensation course. Duncan, who is the chairman of the Texas Senate's State Affairs Committee, expressed concern about the small number of workers' compensation networks that have been certified by TDI. He said the Texas Legislature expected that there would be more networks approved at this point in time. The senator said that while he understood the desire to give careful thought to review of applications and certification of networks, his approach would be to let as many networks in at the outset, and then if problems arose, work with those networks on an as needed basis. Duncan noted that the next session of the Texas Legislature is only a few months away, and that the Texas Legislature and workers' compensation system will not have the benefit of showing much in the way of the expected network cost savings or data to assess the effectiveness of the networks. He encouraged TDI to speed up the network certification process.

A new dawn for the Texas workers' compensation system

It is a new dawn for the Texas workers' compensation system. A lot of change has occurred since the effective date of House Bill 7. Yet, much remains to be done to effectively reform the Texas system. The success or failure of the HB 7 reforms rest with the Texas Department of Insurance and Division of Workers' Compensation as those agencies adopt rules to implement system reforms. System stakeholders will have a better idea about the state of the Texas workers' compensation system when the reform effort reaches "high noon." Until then, system stakeholders continue to hope for the best as they carefully watch every action taken to implement HB 7.

Steve Nichols is manager of Workers' Compensation Services at the Insurance Council of Texas. -------------------

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