Wokers Comp Claim Costs Higher in Texas

Workers’ compensation payments for medical care and indemnity (wage-replacement) benefits in Texas are higher than most states analyzed in a new study by the Workers’ Compensation Research Institute.

The study of eight states, representing 40 percent of the nation’s workers’ comp benefits, also found that in Texas injured workers receive benefit payments faster; medical-legal exams to determine benefit eligibility are used less frequently and cost less than in other states; workers with lost-time injuries are out of work longer; and there is less litigation.

In addition to Texas, the states included in the WCRI study were California, Connecticut, Florida, Georgia, Massachusetts, Minnesota and Pennsylvania.

“Policymakers in Texas should take a hard look at what’s driving the costs of medical and wage-replacement benefits in its workers’ compensation system,” said Dr. Richard Victor, executive director of the Cambridge, Mass.-based WCRI, an independent not-for-profit research organization. “But while addressing these areas, Texas should maintain its low rate of litigiousness and use of medical-legal exams for determining benefits.”

The study found wide variations in system costs and delivery of benefits among the eight states surveyed, according to Victor. For example, overall costs in Texas for claims with more than seven days of lost time were higher than the other states studied, with an average benefit per paid claim of $11,406—29 percent higher than the average of $8,843 across all states.

A closer inspection

Looking more closely at these costs, the study reported that the average medical benefit in Texas of $6,495 was the highest of all eight states and 35 percent higher than the average state.

At the same time, the average indemnity payment—wage replacement benefits of lost-time injuries—was $4,912 in Texas, 21 percent higher than the average state.

The duration of these lost-time payments also was higher in Texas, raising costs to employers and the burden on workers. In Texas, workers with lost-time injuries were off the job an average of 17 weeks, versus 14 weeks in the average state.

“It’s not altogether clear what factors are driving the longer duration of time,” said Scott McAnally, director of the Workers’ Compensation Research and Oversight Council. He added that it could be related to less coordination between employers and care givers in Texas. But an upcoming ROC study relative to Texas House Bill 3697, which relates to the operation of the Texas Workers’ Compensation Insurance Fund and the disposition of certain surpluses of that fund, may shed some light on the issue.

Injured workers in Texas received their initial benefit payments more quickly than most states studied. The study reported that 62 percent of workers in Texas received their initial benefit payment within 14 days of payor notice, compared with 58 percent in the average state. Massachusetts showed the highest percentage of workers (72 percent) who received payment within 14 days of notice.

“While Texas does better than most states in delivering benefits to workers promptly, it should continue looking at ways to speed the process further,” Victor said.

Texas steers clear of courts

The study also reported that Texas is far less litigious than other states. Defense attorneys in Texas were involved in only 6 percent of claims with more than seven days of lost time, the lowest percentage of the eight states. By contrast, the average for the eight states was 17 percent. Georgia had the highest involvement of defense attorneys at 28 percent.

Also, the average defense attorney fee in Texas ($1,388) was 26 percent lower than the average state.

The study did not set out to answer exactly why litigation in Texas is lower, but Ann Clayton, deputy director of Comp-scope, which conducted the study, said it could have to do with recent tort reforms.

“It does look like they’ve accomplished what they set out to accomplish,” she said.

McAnally added to Clayton’s observation, saying the system’s structure has been beneficial in the area of litigation.

“The system doesn’t make it attractive for plaintiff attorneys by virtue of the fact that it’s not lucrative for them because it limits the amount of awards,” he said.

The study also found that medical-legal exams used to determine benefit eligibility are used less frequently in Texas; only 5 percent of claims for lost-time injuries, compared with 25 percent in California. The average across all states was 11 percent.

The frequency of use of medical cost containment techniques in Texas was typical, according to the study. Some kind of medical cost containment service, such as fees for bill reviews, case management or a preferred provider network, was found in 76 percent of claims with more than seven days of lost time. The eight-state average was 78 percent.

However, medical cost containment expenses in Texas were one of the two highest of the states studied at $583 per claim versus $492, the average across all states (for claims with more than seven days of lost time at 12 months maturity).

“Given the high costs of medical cost containment efforts in Texas, it would be useful to quantify their actual financial advantages and the impact on workers,” Victor said.

Topics Texas Claims Workers' Compensation