ROC Study: Texas Workers’ Comp Claim Costs Topping the Charts

Texas has the highest average medical costs per workers’ compensation claim of nine states according to a survey recently released by the Texas Research and Oversight Council on Workers’ Compensation.

The report, Striking the Balance: An Analysis of the Cost and Quality of Medical Care in the Texas Workers’ Compensation System, found that Texas spends significantly more on its workers’ compensation injuries than similar states but gets the same or lower quality of care. The other states researched in the study include California, Florida, New Jersey, Oregon, Minnesota, Kentucky, Georgia and Colorado.

It’s a problem that could result in legislative action as early as this year. Already, the ROC has made recommendations on how to address the issue.

The study is one of three major reports developed over a two-year period at the direction of the 76th Texas Legislature through HB 3697. The bill, a response to rising workers’ comp rates and perceived inadequacies and inequities in benefits, directed the Research and Oversight Council, or ROC, in conjunction with the Texas Workers’ Compensation Insurance Fund, or The Fund, to conduct a series of studies examining the cost and quality of medical care in the Texas workers’ comp system.

Of the nine states examined, Texas had the highest average medical costs per workers’ compensation claim, 20 percent higher than the next-highest state, New Jersey, and more than 250 percent higher than the lowest state, Kentucky. In addition to the high costs associated with medical services, the study also identifies Texas as having the second-highest pharmaceutical cost per claim, more than 23 percent higher than the third-highest state, Florida, and more than 220 percent higher than the lowest cost state, Minnesota.

“The exorbitant costs documented in the ROC studies are already being felt by businesses as higher premiums,” said Rep. Kim Brimer, R-Arlington and ROC Board vice chair, in a prepared statement. “The system cannot continue to accept overpriced care that does not improve the health of our workers without risking more and more employers dropping out of the system.”

Neither Rep. Brimer nor Sen. Troy Fraser, ROC chairman, returned calls on how or if the 77th Legislature might address these issues.

A number of factors identified in the summary report contributed to the high costs for Texas workers’ compensation cases. Of the nine states compared, Texas had either the highest or second-highest utilization rates for surgery, injections, physical medicine (including manipulations and therapeutic exercises), office visits, and diagnostic testing.

Compared with these same state systems, Texas also had the second-highest average pharmaceutical cost per claim—more than 23 percent higher than the third-highest state, Florida, and more than 2.2 times higher than the lowest-cost state, Minnesota.

When similar types of injuries and illnesses were compared in Texas and other states, Texas had the highest average medical costs for eight of the top ten types of injuries. When compared with group health, average workers’ compensation medical costs for injured state of Texas employees were approximately six times higher per worker ($578 per worker in this group health system compared to $3,463 per worker in the Texas workers’ compensation system, 18 months post-injury).

In addition to overall cost differences, the cost of individual medical treatments is lower under the group health system due to the impact of PPO discounts as well as the impact of co-payments and deductibles.

The study also found that Texas’ higher utilization rates result in significantly longer duration of treatment, with Texas injured workers having the longest treatment pattern and most lost time from work among the states examined. And while Texas’ injured workers received higher levels of treatment, there was no increase in satisfaction associated with care, and Texas workers had lower levels of physical and mental functioning after their injury.

The survey found that a small number of providers (7 percent or 4,000 doctors, chiropractors, osteopaths and physical therapists) accounted for 80 percent of the professional medical costs in Texas. While these few providers accounted for the largest cost, they do not explain the total medical care cost-gap that Texas experiences.

This study, along with others, have indicated that a return to safe and productive work is a major benefit to both employers and employees, and that the longer workers remain off the job, the lower their chances of returning to gainful employment. The study identifies several possibilities to better meet the state’s return-to-work goals.

Those recommendations were made by system participants, with additional ROC staff recommendations for each. Some of those are:

• Expanding the temporary income benefits compensation rate for injured workers’ with multiple employment. Currently, an injured workers’ compensation rate is based upon actual wages earned from the job where the injury occurred, and income from a second or third job isn’t considered in establishing the average weekly wages to calculate income benefits. Rep. Scott Hochberg, D-Houston, has recommended that the labor code be amended to include weekly earnings from multiple jobs in the calculation of benefits. ROC staff agreed in part with Rep. Hochberg, saying some equity exists when employees who rely on wages from multiple employment are injured and their benefits are calculated based only on wages earned from the job where the injury occurred
• Regarding access to representation, ROC staff said more research is needed in order to identify those workers whose medical condition substantially changes after maximum medical improvement impairment ratings become final. Currently, an injured worker has 90 days to file a dispute of an IR, and if no dispute is filed, the insurance carrier pays the required income benefits. The staff recommended that the ROC and Texas Workers’ Compensation Commission work together to identify those workers who may have experienced a substantial change in condition.
• Currently, TWCC does not issue medical interlocutory orders, but instead informs the health care provider they were underpaid, encourages the health care provider to resubmit the medical bill and informs the provider of the medical dispute resolution process.

The ROC staff recommends TWCC restructure the practice to bring it into compliance through fraud monitoring, enforcement and reporting; a two-track dispute resolution process; interlocutory medical orders; and election of workers’ comp coverage injury notices to guardians of legally incompetent employees.

ROC representatives are unsure how or when the legislature will address these issues, but Terry Frakes with the Texas Workers’ Compensation Insurance Fund, which worked on the study in conjunction with the ROC, said the issue certainly has the ear of Rep. Kim Brimer, chair of the House Business and Industry Committee.

“If he is concerned, I think he can get it done [this session],” Frakes said.

Topics Florida Texas Workers' Compensation Minnesota