Texas is Doing Something Right - But What?

The Texas work comp system is subject to a unique "report card" process where the Department of Insurance (DOI) uses data supplied by carriers and the Division of Workers' Compensation (DWC) to evaluate the performance of the state's system.

One of the goals of the report card process is to measure the effectiveness of medical care provided injured workers, and the value returned to the system.

Texas measures not only the cost of treatment but also compares that to return to work rates and trends costs over time.

According to the report by the state Department of Insurance's Workers’ Compensation Research and Evaluation Group the average cost of medical care in Texas' workers' compensation system was higher for health care networks than for  non-network care in 2010, but  average medical costs in networks increased less after six months of services compared to non-network care, and networks had higher return-to-work rates for injured employees than did non-network employees.


This was a surprising conclusion to me. But assuming the accuracy of the report's conclusion, there is clearly something Texas is doing that other states should emulate.


There are 34 networks certified by the DOI, with coverage in 250 of Texas’ 254 counties. And there are two types of networks: networks operated by public entities under Chapter 504 of the Labor Code, which are not subject to many of the requirements for private employer networks operated under Chapter 1305 of the Insurance Code.


Networks were introduced into the Texas system with HB 7 in 2005. As with any new feature, there was quite a bit of consternation at the outset of the networks, with confusion about building them, operating them, etc. Now networks are more mainstream so the data measuring their effectiveness is more reliable and consistent.


Other findings in the report include:

• All networks showed claims had shorter times for first non-emergency care than non-network claims.
• Network claims overall tended to show lower use of hospital services, but higher use of professional and pharmacy services, than non-network claims.
• All networks had lower use of physical medicine services.
• Interestingly, network employees overall reported lower levels of access to, and satisfaction with, medical care, but networks provided faster non-emergency care to their injured workers.

A key finding in the report was that when 12 months of additional data were added to the study, average claims costs for non-network injured employees increased by 41%, compared to 27% for network injured employees. This is critical because it is the long tail nature of workers' compensation claims that have the most dramatic impact on rates and premiums employers pay.


The study is incomplete but provides direction for future studies. For instance, what is going on with Texas networks that provide better return to work results and better control over long term medical costs?


Regardless, the rest of the workers' compensation community needs to see what Texas is doing right, because its system costs on a relative scale (i.e. based on percentage of payroll, and other relative scales) are significantly less that its neighboring states, and other big states such as California, Florida and New York aren't even close.


For instance the average Texas loss cost proposed in the last NCCI loss cost filing is $0.66 per $100 of payroll, compared to $1.03 in the region (Arkansas, Louisiana, New Mexico and Oklahoma) and $0.93 countrywide.

What is also interesting is that Texas spends more on medical cost containment services than most states according to the Workers' Compensation Research Institute - I find this surprising because the traditional thought is that cost containment interferes with the delivery of medical care.

So the Texas study produced some surprising results, but really opens the door to more questions that need study - not only by Texans but other states as well.
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