According to the latest study by the Texas Department of Insurance (TDI) Workers' Compensation Research and Evaluation Group the cost "gap" between network and non-network medical costs has been reduced to an average of 7% - with network costs still more expensive than non-network costs.
The first question, to most outside observers, is why are networks MORE expensive than non-networks? It should be the other way around according to traditional thinking.
Second, the cost of networks relative to non-networks seems more a product of the fact that non-network costs inflated 12% over the prior cost study. It's not really a matter of network care decreasing in cost - it's more that non-networks increased dramatically in costs - that result in the lower cost gap.
D.C. Campbell, director of the Insurance Department's Research and Evaluation Group, told WorkCompCentral, "I think that this year, better than any other, shows that networks are approaching the goals the Legislature wanted in House Bill 7." I'm not sure that's an accurate statement.
HB 7 was the dramatic Texas reform bill passed and signed into law in 2005. The bill made sweeping changes to the Texas system, one of which was the introduction of network medical care. Other changes included a complete reorganization of the administrative system, restructuring of benefits, and other claims management laws. The goal of HB 7 was to get the state's overall workers' compensation costs under control and to return carriers in the state to profitable operating margins.
The various aspects of HB 7 did do that and Texas is one of the very few states where carriers now have a sub 100 combined ratio (meaning that less dollars go out the door for claims than dollars coming in from premiums).
I'd say that the overall goal of HB 7 was accomplished in terms of making the state's workers' compensation system more palatable to insurance carriers that choose to do business in Texas.
But I can't say that the medical network program under HB 7 was responsible for this result, in particular based on the results of this latest study.
TDI reviewed 11 larger networks individually and combined the smaller remaining networks into an “others” category for review.
Networks studied had a total of 78,408 injured employees: Texas Star (26,017), 504-Alliance (19,259), Travelers (6,112), Liberty (6,782), Coventry (5,888), Corvel (2,420), Zurich (1,962), Chartis (1,301), 504-Others (1,117), IMO (945), First Health (1,229), and all other networks (5,376). Non-network injured employees totaled 147,995.
The total gross population represented is thus 226,403. The study is based on a survey of 3,276 (page 4) injured workers representing new lost-time claims. The study thus was comprised of a survey of about 1.4% of the total identified injured worker population.
The report, in the explanation of the survey process, states that since network claims only represented approximately 26 percent of the total lost-time claim population for the analysis period, the Research and Evaluation Group utilized a disproportionate random sample and over-sampled network claims. It does not state how this was determined, measured or otherwise implemented in the overall study.
The report states:
- All networks had higher physical functioning outcome scores among their injured employees than non-network injured employees, albeit not by any wide margin in my opinion - and all of them were many percentage points worse than the overall U.S. population according to the report.
- All 12 network entities reported higher return-to-work rates than for non-network and had lower average numbers of weeks off from work - this is a significant finding in that some of these results are dramatic but I have to wonder how much of this is due to outliers. For instance in the measure concerning workers who had not returned to work or had been released with a restriction, the "Others" category scored zero percent - meaning that all of the claimants who went to the "Other" network either returned to work or were released with no restriction. I don't find that credible.
- Injured employees from seven network entities reported higher levels of agreement with their treating doctors than non-network injured employees – up from zero networks in 2011 - this may be a good thing, or it may be irrelevant; the margin between high and low scores is not a big spread other than a single outlier which scored embarrassingly low in this measure.
- Networks tended to have higher overall health care utilization rates for professional and pharmacy services, but lower utilization rates for hospital services, than non-networks.
When I look at the report and the graphs depicting the results of the survey I am not particularly impressed that there is any great benefit to the Texas network model - there is no clear indication that networks AS A WHOLE outperform non-networks in any single measurement. There are outliers in each category reflecting either better or worse performance, but overall non-network care in most of the indices are within a few percentage points of network measures.
The one measure where there was a clear advantage to network care in the study is average number of weeks reported off work due to the industrial injury. Non-network care failed to out-perform any of the studied networks - some by significant margins.
But curiously, non-network medical care outperformed nearly every single network in the measure of claimants who had not returned to work or where the claimant was released with restrictions.
In other words, the study did not, in my opinion, demonstrate any clear advantage of a medical network over a non-network in any measure other than shorter durations of time off work due to an industrial injury. Otherwise the results of the various networks are all over the board with some networks indicating better results in some indices over others, but none of them standing out as a single overall better performer versus other networks, or over non-network care.
To me, the Texas network model is not demonstrating the clear advantage that had been hoped for when the plan was devised.
The report can be reached here.
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