Tuesday, November 20, 2012

Marketing TX Comp by Setting the Standard

One could argue the Texas mandate that the workers' compensation system be reviewed every two years by the Insurance Department to assess the affordability and availability of workers’ compensation insurance for Texas employers and the effects of department-certified workers’ compensation health care networks on return-to-work outcomes, medical costs, quality-of-care issues and medical dispute resolution is just a smart marketing ploy to keep business in the state and attract more businesses.

After all, what business wouldn't like the fact that, according to the latest report, “Setting the Standard,” the average workers’ compensation premium has fallen more than 50%, from a high of $2.85 per $100 of payroll in 2003 to $1.38 per $100 of payroll in 2010?

Or that the number of disputes and the duration to resolve disputes have also decreased significantly since the 2005 reforms, dropping from more than 13,000 in 2005 to less than 8,000 in 2010?

Certainly a business considering Texas would be impressed by the report's conclusion that despite “modest increases” in average costs, when adjusted for inflation, total professional and hospital costs in the Texas workers’ compensation system decreased 30% from 1998 to 2011.

In addition while Texas medical networks overall tend to be more expensive in providing care to injured workers, injured workers in networks reported higher physical functioning scores and access-to-care measures than non-network injured employees.

According to the Insurance Department, an estimated 67% of Texas employers continue to participate in the workers' compensation system in 2012 – down 1% from 68%, but the second-highest participation rate since 1993.

In the only state where employers are not mandated to participate in the workers' compensation system, I'd say that this is probably the most telling statistic in the report, assuming its accuracy.

While the report shows there was a slight decline in the return-to-work rate in 2010 for injured employees with more than seven days of lost time, that could be more related to economic conditions and the availability of work. In February of 2010 the US Bureau of Labor Statistics reported that unemployment in Texas was 8.2%. It is now reporting the rate at 6.8% as of September, 2012.

Those who returned to work also had fewer days lost from work due to their work-related injuries, from an average of 97 days for employees injured in 2004 to 62 days for employees injured in 2010.

Attorneys aren't finding much work in the Texas system. The number of disputes and the duration to resolve disputes have also decreased significantly since the 2005 reforms, dropping from more than 13,000 in 2005 to less than 8,000 in 2010.

That probably makes many people happy.

What about claimants? The report says results of surveys of injured employees in 2012 found 55% said they had “no problem” in getting the medical care they felt they needed, compared to 52% in 2005. In 2008, the rate was 60%.

And for accident year 2010 return-to-work rates at the one year, and one and one-half year milestones were essentially unchanged.

The biggest competition in the Texas market place comes from the state's carrier of last resort, Texas Mutual, which gobbled up 33.8% of the voluntary market in 2011, up from 27.5% in 2007. The next biggest carrier is Liberty Mutual with 9.2%.

The report says that while Texas Mutual is the insurer of last resort, “it predominantly writes voluntary business, competing with the rest of the workers’ compensation market.”

I'm not sure that this description is accurate. Are carriers incentivized to write smaller employers, which likely won't buy ancillary products such as errors and omissions or employee liability policies? Are the other carriers ceding business to Texas Mutual for lack of interest? Or is Texas Mutual that aggressive to price competition out of the market?

Whatever is going on in Texas, however, is what most states would like to claim about their workers' compensation systems. I find the measures concerning injured workers a little lacking in terms of comparative analysis in wage replacement, disability, or other indemnity values and that may be an area of study for the future.

I would like to know, for instance, how Texas workers feel about the adequacy of benefits, whether they seek alternatives to workers' compensation (thus the great decline in disputes and costs), whether access to representation when there is a dispute has been muted, etc.

There are two sides to every story. Focusing on how well the costs are controlled does not reflect the true efficiency or adequacy of a system.

Certainly Texas chambers of commerce are going to tout the state's competitive workers' compensation system as a net benefit for any business looking to relocate or expand. Would the same system also be attractive to workers looking to relocate to a state with comparatively low unemployment statistics?

Does it even matter?

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