Thursday, November 7, 2013

Grading Homework in Texas

I'm in Dallas today speaking at the Texas Workers' Compensation Forum.

So it will be interesting to see how attendees view the announcement Monday that the state's Division of Workers' Compensation is going to change its report card system for scoring carrier performance.

Insurance groups in Texas had been complaining about DWC's rating system alleging that it gave too much weight to how they process requests for reconsideration of medical bills.

Texas law requires the agency to evaluate carriers' performance during even-numbered years and health care providers' performance during odd-numbered years. The program is to establish performance standards and encourage carriers and providers to communicate in a more efficient manner.

It has been a source of contention for years, and as you can imagine the more competitive carriers see the numbers the state publishes as both validation of their jobs and as important marketing information (though insurance representatives counter that insurance consumers - employers - don't care about the numbers because they are driven by price).

And of course there are issues with the quality and accuracy of the data that DWC uses. DWC has in the past accused some carriers of submitting inaccurate or false data and/or no data, and carriers have accused DWC of messing up the data acquisition process and/or the data itself.

Having worked with governmental agencies in the work comp field regarding the data acquisition, transmission and reporting area I can sympathize with both sides - likely it is a combination of all of these reasons.

DWC's response has been to fine, sometimes quite heavily, those carriers it does not believe are playing ball.

In October, Commissioner Rod Bordelon said that DWC has been more aggressive in penalizing carriers, issuing "about twice" as many penalties for inaccurate reporting than it has in the past, with repeat offenders receiving the more costly penalties.

Some of those penalized felt they were being singled out for reasons other than data quality because DWC has not issued a financial penalty for every data-reporting error in the past. There's always going to be someone who's unhappy with a process though.

DWC has taken a stick and carrot approach - penalties of course for those deemed noncompliant.

But the carrot is that those carriers scoring high in reports are less subject to audits, which are time consuming and costly.

The arguments really boil down to whether or not the Performance-Based Oversight program is worth the time and money necessary to carry out administering the program.

Carriers see no value in it. And I can understand that.

Trey Gillespie, senior workers' compensation director for the Property Casualty Insurers Association of America, told WorkCompCentral that, "we do not have any members who feel as though they receive any benefit from being labeled a high performer under PBO."

But I don't know how carriers market themselves (via brokers) other than through base line pricing.

I have long argued that claims performance does matter to employers who value long term stability in their workers' compensation programs, which means keeping the experience modification stable. And the only way to do that is to make sure that the claims department is performing at a very high level providing ultimate service to injured workers and keeping the employer active in the process.

Making claims performance a top priority in presenting a value proposition to a prospective employer/policy holder isn't an easy job. It takes marketing savvy. Selling on price is easy. Selling on quality is a more difficult proposition.

The insurance community wants to do away with the PBO program. I think that would be an error.

Texas is one of the few states now where the insurance industry makes an underwriting profit in workers' compensation. While benefits are low compared to other big states, the system in Texas does function relatively well. This may be due to "market competition" in that work comp is optional in Texas, but I don't think that's the entire answer, because prior to last decade's reform which abolished the Texas Workers' Compensation Commission and shuffled up administration of claims the Texas system was a poor performer under almost every measure.

No, part of the reason why Texas' system performs as well as it does is because of these standards and the mandatory reporting requirements.

It's sort of like grading homework in grammar school - there isn't a whole lot of emphasis towards the final grade in class based on homework performance, but grading homework keeps everyone conscientiously moving towards a good goal.

That's what the Texas legislature was really doing when it prescribed the PBO program. Yes, it needs refinement every once in a while - all systems and programs undergo phases of deployment, testing, usage, error experience and refinement. But I think that PBO is one of the elements necessary to keep workers' compensation honest, and healthy.

Here are the new 2014 performance criteria:
  • Timely payment of initial temporary income benefits will account for 40% of each carrier's score.
  • Timely processing of initial medical bills will be 30%.
  • Timely processing of requests for reconsideration of medical bills will account for 10%.
  • Timely submission of initial payment data via Electronic Data Interchange, or EDI, will be 10%.
  • Timely submission of medical bill-processing data via EDI will account for 10%.

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