Texas Comp System: ‘Good Ship Lollipop’ or ‘Pirates of the Caribbean”

Although Texas Workers’ Compensation Commission Executive Director Richard F. Reynolds acknowledged that statutory changes would do a world of good for the Texas workers’ compensation system, as well as for his agency, he stopped short of describing the system as being “in crisis” when he kicked off the Insurance Council of Texas’ 2004 Workers’ Compensation Symposium in Austin on May 5.

Reynolds told the more than 200 attendees that the state’s workers’ comp system was like a ship that has been taken over by “third party pirates.”

Some other speakers were more direct in their assessments of both the system and the commission, and terms such as “in crisis,” “out of control,” and “broken” cropped up a number of times throughout the day.

“For a broken system, there’s a whole lot being accomplished,” Reynolds said. “I guess if ‘broken’ means escalating medical costs and escalating workers’ comp insurance premiums, then ‘broken’ may have merit, but escalating medical costs and escalating insurance premiums have little to do with [TWCC] operations.”

Other speakers included Larry Hochstetler and Tony DiDonato of the NCCI; Dr. Ron Luke, president of Research & Planning Consultants; Dick Geiger of Thompson, Coe, Cousins and Irons LLP; and Bill Hammond, president of the Texas Association of Business (TAB).

Presenting an overview of the workers’ compensation system, NCCI’s Hochstetler and DiDonato said Texas was not alone in fighting rising costs. Echoing a report issued recently by the Workers’ Compensation Research Institute, Hochstetler and DiDonato noted that claims frequency is down, but rising medical costs are the driving force behind the increases in Texas, as well as in other states.

In a presentation entitled, “What’s Driving the Costs of the Texas Workers’ Compensation System,” Luke went for TWCC’s jugular.

“The additional factor that produced high costs in Texas is the performance of TWCC. The commission has failed for over a decade to impose any standards or limits for medical benefits, and has permitted physicians to practice a very different type of medicine on injured workers than on their group heath patients,” Luke said.

“As the state agency responsible for regulating workers’ compensation benefits,” he continued, “the TWCC staff and commissioners have consistently failed to provide good management or leadership in exercising the authority they were given by the Texas Workers’ Compensation Act.”

Reynolds, however, said “the system is functioning exactly as designed by the workers’ comp statutes currently on the books.
“It’s adversarial and by design it allows employers to abdicate their responsibility to the insurance carriers.

“It provides for doctor selection and shopping by claimants,” he said. “It allows surgeons to do self-referral for surgery. It allows chiropractors to be treating or gatekeeper doctors, to do self-referral for work hardening and conditioning.

“It provides for unreasonable delays in needed medical care,” Reynolds continued. “It provides for non-medical personnel to make medical necessity decisions. It does not promote return-to-work. It provides for excess due process while the injured employee’s medical condition worsens.”

Reynolds agreed that, “the system needs some changes” but refused to entertain the notion—which he attributed to TAB president Bill Hammond—that it is “completely out of control.”

He acknowledged, however, that the “Texas Association of Business at least offered suggestions that could lower medical costs and lower over-utilization.” He said TAB had proposed “at least two options that could contribute to lower system costs and at the same time provide quality medical care. One is: employer sponsored healthcare networks. Two, limiting the role of chiropractors.”

Reynolds added that, “over-utilization by selected medical providers is a major factor in our system,” adding, “it’s not easy to recognize over-utilization by doctors. … Our medical advisor and his panel of medical quality review doctors vigorously pursue reviews and … try to identify doctors. It is not an easy task. In fact, it is very difficult. We are dealing with providers who have the wherewithal to take us to court and they do.”

Thompson, Coe’s Geiger said the system may be in crisis but noted that it’s not nearly as bad as it was in 1989 when a three-member industrial accident board oversaw what passed for a workers’ comp system, in which there was a huge assigned risk pool and insurers were reluctant to write benefits in the state. He agreed that the TWCC is functioning as designed in the statute that resulted from the legislative reworking of the workers’ comp system in 1989.

The TWCC is up for review by the Sunset Advisory Commission in 2005 and Geiger said the legislature’s number one workers’ comp initiative in the next regular session would be to look at the Sunset Advisory Commission’s recommendations for the workers’ comp system. The Sunset Advisory Commission’s report is due to be published this fall.

One of the big issues, Geiger said, is whether medical care can be delivered more effectively through a managed care system similar to those utilized by employer sponsored healthcare plans.

Saying Texas is the only state where workers’ comp insurance is optional for an employer, Geiger advocated a mandatory workers’ comp system, asserting it would be a necessary component in the system’s repair.

Luncheon speaker Hammond disagreed, and said an optional workers’ comp system allows businesses a better opportunity to contain costs.

Editor’s note: To read the full version of this story, see the May 17, 2004 edition of Insurance Journal-Texas/South Central.