Southern Association of Workers’ Compensation Administrators

Convention 2007

A Texas Perspective Lisa Corless

Texas Mutual Insurance Company

Agenda Introduction Texas Workers’ Comp System The Case for Change House Bill 7: Changes the System Health Care Networks Other Texas initiative; eBilling What Does the Future Hold? Questions

About Texas Mutual

• Texas Mutual has been serving the state of Texas since 1991 after the Texas Legislature first chartered the Texas Workers’ Compensation Fund.

• In 2001, the Legislature redesigned the company’s charter and the company was renamed Texas Mutual Insurance Company.

• Texas Mutual is the largest workers’ compensation underwriter in Texas; underwrites approximately 28% of the Texas market.

Top 10 Workers’ Compensation Carriers in 2006

Rank Company 2005 ($000) 2006 ($000) % +/-

1 State Comp Ins Fund of CA

$5,949,840 $3,453,213 -42.0

2 Liberty Mutual Ins Co $2,343,138 $2,604,982 11.2

3 National Union Fire Ins. $2,365,243 $2,465,478 4.2

4 American Home Assurance

$2,240,755 $2,335,716 4.2

5 Hartford Fire Ins $1,130,890 $1,009,556 -10.7

6 Continental Casualty Co $963,753 $989,331 2.7

7 Zenith Ins $1,074,193 $869,345 -19.1

8 Zurich American Ins $875,329 $854,239 -2.4

9 Hartford Accident $890,815 $795,238 -10.7

10 Texas Mutual Ins Co $696,850 $740,023 6.2Source: Best’s Statement File Supplement – Insurance Expense Exhibit (IEE) – P/C 2006

Texas Employment Factoids

• Texas population: 23,507,7831

• # of Texas employers: 426,8462

• # of Texas employees: 9,932,4842

• Total TexasWC premium: $2,726,560,3623

• Texas injury rateper 100 employees: 3.64

1 – Source: United States Census Bureau (July 2006 estimate).2 – Source: Texas Workforce Commission Quarterly Census of Employment and Wages, 4th quarter 2006. Non-

government employers with Texas UI Coverage.3 – Source: Texas Department of Insurance Quarterly Legislative Report on Market Conditions, 4 th Quarter 2006.4 – Source: Texas Department of Insurance, Division of Workers’ Compensation (2005 Nonfatal Injury Rate Data).

Texas Workers’ Comp System Only state in nation without mandatory

comp Employers have the choice; Insured or

“Non-subscriber” Who cannot non-subscribe?

Public employers Certain entities licensed or regulated by TxDOT Construction companies – public project

Approximately 107,000 Texas businesses are non-subscribers1

1 – Source: TXANs website

Percentage of Texas Employers that are Non-subscribers, 1993-2006

Source: Survey of Employer Participation in the Texas Workers’ Compensation System, 1993 and 1995 estimates from the Texas Workers’ Compensation Research Center and the Public Policy Research Institute (PPRI) at Texas A&M University; 1996 and 2001 estimates from the Research and Oversight Council on Workers’ Compensation and PPRI; and 2004 and 2006 estimates from the Texas Department of Insurance Workers’ Compensation Research and Evaluation Group and PPRI.

44% 44%

39%

35%38% 37%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1993 1995 1996 2001 2004 2006

The Insured Market

WCRIThe realization of the need for Texas

Workers’ Compensation reform

WCRI1 Pre-Reform Performance Baselines for Texas

Benefit Payments and Costs per Claim(Claims with more than 7 days of lost time)

$30,205

$26,999

$15,130

$26,390

$10,554

$23,304

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

Average total cost per claim Average benefit payment perclaim

Average medical payment perclaim

TX

13-State Median

321 Workers’ Compensation Research Institute, Cambridge, Massachusetts2 Average total cost less average benefit delivery expense3 Average benefit payment less average indemnity benefit

WCRI1 Pre-Reform Performance Baselines for Texas

1 Workers’ Compensation Research Institute, Cambridge, Massachusetts2 Average total cost less average benefit delivery expense3 Average benefit payment less average indemnity benefit

Benefit Payments and Costs per Claim(All paid claims)

$8,985

$8,033

$4,739

$5,965

$2,335

$5,433

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

Average total cost perclaim

Average benefitpayment per claim

Average medicalpayment per claim

TX

13-State Median

2 3

WCRI1 research Texas Highest in Payments per Claim

1 Workers’ Compensation Research Institute, Cambridge, Massachusetts

WCRI Research (con’t.)

Texas and California versus Massachusetts and Pennsylvania

Texas and California results Recovery rates – Poorer Return to work – Poorer Access – Similar or less Satisfaction – Similar or less

Texas Comp Reform Necessary

Anecdotal information from– Injured workers– Physicians– Carriers

WCRI data – Statistical information

• Costs

• Injured worker satisfaction

“Broken” Workers’ Compensation system

Legislative Session2005

Enacted House Bill 7 Into Law

House Bill 7 System Goals

Improve return to work outcomes for injured workers

• Enhance access and quality of medical care

• Control workers’ compensation costs

• Create a more efficient system

House Bill 7 Overview Introduced Health Care Networks Treating doctors to use treatment and

disability guidelines Emphasis on return to work

Appropriate Stay at work

House Bill 7 Overview (con’t) Performance Based

Oversight Insurance Carrier

Report cards Carriers earn

designations High / Average / Low

Performer

First Report card due August/September 2007

Published on regulator website

Health Care Networks Carriers may establish or contract with

health care networks Employer may elect network Network selects who can serve as

treating doctors Injured worker selects treating doctor from

network

TDI must certify Responsibilities

Certified Networks

27 Networks

Certified

Smallest: 1 county Largest: 208 counties

Health Care Networks

First Network Certified late March 2006 Texas Mutual philosophy Most Carriers Adopting “Wait and See

Attitude”

Learning Curve for System Network Report Cards

August/September 2007

Preliminary thoughts on Network efficacy

Other Texas InitiativeseBilling

Texas will become the first state to mandate carrier requirement to accept eBilling from medical providers

Universal format 837 Effective January 1, 2008 eBilling Challenges

– Workers’ Comp is different from Health Care

EFT next!

What does the future hold?

Impact of Networks– Return-to-Work Outcomes

– Total Claim Costs and System Satisfaction

Performance Based Oversight Increased competition for business