Texas Workers’ Compensation System Trends Presentation for the Workers’ Compensation 2012 Biennial Rate Hearing Texas Department of Insurance Workers’

Texas Workers’ Compensation System Trends

Presentation for the Workers’ Compensation 2012 Biennial Rate Hearing

Texas Department of InsuranceWorkers’ Compensation Research and Evaluation Group

December, 2012

2

Key Legislative and Regulatory Implementation Dates 2001-2011

June 17, 2001 – HB 2600 (Rep. Brimer, Sen. Duncan)

August 1, 2003 – effective date of new Medicare-based professional service fee guideline

September 1, 2005 - HB 7 (Rep. Solomons, Sen. Staples)

April 2006 – first workers’ compensation network certified

May 1, 2007 – effective date of adoption of treatment and return-to-work guidelines

March 1, 2008 – effective date of new professional service, inpatient and outpatient hospital fee guidelines

September 1, 2011 – effective date of pharmacy closed formulary

3

Occupational Injury Trends

4

Rates of Injuries and Illnesses per 100 FTEs in Private Industry: 1996-2011

Source: Texas Department of Insurance, Division of Workers’ Compensation, and the U.S. Department of Labor, Bureau of Labor Statistics, 2012.

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

1

2

3

4

5

6

7

87.4

7.16.7

6.36.1

5.75.3

54.8

4.64.4

4.23.9

3.6 3.5 3.5

6.3

5.65.2

54.7

4.9

4.34

3.7 3.6 3.73.4

3.12.9 2.7 2.7

U.S.

Texas

5

Number of Workers’ Compensation Claims Reported to the Division of Workers’ Compensation,

Injury Years 1999-2011

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

157,162

165,700156,427

146,518

132,068

120,524116,831 116,738112,106

107,727

97,038

98,797

96,587

Injury Year

# o

f Cla

ims

Rep

ort

ed

passage of HB 2600

passage of HB 7

Note: These numbers include the claims that are required to be reported to DWC, including fatalities, occupational diseases, and injuries with at least one day of lost time. Medical-only claims are not required to be reported to DWC.Source: Texas Department of Insurance, Division of Workers’ Compensation, 2012.

6

Number of Fatal Occupational Injuries in TexasInjury Years 2000-2011

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

100

200

300

400

500

600

700

572536

417

491440

495 489 528463 480

461

433

Injury Years

Nu

mb

er

of

Inju

rie

s

Source: Texas Department of Insurance, Division of Workers’ Compensation, and the U.S. Department of Labor, Bureau of Labor Statistics, 2012.

7

Return-to-Work Outcomesfor Texas Injured Workers

Percentage of Injured Workers Back At Work for the First Time, 6 Months to 3 Years Post-Injury: Injury Years 2004-2010

8

Source: Survey of Employer Participation in the Texas Workers’ Compensation System, Texas Department of Insurance Workers’ Compensation Research and Evaluation Group , 2012.

Injury YearWithin 6

Months Post Injury

Within 1 Year Post Injury

Within 1.5 Years Post

Injury

Within 2 Years Post Injury

Within 3 years Post Injury

2004 74% 83% 86% 88% 93%

2005 75% 84% 87% 88% 93%

2006 75% 86% 90% 92% 94%

2007 76% 87% 91% 93% 96%

2008 78% 88% 93% 94% 94%

2009 81% 89% 90% 91%

2010 78% 88% 90%

Initial Return-to-Work Rate

9

Mean and Median Days Off Work for Injured Workers Who Returned to Work At Some Point Post Injury,

Injury Years: 2004-2010

Note 1: “Days Off Work” was defined as days from the injury date to the initial RTW date. Please note that these numbers do not take into account any additional time off work that may have occurred after the initial RTW date. Note 2: The analysis was based on the claimants who returned to work, and did not include those who did not return by the end of 2009. Injury year 2011 was excluded because of insufficient data.

Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2012.

InjuryYear

Mean days off work

Median days off work

2004 97 26

2005 90 24

2006 86 22

2007 75 22

2008 57 21

2009 85 21

2010 62 21

10

Median Temporary Income Benefits (TIBs) Payment and Duration, Injury Years 2000-2010

Injury Year

Median TIBs Payment per

Claim

Mean TIBs Payment per

Claim

Median Number of

Weeks of TIBs Paid

Mean Number of Weeks of TIBs Paid

2000 $2,030 $7,320 7.0 25

2001 $2,488 $7,311 8.0 39

2002 $2,564 $6,884 8.6 58

2003 $2,478 $6,528 8.0 32

2004 $2,156 $6,739 7.3 18

2005 $1,995 $6,341 7.0 16

2006 $1,924 $5,954 6.0 17

2007 $2,128 $6,517 8.4 17

2008 $2,268 $6,708 6.0 16

2009 $2,455 $8,314 7.0 16

2010 $2,319 $7,512 6.0 14


11

MedicalCosts and Utilization

12

Total Medical Payments (Professional and Hospital), One-Year Post Injury, Injury Years 1998-2010

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010$0

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

$700,000,000

$800,000,000

$900,000,000

$754,275,230 $826,222,231

$598,540,743

$684,752,955

Injury Year

To

tal

Pay

men

ts

Passage of HB 2600

New fee guideline adopted

HB 7

ODG treatment guideline adopted

First WC network certified

New fee guidelines adopted


13

Professional and Hospital Costs Current and Inflation-Adjusted Prices


1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000

$1,400,000,000

$1,600,000,000

Current Prices (Not Adjusted) 1998 Constant Prices (Adjusted for Inflation)

14

Average Medical Cost (Professional and Hospital Costs)Per Claim, One-Year Post Injury, Injury Years 1998-2010

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$2,256 $2,389

$2,493

$2,884 $3,062

$2,980

$2,604 $2,582 $2,490 $2,557

$2,743

$2,900

$3,029

Injury Year

Ave

rag

e C

ost

Per

Cla

im

passage of HB 2600

HB 7

First WC network cer-tified

New fee guideline adopted

ODG treat-ment guideline adoptedNew fee guide-

line adopted


15

Average Number of Claims per WC Participating Physician: 1999-2010


22.1

20.720.1 20.1

18.918.3

17.718.8 18.8

17.516.4 16.1

10

12

14

16

18

20

22

24

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

16

Percentage of Claims That Received the First Non-emergency Service Within 7 Days after the Injury:

1998-2010

75.1%74.5%

73.7% 73.4%

76.3%

78.1% 78.4% 78.6%

80.1%

81.7% 81.7% 82.0% 81.8%

68%

70%

72%

74%

76%

78%

80%

82%

84%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010


17

Initial Access and Median Total Costs: 1998-2010

$0

$100

$200

$300

$400

$500

$600

$700

$800

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Median Total Cost per Claim, 6-Months Post-Injury,by Number of Days till First Non-EmergencyTreatment

1-7 Days 8 + days


18

Claim and Medical Denial Trends

19

Note 1: House Bill (HB) 2600, a workers’ compensation reform bill aimed at reducing medical costs was passed in 2001.Note 2: Denial rates for 2005 not reported due to missing data. Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2012.

Percentage of Medical Services Denied for the Top 25 Workers’ Compensation Carriers

for Service Years 1998-2011

1998 1999 2000 2001 2002 2003 2004 2006 2007 2008 2009 2010 20110%

5%

10%

15%

20%

25%

30%

15%16%

17% 17%

22%

25% 25% 25%

22%

18%20%

19%

24%

20

Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2012..

Percentage of Reportable Claims That Are Initially Denied/Disputed for the Top 25 Workers’ Compensation

Carriers, Injury Years 1998-2011

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110%

5%

10%

15%

20%

25%

30%

35%

40%

45%

19%

25%27%

29%

34%

37%39%

36%

32% 33% 33% 32%

29% 29%

21

Employer and Employee Participation Rates in the

Texas WC System

Percentage of Texas Employersthat are Non-subscribers: 1993-2012

22

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 - 2012 estimates from the Texas Department of Insurance Workers’ Compensation Research and Evaluation Group and PPRI.

1993 1995 1996 2001 2004 2006 2008 2010 20120%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

44% 44%

39%

35%38% 37%

33% 32% 33%

Percentage of Texas Employees that are Employed by Non-subscribers: 1993-2012

23


1993 1995 1996 2001 2004 2006 2008 2010 20120%

5%

10%

15%

20%

25%

30%

20%21%

20%

16%

24%23%

25%

17%19%

Percentage of Texas Employers that are non-subscribers, by employment size: 1995-2012

Employment Size 1995 1996 2001 2004 2006 2008 2010 2012

1-4 Employees 55% 44% 47% 46% 43% 40% 41% 41%

5-9 Employees 37% 39% 29% 37% 36% 31% 30% 29%

10-49 Employees 28% 28% 19% 25% 26% 23% 20% 19%

50-99 Employees 24% 23% 16% 20% 19% 18% 16% 19%

100-499 Employees 20% 17% 13% 16% 17% 16% 13% 12%

500 + Employees 18% 14% 14% 20% 21% 26% 15% 17%

24

Note: Non-subscription estimates for 1993 were based on different employer size categories than were used in later years so they are not directly comparable.

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 -2012 estimates from the Texas Department of Insurance Workers’ Compensation Research and Evaluation Group and PPRI.

Percentage of Texas Employersthat are Non-subscribers, by Industry: 2004-2012

25

Industry Type

Non-subscription Rate

2004 2006 2008 2010 2012

Agriculture/Forestry/Fishing/Hunting 39% 25% 27% 25% 29%

Mining/Utilities/Construction 32% 21% 28% 19% 22%

Manufacturing 42% 37% 31% 31% 29%

Wholesale Trade/ Retail Trade/Transportation 40% 37% 29% 32% 26%

Finance/Real Estate/Professional Services 32% 33% 33% 33% 32%

Health Care/Educational Services 41% 44% 39% 32% 35%

Arts/Entertainment/Accommodation/Food Services 54% 52% 46% 40% 40%

Other Services Except Public Administration 39% 42% 36% 42% 49%Note: Industry classifications were based on the 2002 North American Industry Classification System (NAICS) developed by the governments of the U.S., Canada and Mexico, which replaced the Standard Industrial Classification (SIC) system previously used in the U.S. As a result of this change in industry classifications, industry non-subscription rates for 2004 - 2012 cannot be compared to previous years.Source: Survey of Employer Participation in the Texas Workers’ Compensation System, Public Policy Research Institute at Texas A&M University and the Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, 2012.

26

Primary Reasons Why Subscribing Employers Said They Purchased Workers’ Compensation Coverage

Source: Survey of Employer Participation in the Texas Workers’ Compensation System, Public Policy Research Institute at Texas A&M University and the Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, 2012.

Because WC coverage was available through health care networks (20% overall; 20% of large employers)

Because employer thought having WC coverage was required by law (19% overall; 17% of large employers)

Because of employer concerns over lawsuits (21% overall; 17% of large employers)

Because employer needed WC coverage to obtain government contracts (9% overall; 11% of large employers in 2012 – up from 7% in 2010)

Because employer thought WC insurance rates were lower (11% overall; 9% of large employers)

Because employer was able to reduce its WC insurance costs through deductibles, certified self insurance, group self-insurance or other premium discounts (increased from 13% of large employers in 2010 to17% in 2012)

27

Primary Reasons Why Non-subscribing Employers Said They Did Not Purchase Workers’ Compensation Coverage

Source: Survey of Employer Participation in the Texas Workers’ Compensation System, Public Policy Research Institute at Texas A&M University and the Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, 2012.

Because employer thought WC insurance premiums were too high (15% overall; 23% of large employers)

Because employer felt the company could do a better job than the Texas workers’ compensation system at ensuring that employees injured on the job receive appropriate benefits (20% of large employers – down from 28% in 2010)

Because employer had too few employees (17% overall)

Because employer was not required by law to have WC insurance (17% overall; 14% of large employers)

Because employer thought medical costs in the WC system were too high (10% overall; 24% of large employers)

Because employer had few on-the-job injuries (17% overall; 14% large employers)

Percentage of Subscribers That Indicated They Experienced a Premium Increase,by Employment Size: 2004-2012

28


2004 2006 2008 2010 20120%

10%

20%

30%

40%

50%

60%

44%

29%

24%26%

31%

57%

34%

20%

26%

38%

47%

28%

21%

26%

35%

Less than 50 employees50-99 employees100 or more employees

Percentage of Large Subscribers (500+ Employees) That Indicated They Experienced a Premium Increase, Decrease, or No Change in Their Premium: 2006-2012

29


2006 2008 2010 20120%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

26%

22%19%

34%

42%

34% 34%

22%

32%

44%47%

44%

IncreaseDecreaseNo Change

30

Workers’ Compensation Network Participation

Levels

Note *: 56,344 policy holders represents approximately 24 percent of all Texas subscribers.Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2012.

31

Network Participation

Total Number of Policyholders Participating by Premium Size (Texas only Premium)

As of Fall 2007

As of Fall 2008

As of Fall 2009

As of Fall 2010

As of Fall 2012

29,146 34,040 36,806 39,643 56,344*

Less than $5,000 in premium

13,689(48%)

15,937(47%)

17,486(48%)

19,896(50%)

30,016 (53%)

$5,000-$24,999 in premium

9,869(35%)

11,659(34%)

12,795(35%)

13,389(34%)

17,596(31%)

$25,000-$100,000 in premium

4,302(14%)

4,940(15%)

5,254(14%)

5,006(13%)

6,602 (12%)

More than $100,000 in premium

1,275(3%)

1,509(4%)

1,264(3%)

1,344(3%)

2,104 (4%)

Employer Participation in NetworksBy Top 13 Carrier Groups

32

As of July 1, 2012 each of the 13 top carrier groups has contracted with or established a certified WC network

All carrier groups with a network have already begun offering it to policyholders and 12 out 13 carrier groups offer premium credits

As of July, 2012– approx 56,344 policyholders agreed to participate in networks, a 42 percent increase over 2010

Approximately 84 percent are small to medium policyholders with less than $25,000 in premium

Results from Data Call of Top 13 Insurance Carrier Groups


33

Currently 30 networks are certified by TDI covering 250 Texas counties

As of February 1, 2012, 327,000 injured employees were treated by 27 certified networks since the certification of the first network in 2006

Roughly 35% of all new injuries are being treated by networks

One network accounts for 33 percent of injured workers treated in networks, down from 36 percent a year ago, the result of smaller networks treating an increasing share of injured workers

Results from Certified Networks’ Data Call


34

Workers’ Compensation Network Report Card 2012

Average overall medical cost per claim, six months post injury

Average Medical costs: 2012

35

Non-network

504-Alliance

Zurich

504-Others

Travelers

Chartis

Liberty

IMO

Texas Star

Other networks

Coventry

First Health

Corvel

$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000

$2,602

$2,168

$2,420

$2,524

$2,567

$2,699

$2,756

$2,955

$3,006

$3,130

$3,360

$3,430

$3,751


36

Non-network

IMO

Corvel

Coventry

First Health

Liberty

Zurich

Texas Star

504-Others

Other networks

Travelers

504-Alliance

0% 20% 40% 60% 80%

64%

61%

63%

64%

67%

67%

68%

68%

69%

71%

72%77%

Access to Care: 2012

Getting Needed Carepercent of injured employees who reported no problem getting: a personal doctor they

like · to see a specialist · necessary tests or treatment · timely approvals for care


37

Return-to-Work Rates: 2012

Percent of injured employees who indicated that they had returned to work at some point after they were injured

Non-network

Texas Star

Corvel

First Health

Liberty

Coventry

Zurich

Other networks

Travelers

504-Alliance

IMO

504-Others

75% 80% 85% 90% 95% 100%

88%

86%

88%

89%

91%

92%

92%

92%

93%

96%

98%

100%


38

Health OutcomesPhysical Functioning Scores: 2012


U.S. Population

Non-network

First Health

Corvel

Other networks

Coventry

Liberty

Texas Star

Zurich

Travelers

504-Others

504-Alliance

IMO

0 10 20 30 40 50 60

50.0

41.4

42.3

42.6

43.8

44.4

44.5

44.6

44.9

45.4

46.3

47.5

47.5

39

Impact of the Texas Pharmacy Closed Formulary

40

Injury Year 2009 2010 20112010-2011

Percentage Change

N-drugs

Number of prescriptions 8,345 9,515 2,952 -68%

Number of prescriptions per claim 1.93 2.04 1.58 -32%

Other Drugs

Number of prescriptions 88,200 95,753 89,262 -7%

Number of prescriptions per claim 3.71 3.73 3.66 -2%

Number of prescriptions, by injury year (Sept-Nov)

41

Cost of N-drugs,by injury year (Sept-Nov)

Injury Year 2009 2010 20112010-2011

Percentage Change

Total cost of N-drug prescriptions $972,198 $1,032,395 $191,302 -81%

N-drug cost as a percentage of total drug costs

19.3% 19.3% 4.4% -75%

Average cost per N-drug prescription $117 $109 $65 -40%

Average N-drug cost per claim $225 $221 $102 -54%


42

Approximately 67 percent of Texas employers (who employ 81 percent of the state’s private sector employees) are covered in the workers’ compensation system—up from 62 percent in 2004

Injury rates down 27 percent since 2004 and are consistently lower than national average

Return-to-work rates decreased slightly in 2010, but still higher than pre-HB7 years

Adjusted for inflation, total medical costs down 30 percent from 1998 levels

Approximately 82 percent of injured employees received their first non-emergency care within 7 days after the injury—up from 78 percent in 2004

Twenty-four percent of subscribing employers participate in workers’ compensation networks

Networks tend to have higher medical costs in the first six months after the injury, but higher access to care, return-to-work rates, and physical functioning scores than non-network claims

The pharmacy closed formulary has resulted in an 81 percent decrease in the cost of N-drugs prescribed to new injured employees

The Texas Workers’ Compensation System since 2005Summary


Documents

Texas Workers’ Compensation System Trends Presentation for the Workers’ Compensation 2012 Biennial Rate Hearing Texas Department of Insurance Workers’