Texas wrangling employer costs for workers' comp insurance

April 1, 2005

When worker's compensation laws were first adopted in the early part of the 20th century, they were promoted as a revolutionary advancement of employees' rights.

When worker's compensation laws were first adopted in the early part of the 20th century, they were promoted as a revolutionary advancement of employees' rights. While the laws were primarily designed to minimize litigation, the medical benefits component of workers' compensation was supposed to reduce the economic loss to the injured employees, and promote recovery and return to work. However, after almost a century in existence, costs have spiraled out of control, and they now often exceed the cost of group health insurance.

The introduction of managed care to workers' compensation has occurred gradually over the last 10 years, with more than half of the states now allowing the use of some managed care concepts, such as medical management and cost containment. A new model being considered by the Texas legislation has two goals: controlling costs and improving the quality of care.

TEXAS MODEL The Texas model would borrow heavily from HMO-style managed care. It would employ the use of a "certified provider network" that would be a network of healthcare providers established to manage medical costs. The delivery system would be built around the "treating doctor" who would serve as a gatekeeper to coordinate healthcare services for injured workers. The certified provider network would not be a risk-bearing entity, but would be a closed panel of providers. Except in emergency situations, only care received in-network would be covered.

The focus of this new regulatory scheme would be the workers' compensation carrier, not the healthcare provider. While the carrier would be allowed to delegate managed care functions to the certified provider network, the network would only be regulated indirectly-through standards imposed on the carrier.

In turn, the carrier would be responsible for supervising and monitoring the activities of the certified provider network. In particular, the carrier would monitor performance by the certified provider network of any delegated functions, such as utilization review, quality improvement and/or credentialing. Carriers also would have annual reporting obligations to the regulators on the activities and performance of the certified provider networks. Those reports would focus on return-to-work outcomes and worker satisfaction, as well as cost measures and utilization of services.

The proposed law would not include "any- willing-provider" requirements. Carriers would be empowered to build their own networks or lease networks from other insurers or preferred provider organizations. However, the proposed law would contain many of the existing facets of managed care law that regulate the insurer-provider relationship and that provide for patient protection. In the patient-protection category, there are provisions that deal with privacy of healthcare information, hold-harmless from balance billing, complaint and appeal mechanisms, and minimum standards for utilization review. In the insurer-provider context, there are provisions that would require prompt payment of claims, provide minimum contracting standards, and establish due process requirements for provider deselection.

This column is written for informational purposes only and should not be construed as legal advice.