sunset staff releases report on dwc and oiec - fol · sight and adjudication duties, ... in...

F O L I O C L I E N T N E W S L E T T E R B Y F L A H I V E , O G D E N & L A T S O N

A P R I V I L E G E D A T T O R N E Y - C L I E N T C O M M U N I C A T I O N B Y F L A H I V E , O G D E N & L A T S O N

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©2010 – Flahive, Ogden & Latson A P R I L 2 0 1 0 n V O L U M E 1 5 , N O . 4

SunSet Staff ReleaSeS RepoRt on DWC anD oIeC

This month the Legislature’s sunset review committee published its staff recommendations regarding the continued existence of the Divi-sion of Workers’ Compensation and the Office of Injured Employee Counsel. Tellingly, the staff wrote that overall the system seems to be health-ier, with stabilizing medical costs, fewer claims and disputes, lower insurance rates, fewer lost days of work, and better return-to-work outcomes as the result of system reforms implemented in 2005.

In an important preliminary statement, the report states that the review staff has determined that wholesale changes to the system, such as ben-efit level changes, were outside the scope of staff reviews, which were aimed only at evaluating the continuing need for the functions and the effec-tiveness, efficiency, fairness, and accountability of statutory programs. Given these challenges, Sunset staff focused on identifying possibilities to fine-tune past reform efforts, improve major program areas, and address lingering statutory questions needing further directive.

The Legislature will consider the effective-ness of both the Division of Workers’ Compensa-tion and the Office of Injured Employee Counsel during the 2011 legislative session. That effort

will produce a bill that recommends whether and in what fashion each agency will continue to exist.

With respect to the Division of Workers’ Compensation, sunset staff made specific recom-mendations in seven key areas: benefit dispute resolution, medical quality review, enforcement procedures, designated doctors, Division over-sight and adjudication duties, nonsubscriber data collection, and whether the Division should be continued beyond 2011.

Staff also recommended specific changes be made to OIEC procedures in the following areas: whether OIEC should be continued beyond 2011 and what access OIEC employee should have to Division records.

In separate sections of this month’s FOLIO, we have outlined specific recommendations that staff has made, together with a more complete explanation of the sunset review process gener-ally.

In this Issue...

RtW ReIMBuRSeMent RuleS ..................... p. 4

pBo ........................................................... p. 9

F O L I O C L I E N T N E W S L E T T E R B Y F L A H I V E , O G D E N & L A T S O N2

Key ReCoMMenDatIonS fRoM the SunSet

Staff RepoRt on the DIvISIon of WoRKeRS’

CoMpenSatIon

As a part of the legislative sunset review process, staff member of the Texas Sunset Advisory Com-mission have released recommendations regarding the future operation of the Division of Workers’ Compensation. These recommendations are just that – recommendations. While these recommen-dations are inf luential glimpses into the legisla-tive sunset review thought process, the recom-mendations have not been formally implemented and are subject to substantial alteration during the legislative process. They should be considered as important suggestions about where the Texas system may be headed over the next year or so.

Sunset staff made specific recommenda-tions regarding the future existence and opera-tion of the Division of Workers’ Compensation. Specifically, staff believes that insufficient time has passed to allow for evidence of long-term, concrete outcomes from recent system reforms. Accordingly, staff concludes that many of the sys-tem-wide changes are not yet ripe for evaluation. As a result, Sunset staff did not make recommen-dations on most of the recent reforms.

Staff did make a number of key recommenda-tions, however. The following summary of those recommendations describes workers’ compensa-tion system changes that may take place in the 2011 legislative process as the result of sunset staff recommendation.

Staff recommends a number of changes to the dispute resolution process to make it less formal, confusing, and costly. The key recommendations in this area are:


Flahive, Ogden & Latson, a 26 lawyer firm, defends contested workers’ compensation cases statewide every day. The firm has represented insurance companies and employers before the Texas Workers’ Compensation agency for more than

50 years. For general questions concerning the newsletter call: (512) 435-2234.

Flahive, Ogden & LatsonP.O. Box 13367

Austin Texas 78711

An electronic copy of FOLIO, our monthly client newsletter, is now available for

clients. If you are interested in receiving FOLIO by email, please let us know.

FOLIO is prepared for the exclusive use of Flahive, Ogden & Latson clients only. It contains privileged communications and further sharing of this newsletter

(in either hard copy or electronic format) outside your company without the express written consent of Flahive,

Ogden & Latson is not permitted.

Our regular office hours are 8:15 a.m. to 4:45 p.m. If you need to call after 4:45,

please call Patsy Shelton at (512) 435-2234. She will be on duty until 6:00 p.m. daily.

fo&L offICe HourSDon’t wait until the last hour of the day for deadline filing. Any faxes with information due must be received by 3:30 p.m. for any deadline handling for same day delivery to the Division, and faxed according to the fax directory listed on the last page of FOLIO.

Furthermore, if you have a last minute deadline, call our office by 3:00 p.m. and

speak with Sally Matthews or Patsy Shelton to advise that a last minute filing is necessary

to meet a deadline. We will be watching and waiting for the fax. Otherwise, last

minute faxes could delay receipt. Our last daily run to the Division will be at 4:00 p.m.,

in order to get across town to meet their 5:00 closing time.

DWC takeS pubLIC Comment on CLoSeD

formuLary

The Texas Department of Insurance, Division of Workers’ Compensation conducted a stakeholder meeting on March 5, 2009 to address progress on the proposed closed pharmaceutical formulary.

The agency opened the meeting with introductions of key staff members who are working on the project, followed by an overview of the informal working draft rules.

Next, Division staff facilitated a Stakeholder discussion of issue specific topics based on informal comments. Some of the most vociferous public comments came from the provider community. These comments ranged from complaints over the development of a closed formulary at all to expressions of concerns over how the proposed formulary would interact with the Division’s preauthorization rule.

Other public comments suggested that the Division should apply the closed formulary to all medications so that refills during transition are covered as well and whether the Division should recognize a licensed pharmacy limitation.

It is clear that Division staff were interested in receiving input on several critical implementation sticking points, including whether the rule should take effect based on the date a drug was “prescribed” verses the date the drug was “dispensed”.

Finally, the Division solicited public testimony in the following areas: Acute injury vs. chronic injury formularies; Statements of Medical Necessity; and the use and regulation of Compounding.

Even after a closed formulary is adopted, the Division faces further rule development and will solicit stakeholder input with respect to the application of the formulary to legacy claims long-term narcotic/opioid use.

The copy of the Informal Working Draft Rules can be found at: www.tdi.state.tx.us/wc/rules/documents/drpharm1208.pdf. date.Continued on p.4

F O L I O C L I E N T N E W S L E T T E R B Y F L A H I V E , O G D E N & L A T S O N 3

Key ReCoMMenDatIonS fRoM the SunSet Staff RepoRt on the offICe of InjuReD eMployee

CounSel

As a part of the legislative sunset review process, staff member of the Texas Sunset Advisory Com-mission have released recommendations regard-ing the future operation of the Office of Injured Employee Counsel. As otherwise suggested, while these recommendations are inf luential glimpses into the legislative sunset review thought process, they have not been formally implemented and are subject to substantial alteration during the legislative process.

Staff noted that nearly five years after its creation, OIEC was still in the wake of incred-ible transition. In addition, staff concluded that the structural transition of both the Division and OIEC has worked, although many aspects of the 2005 reforms are still very much in the imple-mentation phase.

Sunset staff made specific recommendations in only two areas regarding the future existence and operation of OIEC.

Specifically, staff wrote that that Texas has a continuing need to help injured employees navi-gate the complex workers’ compensation system and ensure access to medical and income benefits promised by state law. Staff believes that OIEC fulfills this need by providing beneficial educa-tion and assistance to individuals with workers’ compensation claims and by promoting the inter-ests of injured employees in the system.

Sunset staff found that there would be no sig-nificant benefit to altering OIEC’s current orga-

nizational structure. The review also found that OIEC was well-positioned to positively affect the efficiency of DWC’s dispute resolution process by increasing the preparedness of injured employees it is assisting as parties to informal mediations.

Key staff recommendations in this area are to:

• ContinuetheOfficeofInjuredEmployeeCounsel for 12 years.

• DirectOIECtoworkwithDWCtoensure injured employees are fully pre-pared by Ombudsmen before attending a DWC Benefit Review Conference.

In addition, staff wrote that OIEC’s admin-istrative attachment to DWC, and statutory language allowing the Office to obtain other-wise confidential information, gives it access to information that other parties cannot receive. This situation, sunset staff wrote, places OIEC in a potentially more favorable position than other parties in the workers’ compensation system. Staff noted that a limitation on OIEC’s access to such files would remove the appearance of impro-priety, as well as solidify its independence from DWC without preventing it from fulfilling its statutory duties.

Accordingly, staff made the following key recommendation:

• LimitOIEC’sauthoritytoaccessclaimfiles for injured employees that it is not directly assisting.

In conclusion, sunset staff noted that none of its OIEC recommendations would have a fiscal impact to the State since OIEC is funded through taxes and assessments on workers’ compensation insurers. Presumably, the limited nature of the changes suggested for OIEC ref lects a relatively small affect upon Texas assessments earmarked for OIEC’s operations.


• Requiringpartiestoadisputetoprovepreparedness as a prerequisite to a Benefit Review Conference.

• Requiringpartiestoanon-networkmedicalfee dispute to attempt a low-level media-tion, through a Benefit Review Conference, before appealing to the Contested Case Hearing level.

• Establishinganadministrativeappealmechanism for network medical necessity disputes.

• Streamliningtheprocessforresolvingnon-network medical disputes, by removing SOAH’s involvement in conducting Con-tested Case Hearings.

• AuthorizingtheDivision’sAppealsPaneltoissue written affirmations in limited cir-cumstances.

• Extendingthetimeframeallowedforappeals of DWC decisions regarding medi-cal necessity and nonnetwork medical fee disputes to district court.

• Clarifyingthevenuefordistrictcourtappeals of agency decisions regarding medi-cal disputes.

Staff also recommended shifting the Division’s oversight of the medical quality review process to depend more on multiple agency staff , instead of on solely the Medical Advisor and contracted Panel members. This change, staff reasons, would reduce the appearance of any impropriety. In addition, staff recommended increasing qualifica-tion and training requirements for Panel members and providing an opportunity for input at various review stages in order to provide a more transpar-ent process and allow for solid decisions regarding recommended enforcement actions.

Key staff recommendation in this area include:

• RequiringDivisionstaff,ratherthantheMedical Advisor, to manage and oversee the medical quality review process.

CoMMISSIoneR SIgnS RtW ReIMBuRSeMent

RuleS Texas Workers’ Compensation Commissioner

Rod Bordelon has signed the adoption order for changes to 28 TAC Chapter 137 regarding the Return-to-Work Reimbursement Program for Employers.

Amy Lee, Special Deputy Commissioner for Policy and Research, says that the changes have been made consistent with the passage of SB 1814 last session. SB 1814 amended Labor Code §413.022 to convert the existing RTW pilot pro-gram to a permanent Return-to-Work Reimburse-ment Program.SB 1814 also increased the amount an employer may receive from the program from $2,500 to $5,000 for an allowable expense.

In addition to having a reimbursement and optional preauthorization plan, SB 1814 allowed for the creation of an optional advance of funds plan for eligible employers who participate in the Return-to-Work Reimbursement Program. Under this plan, an eligible employer may, prior to making workplace modifications, submit to the Division an application that describes the workplace modi-fications that the employer proposes to make to accommodate an injured employee’s return to work. If the Division approves the application, the Divi-sion may, up to the permitted amount, advance the funds for the expenses the employer will incur to implement the workplace modifications.

Rule 137.44 prohibits an employer from mak-ing workplace modifications that materially differ from the accepted application unless the employer receives prior written approval from the Division. New Rule 137.50(e) requires the employer to com-plete the approved workplace modifications within six months of receiving funds from the Division or

Key Recommendations from the Sunset Staff Report Division of Workers Compensation. p.2

Continued on p.6


• RequiringtheDivisiontodevelopguide-lines to strengthen the medical quality review process.

• Establishingamorestreamlinedmedicalreview process by removing the Quality Assurance Panel’s involvement.

• RequiringtheCommissionertodevelopadditional qualification and training requirements for Medical Quality Review Panel members.

• RequiringtheDivisiontoworkwithhealth licensing boards to expand the pool of Medical Quality Review Panel members.

In the area of enforcement, sunset staff has recommended that the legislature provide DWC with additional enforcement tools and clarify its existing authority. These changes, staff con-cludes, will enable the Division to better ensure compliance in the workers’ compensation sys-tem by taking appropriate, consistent, and swift action. The changes will also, in staff ’s view, eliminate confusion about the scope of DWC’s enforcement authority.

Key recommendations in this area include:

• ClarifyingthattheDivisioncanconductannounced and unannounced inspec-tions.

• AuthorizingDWCtorefusetorenewDesignated Doctor certifi cations.

• AuthorizingtheCommissionertoissueemergency cease-and-desist orders.

• Specifyingthatthejudicialreviewstan-dard for appeals of DWC enforcement cases is substantial evidence.

• AuthorizingtheCommissionertomakefinal decisions on enforcement cases involv-ing monetary penalties.

• Removingoutdatedandconfusingenforcement provisions in the Labor Code.

Staff writes that the designated doctor pro-cess is important to the dispute resolution system, but that it needs improvement. In this regard, sunset staff suggest that additional guidance be

given to strengthen the Division’s processes for selecting, training, and assigning designated doc-tors, which would help ensure that the best quali-fied doctors serve in this important role, while fortifying the goal of providing neutral expert opinions that DWC may use to resolve disputed claims.

Staff ’s key recommendations regarding desig-nated doctors include:

• RequiringthattheCommissionerdevelopqualification requirements for Designated Doctors.

• DirectingtheCommissionertoadoptrules requiring Designated Doctors remain with case assignments, unless oth-erwise authorized.

• AuthorizingtheCommissionertoestab-lish a certification fee in rule for Desig-nated Doctors.

• DirectingtheDivisiontoremovetheDesignated Doctor scheduling data from its website.

Sunset staff found that DWC’s involvement in eight types of decisions is unnecessary and conf licts with the Division’s regulatory role. They recommended transferring responsibility for these decisions from DWC to insurance car-riers, whom they described as well-positioned to manage individual claims. Such a change would, in staff ’s view, allow DWC to focus on its over-sight duties and ensure DWC’s neutrality when adjudicating disputes.

The key staff recommendation in this area is to:

• Transfertheresponsibilityforcertainclaims decisions from DWC to insurance carriers.

In a data reporting issue, staff concluded that only an estimated 10 percent of nonsubscrib-ing employers report injury data to the Division as required by law. Staff recommends that the Division work with other state agencies that have interactions with Texas employers in an effort to


benefit the agency’s data collection efforts and potentially increase reporting. This effort, staff argues, would provide the Legislature a broader picture of the system as a whole.

The key staff recommendation in this area provides that:

• TheDivisioncloselycoordinatewithother state agencies to include nonsub-scription reporting requirements in their print and electronic publications.

In perhaps its most significant issue, sunset staff observed that the agency’s functions and structure as a division within the Texas Depart-ment of Insurance, led by a separate Commis-sioner of Workers’ Compensation fulfills an important role in ensuring the fair treatment of all system participants. Similarly, staff con-cluded that, while the merger with TDI is still being implemented, the integration works well. As a result, staff concluded that DWC no longer needs to have a separate Sunset date from TDI in statute.

The key staff recommendations in this area state that the legislature should:

• ContinuetheDivisionofWorkers’Com-pensation for 12 years, and remove its separate Sunset date from statute.

• RequiretheDivisiontodevelopstandardprocedures for documenting complaints and for tracking and analyzing complaint data.

Sunset staff key recommendations will now be considered by the Sunset Commissioners, whose job it is to make specific recommendations to the legislature prior to the 2011 legislative ses-sion.

the funds must be returned unless an extension is requested and granted in writing. Rule 137.50(f ) requires the employer to submit to the Division proof, in the form of a receipt, when the approved workplace modifications have been made.

Under Rule 137.51 the Division may inspect a participating employer’s business before any funds have been given by the Division or spent by the employer to insure that the proposed workplace modifications are appropriate. The Division may also inspect the business after any funds have been spent to insure that the funds were used appropri-ately and the new rule would allow for the Divi-sion to request records or information from the employer regarding the requested or spent funds. In addition, Rule 137.51 provides that a that mis-use of funds provided by the RTW reimbursement program is an administrative violation under the act.

In response to comments contained in the preamble to the rule adoption order the Division observed that it intends to fund approved appli-cations on a case-by-case basis as funds become available. The Commission also noted that Labor Code §413.022(f ) sets restrictions on the distri-bution of funds regarding this program; at that because of that provision the Division may dis-tribute funds only to the extent that funds are available.

DIvISIon SetS eDuCatIon

ConfeRenCeS In auStIn anD DallaS

The Texas Department of Insurance, Division of Workers’ Compensation is hosting two Workers’ Compensation Educational Conferences in 2010.

Commissioner Signs RTW Reimbursement Rules. p.4


The conferences, which will be held in Austin and Dallas, will feature information about Texas workers’ compensation for system participants including: doctors and ancillary health care pro-viders; medical office staff; employers; employee organizations; workers’ compensation insurers; third party administrators; attorneys; and other related professionals.

The Austin conference will be held July 19-21, 2010, at the Hyatt Regency Austin. The Dallas conference will be held August 2-4, 2010, at the Renaissance Dallas-Richardson Hotel. Registra-tion is $275 per person through June 1, 2010, and $350 per person after June 1, 2010.

The hotels are offering conference room rates of $125 for single or double occupancy at the Hyatt Regency Austin, and $145 for single or dou-ble occupancy at the Renaissance Dallas-Richard-son Hotel. To qualify for these room rates, con-tact the Hyatt Regency at 512-477-1234 by June 18, 2010, or the Renaissance Dallas-Richardson at 972-367-2000 by July 1, 2010, and reference the “Texas Workers’ Compensation Educational Conference” to make reservations.For exhibitor information and additional conference details, visit the TDI website at http://www.tdi.state.tx.us/wc/events/conference10.html.

InSuRanCe InfoRMatIon

InStItute RepoRtS on WC MaRKet

The Insurance Information Institute has pub-lished a report on the workers compensation market. The report, which was announced by III President Robert Hartwig, notes that workers’ compensation exposure and performance are in-timately linked to the economy and labor market, focuses on regional differences and labor market trends.

A section of the presentation highlights crisis-driven exposure drivers in workers’ compensation, including trends in business bankruptcies and new business formation. Sources of growth in work-ers’ compensation are discussed and an industry and occupation growth analysis through 2018 is provided.

Steven W. Nichols, Manager for Workers’ Compensation Services at the Insurance Council of Texas, observes that the presentation looks at key issues facing workers’ compensation insurers in the decade ahead, including Texas Insurers. The report also examines investment outlook, regulation, torts, terrorism and healthcare reform. Workers compensation premium growth, under-writing performance and medical and indemnity claims cost trends are reviewed.

The report concludes with a property/casualty insurance industry financial overview.A copy of the PowerPoint presentation can be found at http://www.iii.org/assets/docs/ppt/WorkersComp-032510.ppt.

DepaRtMent pRopoSeS DCI Stat plan RuleS

The Department has recently proposed a new 28 TAC Section 5.6601 to adopt a new 2010 version of the DCI Statistical Plan. According to Amy Lee, Special Deputy Commissioner for Policy and Research, the proposed plan would replace the current DCI Stat Plan, which was adopted in 1997.

This new rule rule is being proposed to com-ply with Senate Bill (SB) 471 (80th Legislature, Regular Session, 2007), which amended Insurance Code §2053.151 and requires the Department to, by rule, adopt a DCI Statistical Plan. An informal draft of this rule and statistical plan was published last year.

This formal proposal has been published in the Texas Register and comments are due to be filed on or before June 1, 2010.


The proposed rule language can be found at the following link: http://www.tdi.state.tx.us/rules/2010/documents/5-6601.pdf

The proposed statistical plan can be found at the following link: http://www.tdi.state.tx.us/rules/2010/documents/Prop2010Stat_Plan.pdf

The current statistical plan can be found at the following link:http://www.tdi.state.tx.us/rules/2010/documents/Current1997_StatPlan.pdf

ConnIng pReDICtS: InDuStRy

tuRnaRounD In 2011; eConoMIC ReCoveRy

a MajoR DRIveR thRough 2012

Results for the property-casualty industry over the next few years will be driven by the economic recovery, a return to a modest inf lationary envi-ronment, and larger underwriting losses in 2010 leading to rate firming in 2011, according to the most recent Property-Casualty Industry Forecast by Conning Research & Consulting.

“Our expectation is for modest growth in 2010, with net premium growth positive, but weaker than GDP growth,” said Clint Harris, analyst at Conning Research & Consulting. “Yet we also anticipate a deterioration in the loss ratio due to eroded premium rate adequacy and expected thinner loss reserve releases. While the overall combined ratio increase is a significant 2.5 points under average catastrophe load, implied return on equity should increase to approximately 7 percent due to the positive impact of realized capital gains.”

The Conning Research study, “Property-Casualty Forecast & Analysis” forecasts industry growth and performance for 2009-2012. The

report is based on Conning’s proprietary indus-try model and analysis of key industry drivers as well as statutory data filings, public insurer reports results, and 2010 catastrophe loss esti-mates to date.

“Looking beyond 2010, more robust growth for the property-casualty industry in 2011 and 2012 will result from increases in both exposures and premium rates,” said Stephan Christiansen, director of research at Conning. “While personal lines is leading the industry even in 2010 with robust premium rate growth, many commercial lines, and particularly workers compensation, will not see improvements in combined ratio until 2012.”

Conning’s “Property-Casualty Forecast & Analysis” is available for purchase from Con-ning Research & Consulting by calling (888) 707-1177 or by visiting the company’s web site at www.conningresearch.com.

Conning Research & Consulting is a divi-sion of Conning, a provider of asset management and insurance industry research and consult-ing services to insurers. Conning Research & Consulting has published independent insur-ance industry research for 50 years, including market coverage of 30 segments of the industry in addition to industry forecasting and identifi-cation and analysis of major strategic issues. As a result of its wealth of experience and intimate knowledge of the insurance industry, Conning understands industry challenges and opportuni-ties and provides in-depth analyses on a wide range of industry products and issues. Conning is headquartered in Hartford, CT.


Division Releases Final 2010 PBO Plan for Carriers

The Division of Workers’ Compensation has announced its final 2010 Performance Based Oversight assessment measures and protocols for insurance carriers. The announcement follows the agency’s solicitation of public comments and after months of system stakeholder input.

The Division’s full explanation of the 2010 carrier requirements has been posted on the agency’s website at http://www.tdi.state.tx.us/wc/pbo/index.html. The Division will also send notification letters to each of the selected insurance carriers.

The agency’s plan addresses each component of the carrier PBO process, including the carrier selection criteria, the measures to be applied and the weighting applicable to those measures, the data timeframe to be used for the assessment, the data sources to be used for the assessment and the tier structure and placement methodology to be used for the assessment.

The Division has also outlined its internal process for reviewing management responses to the initial data findings, a tentative timeline of milestones in the PBO assessment process, the published incentives afforded carriers who achieve high tier status and the effect that PBO ranking will have on enforcement actions.

This plan only addressed insurance carrier assessments. The selection criteria and measures for health care providers are still in the planning phase and will be announced in 2011.

Selection Criteria

The Division has selected 132 insurance carriers for the 2010 PBO assessment. These carriers were chosen based on their volume of initial TIBs transactions between January 1, 2009 and June 30, 2009. This includes 80 commercial carriers, three state entities, 43 self-insurers and six certified self-insurers.

The carriers that will be measured in the 2010 PBO process may be found on the list attached to this advisory. Carriers who are not assessed in the PBO process because of low claim volume are not absolved from regulatory duties or regulatory oversight by the Division.

Weighted Measures

The Division will assess the same carrier measures in 2010 that it assessed in 2009: timely payment of TIBs (40%); timely medical bill processing (40%); timely EDI submission of initial payment data (10%); and timely EDI submission of medical bill processing data (10%).


Data Timeframe

The data timeframe to be used to assess performance of the carrier measures is January 1, 2010 through June 30, 2010. Thus the performance measurement will be based in part on a retrospective data review. In the past, the PBO measures have been outlined to system stakeholders well in advance of the data timeframe.

Data Sources

The data sources used to assess performance of the carrier measures will come from the claim and medical data submitted electronically via EDI data submissions.

Tier Structure, Placement Methodology and Performance Standards

Just as in past years, the Division will place carriers into three regulatory tiers that distinguish among poor, average and high performers in the system. The tiers will be based on pre-determined performance standards as follows:

High Tier: 95 or greater Average Tier: 80.00 through 94.99 Poor Tier: 79.99 or less

The Division received many comments from system stakeholders suggesting that the high tier measurement be lowered to a score of 90 or greater. The agency rejected those comments.

Carrier X Step 1 Calculate Individual Measure

Step 2 Weight of Individual Measure

Step 3 Multiply Score by 100 to obtain weighted value

Step 4 Overall Score

Step 5 Overall Tier Placement

Measure 1 Medical Bill Processing

95% 40% 38

Measure 2 Timeliness of Payment of Initial TIBs

82% 40% 32.8

Measure 3 Timeliness of submission of the EDI Initial Pay Data

87% 10% 8.7

Measure 4 Timeliness of Submission of the EDI Medical Data

75% 10% 7.5

87 Average


Data Timeframe

The data timeframe to be used to assess performance of the carrier measures is January 1, 2010 through June 30, 2010. Thus the performance measurement will be based in part on a retrospective data review. In the past, the PBO measures have been outlined to system stakeholders well in advance of the data timeframe.

Data Sources

The data sources used to assess performance of the carrier measures will come from the claim and medical data submitted electronically via EDI data submissions.

Tier Structure, Placement Methodology and Performance Standards

Just as in past years, the Division will place carriers into three regulatory tiers that distinguish among poor, average and high performers in the system. The tiers will be based on pre-determined performance standards as follows:

High Tier: 95 or greater Average Tier: 80.00 through 94.99 Poor Tier: 79.99 or less

The Division received many comments from system stakeholders suggesting that the high tier measurement be lowered to a score of 90 or greater. The agency rejected those comments.

Carrier X Step 1 Calculate Individual Measure

Step 2 Weight of Individual Measure

Step 3 Multiply Score by 100 to obtain weighted value

Step 4 Overall Score

Step 5 Overall Tier Placement

Measure 1 Medical Bill Processing

95% 40% 38

Measure 2 Timeliness of Payment of Initial TIBs

82% 40% 32.8

Measure 3 Timeliness of submission of the EDI Initial Pay Data

87% 10% 8.7

Measure 4 Timeliness of Submission of the EDI Medical Data

75% 10% 7.5

87 Average

Process and Timeline

The Division will distribute the initial carrier findings in July 2010. Carriers will be given an opportunity to review those findings. Between September and October 2010, carriers will be permitted to submit a management response refuting the initial findings, with supporting documentation.

The Division will review carrier management responses and prepare a summary of changes for distribution to the carriers. The final results will be published on the Division website after the results have been shared with each carrier respectively. The Division anticipates the publication of final PBO results for carriers in late December 2010.

Incentives

The Division will provide a number of incentives to carriers who achieve high tier standing, including: a limited audit exemption, modified penalties, publication of results, authority to market using a high performer logo, and reduced penalties for self-disclosure of non-compliance.

Enforcement

The Division’s emphasis is on early detection of noncompliance and informal discussions to resolve any noncompliant issues. The agency will initiate enforcement actions, including warning letters and the assessment of penalties when appropriate and necessary to ensure compliance and to deter future noncompliance. The Division will consider a carrier’s Performance Based Oversight ranking in determining an appropriate enforcement action.

We continue to monitor PBO issues closely. If you have questions concerning this issue, please contact Bobby Stokes or James Sheffield in our office.


4/15/2010 5

ATTACHMENT A INSURANCE CARRIERS 2010 PBO ASSESSMENT

Ace American Insurance Co Ace Fire Underwriters Ins Co AIG Casualty Co Alief ISD American Casualty Co of Reading PA American Guarantee & Liability Ins Co American Home Assurance Co American Interstate Insurance Co American Zurich Insurance Co Amerisure Insurance Co Amerisure Mutual Insurance Co Arch Insurance Co Beaumont ISD Bexar County Bituminous Casualty Corp Brownsville ISD Charter Oak Fire Insurance Company Church Mutual Insurance Co City of Austin City of Corpus Christi City of Dallas City of El Paso City of Fort Worth City of Houston City of McAllen City of San Antonio Commerce & Industry Insurance Co Corpus Christi ISD Dallas Area Rapid Transit Dallas County Dallas National Insurance Co Deep East Texas Self Insurance Fund Donna ISD East Tx Educational Ins Assn El Paso County El Paso ISD Electric Insurance Co Employers Assurance Co Employers Insurance Co of Wausau Farmington Casualty Co Federal Insurance Co Federated Mutual Insurance Co Fedex Ground Package System Inc Fidelity & Guaranty Insurance Co First Liberty Insurance Corp

Fort Bend ISD Fort Worth ISD General Motors Co Granite State Insurance Co Harris County Harris County Hospital District Hartford Casualty Insurance Co Hartford Fire Insurance Co Hartford Ins Co of the Midwest Hartford Underwriters Insurance Co Houston ISD Illinois National Insurance Co Indemnity Insurance Co of North America Insurance Co of the State of PA La Joya ISD Liberty Insurance Corp Liberty Mutual Fire Insurance Co Liberty Mutual Insurance Co LM Insurance Corp Lockheed Martin Corp Lowes Home Centers Inc Lumbermens Underwriting Alliance McAllen ISD Metropolitan Transit Authority Harris Co Midwest Employers Casualty Co Mitsui Sumitomo Insurance USA Inc National American Insurance Co National Fire Insurance Co of Hartford National Interstate Insurance Co Netherlands Insurance Co New Hampshire Insurance Co Northside ISD Old Glory Insurance Co Old Republic General Insurance Corp Old Republic Insurance Co Pennsylvania Manufacturers Assoc I Pharr San Juan Alamo ISD Plano Independent School District Public WC Program Safety National Casualty Corp San Antonio ISD Seabright Insurance Co Security National Insurance Co Sentry Insurance A Mutual Co Service Lloyds Insurance Co


4/15/2010 5

ATTACHMENT A INSURANCE CARRIERS 2010 PBO ASSESSMENT

Ace American Insurance Co Ace Fire Underwriters Ins Co AIG Casualty Co Alief ISD American Casualty Co of Reading PA American Guarantee & Liability Ins Co American Home Assurance Co American Interstate Insurance Co American Zurich Insurance Co Amerisure Insurance Co Amerisure Mutual Insurance Co Arch Insurance Co Beaumont ISD Bexar County Bituminous Casualty Corp Brownsville ISD Charter Oak Fire Insurance Company Church Mutual Insurance Co City of Austin City of Corpus Christi City of Dallas City of El Paso City of Fort Worth City of Houston City of McAllen City of San Antonio Commerce & Industry Insurance Co Corpus Christi ISD Dallas Area Rapid Transit Dallas County Dallas National Insurance Co Deep East Texas Self Insurance Fund Donna ISD East Tx Educational Ins Assn El Paso County El Paso ISD Electric Insurance Co Employers Assurance Co Employers Insurance Co of Wausau Farmington Casualty Co Federal Insurance Co Federated Mutual Insurance Co Fedex Ground Package System Inc Fidelity & Guaranty Insurance Co First Liberty Insurance Corp

Fort Bend ISD Fort Worth ISD General Motors Co Granite State Insurance Co Harris County Harris County Hospital District Hartford Casualty Insurance Co Hartford Fire Insurance Co Hartford Ins Co of the Midwest Hartford Underwriters Insurance Co Houston ISD Illinois National Insurance Co Indemnity Insurance Co of North America Insurance Co of the State of PA La Joya ISD Liberty Insurance Corp Liberty Mutual Fire Insurance Co Liberty Mutual Insurance Co LM Insurance Corp Lockheed Martin Corp Lowes Home Centers Inc Lumbermens Underwriting Alliance McAllen ISD Metropolitan Transit Authority Harris Co Midwest Employers Casualty Co Mitsui Sumitomo Insurance USA Inc National American Insurance Co National Fire Insurance Co of Hartford National Interstate Insurance Co Netherlands Insurance Co New Hampshire Insurance Co Northside ISD Old Glory Insurance Co Old Republic General Insurance Corp Old Republic Insurance Co Pennsylvania Manufacturers Assoc I Pharr San Juan Alamo ISD Plano Independent School District Public WC Program Safety National Casualty Corp San Antonio ISD Seabright Insurance Co Security National Insurance Co Sentry Insurance A Mutual Co Service Lloyds Insurance Co

4/15/2010 6

Southern Insurance Co Southern Vanguard Southwestern Bell Telephone LP Standard Fire Insurance Co State Farm Fire & Casualty Co State Office of Risk Management Sua Insurance Co Tarrant County TASB Risk Mgmt Fund Texas A & M University System Texas Alliance of Energy Producers Texas Automobile Dealers Self Insurers Group Texas Builders Insurance Co Texas Cotton Ginners Trust Texas Hospital Insurance Exchange Texas Mutual Insurance Co Texas Schools Property & Casualty Texas Municipal League Intergovernmental

Risk Pool TPS Joint Self Ins Funds Travelers Casualty Ins Co of America Travelers Indemnity Co

Travelers Indemnity Co of America Travelers Indemnity Co of Connecticut Travelers Property Casualty Co of America Truck Insurance Exchange Twin City Fire Insurance Co Tx Assoc of Counties RMP Tx Public School WC Project United States Fire Insurance Co University Health System University of Texas System Utica Mutual Insurance Co Valley Forge Insurance Co VIA Metropolitan Transit Wal Mart Associates Inc Wausau Business Insurance Co Wausau Underwriters Insurance Co WC Solutions XL Specialty Insurance Co Ysleta ISD Zenith Insurance Co Zurich American Insurance Co


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For non-network claims, Rule 124.3 provides that if the carrier denies the claim by the 15th day after receiving first

written notice of the claim, then it is not liable for any benefits, except initial pharmaceutical coverage (see Rule 134.501). If the carrier denies the claim after the 15th day but before the 60th day after it received first written notice of injury, then the carrier is liable for income and medical benefits that accrued prior to the carrier filing its notice of denial. For network claims a carrier may be liable for up to $7,000 in medical care if such care constitutes emergency care or is in-curred by a network physician prior to the denial of the claim.

The claimant is receiving medical care through a healthcare network. Can the carrier request a required medical exam to

evaluate appropriateness of healthcare received by the claimant?

Section 408.004(f ) of the Texas Labor Code prohibits a carrier from using a required medical exam to evaluate appro-

priateness of healthcare when the claimant is re-ceiving healthcare through a healthcare network. The healthcare network has its own process for the evaluation of appropriateness of healthcare that must be followed.

A referral doctor certified the claimant as reaching maximum medical improvement (MMI) on 11/1/09 with a 15% impair-

ment rating. The carrier disputed the impair-ment rating only by requesting a designated doctor (DD) exam and began to pay impairment income benefits (IIBs) based upon a reasonable assessment of 5%. The DD examined the claim-ant and sent a report stating that the claimant is

At the time of injury, the claimant was working two jobs. The carrier paid the claimant TIBs by using an AWW calcula-

tion based upon both employers. The claimant has now reached MMI. Since IIBs are not wage replacement benefits, does the carrier still have to pay those benefits based upon the multiple employer AWW?

Yes. Section 408.042(c) of the Texas Labor Code provides that for employees with multiple employment the AWW for

determining TIBs, IIBs, SIBs, LIBs, and death benefits is equal to the sum of AWW computed for each employer. Remember, however, that a carrier is entitled to apply for and receive reim-bursement from the Subsequent Injury Fund for the amount of income and death benefits paid to an employee based upon employment from the non-claim employer. See Tex. Lab. Code §408.042(g).

Is a physician’s assistant allowed to certify that a claimant has reached maximum medical improvement with an impairment

rating?

Rule 130.1(a)(1) provides which doctors may provide a certification for maximum medical improvement and impairment.

The certifying physician must be authorized by the Division and must be a treating doctor, refer-ral doctor, designated doctor, or required medical examination doctor. It is highly unlikely that a physician’s assistant meets the requirements needed to provide a valid certification of maxi-mum medical improvement and impairment.

Is the carrier liable for medical bills if the carrier denies the claim in its entirety?

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not at MMI. Is this a valid report? What are the carrier’s options?

The DD’s report may be valid. The Division sends an EES-14 notice identi-fying the issues that the DD is to address

during the exam. When the carrier disputed the impairment rating, the Division probably asked the claimant if he wanted the DD to address MMI as well. If so, then the Division will set up the DD’s exam to address both issues. If the EES-14 did not indicate that MMI was to be addressed by the DD, then the carrier should send a letter of clarification to the DD telling him to provide an impairment rating based upon the MMI date given by the referral doctor. The carrier should continue to pay IIBs based upon the reasonable assessment. If the EES-14 did indicate that the DD was to address MMI, then the report is valid and the carrier should stop payment of IIBs. If the DD did not provide an explanation as to why the claimant is not at MMI, the carrier should request a letter of clarification asking the DD to comply with Rule 130.6(b)(2) which provides that the DD “shall provide an explanation with clini-cal documentation to support why the employee had not reached MMI as of the date certified by the treating doctor.”

A designated doctor (DD) evaluated the claimant and determined that she had a 15% impairment rating and an ability to

return to work full duty. The claimant returned to work but was earning less than 80% of her average weekly wage. The claimant submitted an application for supplemental income benefits as-serting that she is entitled to partial supplemental income benefits (SIBs). Does the carrier have a defense?

Rule 130.102(b) provides that a claimant may be entitled to SIBs if she has earned less than 80% of her average weekly wage

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as a direct result of the impairment from the com-pensable injury. Rule 130.102(c) further clarifies that the reduced earnings must be caused by the impairment from the compensable injury. Thus, the carrier may argue that even though the claim-ant had a 15% impairment rating she also had a full duty release. The full duty release is evidence that there was no restriction on her ability to work thereby causing reduced wages. The carrier’s argument may be further strengthened if there is evidence that the reduced wages were caused by economic changes such as the employer no longer permitting overtime.

The employer would like the claimant’s indemnity check to be sent to the em-ployer so that they can at least visit with

the employee on a weekly basis. Can this be done without the employee’s permission?

No. Reading Rules 102.4 and 124.5 togeth-er requires the carrier to send indemnity payments directly to the claimant.


InteReSt CalCulatoRInterest Calculation Per Rule 126.12

Second Quarter 20003.91%

12

3

4

5

"X" Value Weeks "X" Value Weeks "Y" Value Weeks "Y" Value0.0012 27 0.2839 1 0.0008 27 0.02030.0027 28 0.3049 2 0.0015 28 0.02110.0050 29 0.3267 3 0.0023 29 0.02180.0080 30 0.3492 4 0.0030 30 0.02260.0117 31 0.3724 5 0.0038 31 0.02330.0162 32 0.3964 6 0.0045 32 0.02410.0215 33 0.4212 7 0.0053 33 0.02480.0275 34 0.4467 8 0.0060 34 0.02560.0342 35 0.4729 9 0.0068 35 0.02630.0417 36 0.4999 10 0.0075 36 0.02710.0500 37 0.5277 11 0.0083 37 0.02780.0590 38 0.5561 12 0.0090 38 0.02860.0687 39 0.5854 13 0.0098 39 0.02930.0792 40 0.6154 14 0.0105 40 0.03010.0905 41 0.6461 15 0.0113 41 0.03080.1025 42 0.6776 16 0.0120 42 0.03160.1152 43 0.7099 17 0.0128 43 0.03230.1287 44 0.7429 18 0.0135 44 0.03310.1430 45 0.7766 19 0.0143 45 0.03380.1580 46 0.8111 20 0.0150 46 0.03460.1737 47 0.8463 21 0.0158 47 0.03530.1902 48 0.8823 22 0.0165 48 0.03610.2075 49 0.9191 23 0.0173 49 0.03680.2255 50 0.9566 24 0.0180 50 0.03760.2442 51 0.9948 25 0.0188 51 0.03830.2637 52 1.0338 26 0.0196 52 0.0391

Accumulated Interest from Beginning to End of Continuous Payment

Accumulated Interest from End of Payment Period to Date Paid

4

23

18

Weeks1

20

5

14151617

26

6789

10111213

21

Interest Rate Effective from 04/01/2010 through 06/30/2010:

Determine total benefits plus interest owed by adding interest from steps 2 and 4, and adding total benefits to be paid.

Multiply “Y” by the total benefits owed (not including interest determined in steps 1 and 2 above). This is the approximate amount of interest owed from benefit ending date to payment date.

Determine number of weeks between ending date of payments and date benefits are to be paid. Find corresponding “Y” value on chart.

Multiply “X” by weekly compensation rate. This is the approximate amount of interest owed on the ending date of benefits.

25

222324

19

NOTE: For partial weeks, round up to next week (8 2/7ths weeks = 9 weeks).

Determine number of weeks of continuous payment owed. Find corresponding “X” value on chart.

TIBs: Calculate interest from the 7th day after first day benefits began, or the 7th day after the first notice, whichever is LATER.

Calculate interest from the 5th day after notice of the certification of MMI and impairment, or the date of a CARRIER dispute of MMI or impairment, whichever is EARLIER.

IIBs:


flahIve, ogDen & latSon DIReCtoRy

attorneys Direct Dial(512)

Direct fax* (512)

e-Mail **Initials @fol. paralegal paralegal

(512)

Bobby Stokes 435-2150 867-1705 RDS Anita Drake 435-2249

Carlos Acosta 435-2177 867-1712 CA1 Marilyn Mueller 435-2229

Chuck Finch 435-2158 867-1745 CCF Kristi Wilson 435-2263

Dana Gannon 435-2151 867-1710 DMG Anita Drake 435-2249

Greg Solcher 435-2175 867-1718 GDS Shannon Burgess 435-2298

Jack Latson 435-2156 867-1701 JWL Patsy Shelton 435-2234

James Sheffield 435-2169 867-1703 JRS Sharissa Karol 435-2224

Jeremy Lord 435-2184 867-1711 JXL Anita Drake 435-2249

Kevin MacEwan 435-2166 867-1706 KEM Sharon Youso 435-2233

Kevin Poteete 435-2163 867-1728 KSP Brandi Senters 435-2219

Lynette Phillips 435-2165 867-1708 LLP Sharon Youso 435-2233

Nancy Ippolito 435-2181 867-1721 NHI Kristi Wilson 435-2263

Paul Stone 435-2157 867-1716 PBS Karen VanLoo 435-2240

Pamela Pierce 435-2152 867-1736 PEP Shannon Burgess 435-2298

Rebecca Strandwitz 435-2160 867-1720 RMS Gina Flowers 435-2241

Rhett Robinson 435-2154 867-1709 SRR Marilyn Mueller 435-2229

Ron Johnson 435-2178 867-1745 RMJ Brandi Senters 435-2219

Roy Leatherberry 435-2179 867-1714 RJL Gina Flowers 435-2241

Scott Bouton 435-2153 867-1737 SDB Marilyn Mueller 435-2229

Steve Tipton 435-2162 867-1704 SMT1 Mary Casebier 435-2275

Tom Wilkins 435-2183 867-1727 TRW Karen VanLoo 435-2240

Tricia Blackshear 435-2180 867-1723 PHB Linda Thompson 435-2274

*Attorney’s direct dial fax no. is directed to his/her paralegal. **Alternative e-mail address: first initial+last [email protected] (example: [email protected])


Key taSK DIReCtoRy

To help expedite your faxed information to the correct area within FO&L and get it to the responsible per-son at the earliest time, use the following fax directory. Please remember the 3:30 p.m. receipt deadline for material required to be date stamped at the Commission. Material received after 4:00 p.m. does not permit time to deliver it across town prior to the DWC close.

task Contact person Direct Dial (512)

fax no. (512) e-Mail

[email protected]

Administrative Violations – C&P Patsy Shelton 435-2234 867-1701 PGS

BRC Settings (Request For Evidence) Cindi Friedel 435-2244 477-4987 CAF

Disputed Claims (PLNs) request for BRC (DWC-45) Sally Matthews 435-2237 477-4996 SLM

General Questions Receptionist 477-4405 867-1700 GQS

Insurance Coverage (DWC-20) Patsy Shelton 435-2234 867-1701 PGS

Records Requests/Photostats Sarah Van Wettering 435-2257 867-1717 [email protected]

DWC-60 Kim Lunday 435-2267 867-1733 KSL

Client Consultant Trina DeCecco 435-2239 867-1700 TAD

Designated Doctor Filings Katie Jaimes 435-2251 479-5319 KEJ

TWC Manual Sales Jordan Kazmann 482-9710 472-9160 [email protected]

IRO Katie Foster 435-2266 867-1733 KTF

Flahive, Ogden & LatsonAttorneys at LawP. O. Box 13367

Austin, TX 78711

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