Workers’ Compensation Reform: Good Medicine But No Cure

As every employer knows, Texas’ workers’ compensation system is sick. In fact, some say it’s on life support. The remedies offered by the two bills currently before the legislature–House Bill 7 and Sentate Bill 5–promise to nurse it back to health. Yet, neither will cure the problems.

The cure is in the hands of each and every employer in the state. Unless employers take the steps necessary to address workers’ comp issues in their businesses, it will remain a chronic condition in Texas. Here’s why the proposed legislation, while helpful, falls far short of a cure:

Medical care networks
The formation of medical care networks is the most highly touted component of both bills. The proponents proclaim this to be the cure-all to Texas’ workers’ comp woes. Since one of the common complaints of the present system is that injured employees do not have access to adequate health care, a system of medical care networks, which are similar to group health plans, will overcome this problem.

Physicians have been leaving the current workers’ comp system in droves for one reason: Money. Not only has the state reduced the authorized payment schedule substantially, but some insurance carriers have compounded the problem by making it difficult for physicians to be paid. The result is predictable: Many doctors are refusing workers’ comp cases. It’s said many of those who are accepting injured workers as patients are doing so because they know how to “work the system.”

The bills’ supporters argue that a network to manage patient care will provide injured workers with a choice of qualified, credentialed medical doctors who will effectively guide their care and expedite their return to work. In turn, costs to employers will be reduced. Yet, this logic belies common sense. Quibbles about money have long dominated the relationship between insurers and the medical profession. Although these two parties now would have common goals and work hand-in-hand to get the employee back to work, fees will still be the bottom line.

As the argument goes, the networks will control costs through a system of consistent, regulated guidelines for treatment. While that sounds reasonable, it must be remembered that many consumers are dissatisfied with managed health care today because it limits choices and denies access to medical services they deem necessary. Similarly, employees want a strong voice in care options for a work-related injury.

Moreover, the proposed model has failed to solve the nation’s health care crisis. Medical groups, hospitals and even HMO’s are running in the red and no one wants to ante up the funds to cover the shortfalls. And health care plan costs continue to escalate with employers facing annual double-digit increases.

It’s time we took a much closer look at the causes and not just the ailments. To put it as clearly as possible: To control worker compensation costs, employers must do everything possible to prevent job-related injuries.

Texas is the only state in the nation where workers’ comp is truly optional. Skyrocketing costs and a low return to work rate have caused 38 percent of the employers, covering 24 percent of the state’s workforce, to opt out of the system, according to the Texas Association of Business. This is not a good situation, to be sure.

When working properly, the workers’ compensaton system offers safeguards to both the employee and employer. If employees are hurt on the job, they get paid while they are unable to work, receive necessary medical services, and retraining, if needed. Employers can protect their employees and remain in business by implementing simple, common sense processes in the hiring and post-injury phases that will drastically reduce their costs.

What must be done to get our workers’ comp system on track? The answer is simple: Employers must develop a workplace culture that’s committed to loss prevention and to employee satisfaction. This is what it will take to reduce the number of claims and system abuse.

Increased benefits
Each of the proposed bills contains a provision to increase the amount of temporary income benefits for an injured worker. While higher indemnity payments may actually help the person unable to work, what will happen to employer premiums? They can’t do anything but increase, at least in the short term.

One of the built-in functions of workers’ comp is that employers pay up to $3 in additional premium for every $1 the insurance carrier pays on the cost of a claim. With higher indemnity payments come higher experience modifiers, and therefore, higher premiums.

Return to work
An incredible amount of lip service has been paid to the return-to-work provisions in the new legislation. Yet, the language in both bills is either already written into the current law or provides little or no real solution. Return-to-work is effective only when it is devised, instigated, mandated and supervised by the employer and made part of the overall corporate culture.

The Senate bill offers an employer up to $2,500 to make changes to the workplace that will accommodate an injured worker’s return to modified duty. While this is a step in the right direction, the annual fund is only $100,000 to cover the 70,000 Texas businesses that qualify. There are better odds at the lottery.

The fact remains that return-to-work, or better yet, remain-at-work policies, are clearly one of the most important components for reducing workers’ compensation costs. Getting a $2,500 grant from the state to buy a video recorder and a couch is not the answer.

Effective return-to-work is not something that can be mandated from the state capitol, nor can it be implemented by the insurer.

The fact is that employers are already allowed to–and should–implement return-to-work and remain-at-work programs, not only because it’s the right thing to do but it also saves tons of money. Most employers don’t have effective programs because they’ve never understood the impact of the $3.00/$1.00 rule. Until that happens, they will continue to treat workers’ comp as they do other lines of insurance.

It’s not that some revamping of the workers’ comp system won’t help. Unfortunately, it will continue to perpetuate the myth that the state and insurance carriers can solve the workers’ compensation cost problem. They can’t. Only the employer can do that.

That’s the good news. If we want to reduce our workers’ comp costs, we can do it. Employers have it in their power to fix the problem. Today.

Scott Cain is a Certified WorkComp Advisor and the Workers’ Compensation practice leader at Dexter & Company in Dallas, one of only 20 insurance brokers nationwide designated as a Level 5 Agency by the Institute of WorkComp Advisors.

Topics Texas Workers' Compensation Talent