Beginning January 1, 2012, the Division of Workers’ Compensation (DWC) will begin its six month collection of data to assess insurance carriers for Performance Based Oversight (PBO). The PBO period will last until June 30, 2011. The PBO measures are as follows:
Timely Initial Payment of Benefits (40%)
Timely EDI Filing of Initial Payment (10%)
Timely Payment of Medical Benefits (40%)
Timely Medical EDI Filing of Medical Payment (10%)
After an exhaustive search for additional meaningful measures, DWC decided to keep the same four measures from the last PBO. This consistency allows DWC and carriers to compare and track performance over time. DWC considered but elected not to adopt an appeal or reassessment process. However, DWC indicated to stakeholders that it will be more forthcoming with descriptions of evidence it will accept (before making a decision) and explanations of why DWC did not accept carriers’ evidence.
Carriers urged DWC to adopt more meaningful incentives. HB7 directed DWC to adopt a performance based system instead of a penalty-driven system. Yet, DWC issued more penalties this year than in years past. DWC is not satisfied with carriers’ performance; yet, clearly the current penalty-driven system is not incentivizing “average tier” carriers to invest more resources to obtain “high tier” status. High unemployment results in declining premiums. Yet costs are rising. Nationally, carriers are experiencing their worst loss ratios in years. So, carriers are reducing the level of resources allocated to claims handling. Carriers cannot achieve “high tier” status unless greater resources are allocated. DWC must provide measurable, objective, and obtainable incentives to convince national carriers to invest greater resources.
Stakeholders met with DWC to urge a “more carrots, less stick” approach. DWC issued new guidelines explaining the incentives to carriers. However, many stakeholders believe DWC intends to continue its penalty-driven approach to regulation.
Downs Stanford recommends carriers review their workflows for the four PBO measures and take appropriate steps to ensure compliance. Downs Stanford suggests carriers file a PLN-11 disputing disability in cases where the injured worker did not lose time (or pay) from work initially. (DWC believes carriers should continue to follow-up with employer and employee after initial return to work to see if the injured worker began losing time again from work).
Additionally, DWC is conducting audits including reviews of the accuracy and timeliness of benefit payments and EDI transactions. Downs Stanford recommends carriers internally audit, monitor and improve the integrity and accuracy of data and payments. Despite its reputation as a business friendly state, Texas remains a highly-regulated insurance market. Rules and interpretations of those rules change frequently. Texas regulators pursue fines and penalties at a rate far higher than most other states. Each carrier will independently determine the cost of regulation and decide the resources necessary to achieve an acceptable level of performance given current economic realities.