The Workers' Compensation System in Texas


Brief History  

The idea that workers should be compensated for work-related injuries, and that governments should administer programs to ensure compensation, spread to the United States from Europe during the opening decade of the 20th century. Texas enacted its first Workers' Compensation law in 1913. Today, all 50 states and the District of Columbia have Workers' Compensation.

In 1917, the U.S. Supreme Court ruled that states could legally require employers to provide compensation to injured workers. As a result, many states revised their laws to include mandatory Workers' Compensation. Texas revised its Workers' Compensation law in 1917 but retained voluntary employer participation in the system. Today, Texas is the only state that allows employers to choose whether or not to provide Workers' Compensation (although public employers, and employers who enter into a building or construction contract with a governmental entity, must provide Workers' Compensation).

The 1917 Texas law provided the basic framework for the state's Workers' Compensation system for the next 72 years. In 1989, after much controversy, a new Texas Workers' Compensation law was enacted, becoming effective in 1991. Provisions of this law set up specific billing and reporting requirements for physicians treating injured workers and enact a new income benefit and administrative dispute systems.  During the 2001 Texas legislative session, lawmakers passed House Bill 2600 (HB 2600), which significantly changed the delivery of health care to injured Texas workers.

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The Basics  

Workers' compensation is a state-regulated insurance program that pays medical bills and replaces some lost wages for employees who are injured at work or who have work-related diseases or illnesses.  It also protects covered employers from civil suit brought by the injured worker.  The Texas Workers' Compensation Act states that recovery of Workers' Compensation benefits is a covered employee's or a legal beneficiary's exclusive remedy against the employer for a work-related injury sustained by the employee or the death of the employee.

When a patient presents at a medical office, it is very important for the physician to determine if any injury or illness is work-related. The intake information sheet and the physician's history and physical can accomplish this. If the patient's injury or illness is work-related, the physician's office should determine if the employer has Workers' Compensation coverage. If the coverage is under the Texas Workers' Compensation system, then the physician and his or her office must follow the statute, rules, and guidelines of the state of Texas. These rules mandate reporting requirements, preauthorization of certain procedures and services, prescribed billing forms, and specific time frames for filing. Workers' compensation law and rules also define different roles for doctors, how the physician's examination impacts the injured workers' income benefits, and the expected reimbursement for health care services.

The Workers' Compensation law is referred to as the "Labor Code" because the Texas Workers' Compensation Act is within the area of the Texas law called the Texas Labor Code, Title 5, Subtitle A. The Texas Workers' Compensation Commission (TWCC) administers the act and is mandated to adopt specific administrative rules, including administrative processes and the Medical Fee Guidelines. In addition to mandated rules, the Commission will draft and adopt other rules it deems appropriate and necessary. The TWCC executive director (presently Richard "Dick" Reynolds) issues advisories that clarify the law or rules, or give guidance for resolving recurring problems. The Commission staff at the conclusion of dispute resolution proceedings writes decisions.

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Who is Covered  

According to a 1996 survey by the Texas Research and Oversight Council on Workers' Compensation (ROC), approximately two-fifths of Texas employers do not carry Workers' Compensation coverage. Most large employers tend to carry it, while small employers may not. Overall, an estimated 80 percent of the Texas workforce is covered under the worker's compensation system. Workers need not be U.S. citizens. Employees who are not U.S. citizens are entitled to compensation under the law.

Private-sector employers who choose to carry Workers' Compensation insurance can buy commercial insurance or become certified as self-insured. Under the first option, they must buy insurance from a company licensed by the Texas Department of Insurance to underwrite Workers' Compensation coverage in Texas or from the Texas Mutual Insurance Co. (formerly named the Texas Workers' Compensation Insurance Fund). The second option, certified self-insurance, is open only to those private-sector employers who can meet financial and safety requirements. They must obtain a certificate to that effect from TWCC. An updated list of certified self-insured employers is published monthly on the TWCC Web site.

By law, certain employers must provide Workers' Compensation insurance, and physicians should be alert to these: 

  • Public employers such as cities; counties; state agencies; and The University of Texas, Texas A&M, and Texas Tech University systems;
  • Building and construction contractors for public employers;
  • Motorbus companies;
  • Motor carriers (persons who operate motor vehicles over public highways to provide transportation services);
  • Liquid propane gas and compressed natural gas dealers; and
  • Employers of inmates in work furlough programs.

Public employers may buy commercial coverage, self-insure (no certificate required), or join a Workers' Compensation pool or fund composed of other public sector entities. Some groups that pool insurance are the Texas Association of School Boards, Texas Municipal League, and Texas Association of Counties. Employers who cover their workers with Workers' Compensation insurance have to follow all the rules and regulations written in the Workers' Compensation law as well as the rules and guidelines adopted by TWCC. This includes public employers, private employers with private Workers' Compensation, and certified self-insured companies.

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Who is Not Covered  

Workers employed by the federal government fall outside Texas law. Claims for these workers follow different procedures. Federal employees claims are processed by the U.S. Department of Labor, and personnel working on military bases claims are processed by the U.S. Department of Defense.  Other categories of workers not covered under Texas law are: 

  • Workers employed on offshore drilling rigs and ships, and those involved in loading or unloading sea vessels (covered under specific federal laws, and their claims are handled by commercial insurance carriers);
  • Domestic or incidental household workers; and
  • Family members working on their farms and ranches.

Nonsubscribers, employers who do not carry Workers' Compensation, are not obligated by law to follow any of the Workers' Compensation law or rules. The workers least likely to be covered are those in retail trade and agriculture. Only about half the employers in these industries, according to a survey by the ROC, provide Workers' Compensation insurance for their employees.

A physician's office should call the local TWCC office to confirm the employer's coverage. If the employer is not covered by Workers' Compensation, the medical office may treat the injured worker as a private-pay patient and follow standard office policies and procedures. Under the Texas Workers' Compensation system, the employer is under no legal obligation to cover the medical charges incurred by an injured worker.  In some cases, employers may have bought life, accident and health, and disability policies as alternatives to Workers' Compensation. These alternative policies may cover the costs of some of the medical bills or offer coverage for lost wages for on-the-job injuries, but they are not considered Workers' Compensation insurance.

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The Employer's Role  

Employers must inform the Commission about whether they carry Workers' Compensation insurance and, if so, which type - commercial or, if they qualify, certified self-insurance.  Similarly, insurance carriers must notify the Commission when they sell, renew, or cancel policies to employers. An employer must notify its insurance carrier within eight days of certain work-related accidents or fatalities and is required to provide a written report to the employee with an explanation of his or her rights and responsibilities in wording specified by the Commission.

How faithfully employers comply with the requirement is open to question. Some employers are reluctant to report injuries or even inform physicians about coverage when an accident occurs because they fear an increase in premiums.  At the same time, employees may delay informing their employers because they fear the consequences or may not know exactly how the injury occurred. The important point for physicians is that when a patient presents with a workplace injury or illness, staff must determine rather quickly whether the patient's employer carriers Workers' Compensation insurance.  If so, the ball starts rolling on a whole set of billing and reporting procedures - which, in many cases, can restrict services to the patient and define the physician's working relationships with colleagues.

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Treating Doctor as Gatekeeper  

One important difference in filing claims on injured workers compared with private-pay patients is the Workers' Compensation law's "treating doctor" concept. Under this concept, the physician who initiates treatment for the injured worker becomes the gatekeeper for that worker's medical services. (There are exceptions. Typically, unless the injured worker continues to see the physician for more than 60 days, the emergency room physician, or a physician who is recommended by the company or carrier will not serve as the worker's treating doctor.) Any other physician who becomes involved with the worker's care does so at the request and with the approval of the treating doctor.

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Maximum Medical Improvement  

Another important difference in treating injured workers compared with private-pay patients is the concept of "maximum medical improvement" or (MMI). According to the Workers' Compensation law, MMI is a specific date set either by the injured worker's medical condition or the time since income benefit eligibility. When MMI is reached, an impairment rating is calculated, and the type of income benefits changes. Carriers use the MMI date to determine the type and amount of benefits a patient receives.

MMI is the earlier of two conditions. Medically, it is the point in time that an injury or illness has improved as much as it's going to improve. Statutorily, it is 104 weeks from the date the patient became eligible for income benefits.

In addition, the Commission has the authority to extend MMI for patients who will undergo, or have undergone, spinal surgery within 12 weeks before the statutory date. Spinal surgery is the only treatment or surgery where the statutory MMI date can by extended by the TWCC staff. Ideally the employee suffers minimal injuries and returns to work quickly and fully restored.  However, when injuries are more severe or intractable, medical staff must know the clock is ticking.  Carriers sometimes push for an MMI assessment well before the statutory limit, and physicians need to be prepared to deal with these demands.

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The Texas Workers' Compensation law lists four types of benefits: income, medical, death, and burial. Income benefits replace a portion of any wages a worker loses because of a work-related injury or illness and provide compensation for a permanent impairment to a worker's body. The four types of income benefits are temporary income benefits, impairment income benefits, supplemental income benefits, and lifetime income.

Medical benefits Medical benefits pay for any medical care that is reasonable and necessary to treat a work-related injury or illness. The employer's Workers' Compensation insurance company pays medical benefits directly to the physician or health care provider who treated the injured worker. The common phrase "lifetime medical benefits" means that an injured worker cannot "settle" for a certain amount of money or number of years of medical benefits not that an insurance carrier is obligated to pay for services that are unreasonable or unnecessary. Medical benefits pay only for the treatment of work-related injuries and illnesses. The worker may choose a doctor, but the doctor must be on a list of doctors approved by the Commission. Except in an emergency, the injured worker's treating doctor must approve all medical care for an injury or illness.

Death benefits replace a portion of lost family income for eligible family members of workers killed on the job. Burial benefits pay some of the deceased worker's funeral expenses.

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House Bill 2600  

As noted in the previous chapter, Texas House Bill (HB) 2600 passed after review of state and national studies and discussions with all the parties involved in the Texas system. The complete impact of how HB 2600 will change physicians' reimbursement, injured workers' treatment patterns, speed of return to work, or costs to the system will not be realized or understood for several years.

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The Motivation Behind HB 2600  

In January 2001, the ROC presented a report to the 77th Texas Legislature titled, Striking the Balance: An Analysis of the Cost and Quality of Medical Care in the Texas Workers' Compensation System. The report was the product of a study mandated by the 76th legislature to investigate the quality and cost-effectiveness of the current Workers' Compensation health care system and to examine medical provider treatment patterns and insurance carrier utilization review practices in Texas.

The following are some of the key findings from that study. Of the nine Workers' Compensation systems included in the analysis: 

  • Texas has the highest average medical costs per claim which was more than 20 percent higher than the second highest state ("claim" in Workers' Compensation does not mean a claim for medical payment but an injured worker's case).
  • Texas also has the second highest average pharmaceutical cost per claim (more than 23 percent higher than the third highest state.
  • Texas ranked second only to California in the longest duration of medical care for injured workers.
  • Fewer injured workers in Texas (64 percent) reported that they were currently working more than two years after their injury, compared with injured workers in other states (75 percent).
  • Compared with injured workers in other states, Texas injured workers had lower levels of physical and mental functioning after their injury (i.e., they were less likely to get better after their injury and more likely to experience depression and alienation).

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HB 2600 Highlights  

Following is a brief outline of major issues that will affect Texas physicians. HB 2600: 

  • Requires physicians who wish to treat injured workers to register to be on the Approved Doctor List.
  • Commission rule will mandate specific training and testing requirements.
  • The Commission must hire a medical advisor (a licensed doctor) to oversee medical issues in the Texas Workers' Compensation system.
  • A medical quality review panel will be put in place to review medical services and recommend sanctions to the medical advisor.
  • Establishes a governor-appointed Health Care Network Advisory Committee to study the feasibility of regional Workers' Compensation networks.
  • Mandates employers, if requested, to report if modified work duty is available.
  • Carriers must offer return-to-work coordination, including job analyses.
  • Changes preauthorization and spinal surgery processes.
  • Changes the use of required medical examinations and designated doctors.
  • Mandates TWCC to develop a pharmaceutical open formulary that requires the use of over-the-counter medications instead of prescription medications when clinically appropriate.
  • Abolishes the current TWCC treatment guideline and changes the methodology used to develop the Commission's fee guidelines.
  • Requires health care providers to disclose financial interest in other providers, following federal guidelines.
  • Requires TWCC to use independent review organizations licensed by the Texas Department of Insurance to review medical necessity in medical dispute resolution.
  • Increases the eligibility for lifetime income benefits to include individuals with third-degree burns.

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  TWCC Rules  

Since the passage of HB 2600, TWCC has developed and proposed numerous rules for the implementation of the law.  Specifically, TWCC has proposed rules that deal with treatment guidelines, work release guidelines, medical dispute resolution, preauthorization of services and treatments, and Medical Fee Guidelines.  The following is a brief status and summary of these proposed rules.

Treatment Guidelines:   TWCC withdrew this proposal at a public meeting held Feb. 14, 2002.  The withdrawal was due in part to TMA's comments demonstrating that the Intracorp Clinical Guidelines Tools (CGT) proposal was never submitted to the National Guideline Clearinghouse (NGC) for review.  Furthermore, TMA noted that the Intracorp proposal did not meet the NGC's inclusion criteria or nationally recognized standards for practice parameters developed by the American Medical Association, national specialty organizations, and other participants from the health care industry.  No one testified in support of the proposed guidelines during the public hearing on this subject, including the business community, employers, and Workers' Compensation carriers.

Work Release Guidelines:   TWCC withdrew this proposal at a public meeting held Feb. 14, 2002.  TMA submitted formal comments stating that the proposed rules tie work release determinations to the CGT published by Intracorp.  Because Intracorp has failed to submit CGT to NGC for appropriate review, the proposed rules are based on data that are not recognized as current or clinically relevant and should not be used.

Medical Dispute Resolution:   TWCC adopted these rule proposals at its public meeting held Dec. 13, 2001.  These rules encompass Prospective Necessity, Review Timeliness, Dismissal of Dispute by TWCC, and Resolution by Independent Review Organizations.

Preauthorization of Services or Treatment:   These rules have been published in their final form.  Preauthorization of Services or Treatment has created much controversy and concern since the passage of the Workers' Compensation Act on Dec. 13, 1989.  Over the years, such rules have been the subject of several proposed revisions intended to make them more effective and to target only those services that require specific oversight as to their efficiency and medical necessity.  Due in large part to TMA's comments regarding the most recent revision of these rules, the number of items requiring preauthorization was reduced from 16 to 14, and the responsibility of the carriers for a more timely response has been accelerated.

Medical Fee Guidelines:   The Medical Fee Guideline rules have been the most controversial rule proposals to date. The Texas Workers' Compensation Act provides that TWCC must establish guidelines for the payment of health care services.  Although the law states that TWCC must update the guidelines every two years, the Commission has not done so since 1996. Legally, the guidelines must be fair and reasonable and designed to ensure quality medical care and achieve effective cost control. The guidelines may not provide for payment of a fee in excess of the charge for a similar treatment of an injured individual with an equivalent standard of living.

In the last legislative session, HB 2600 made several amendments to the Labor Code that provided for the adoption of the Health Care Reimbursement Policies and Guidelines of the federal Health Care Financing Administration (HCFA, now the Centers for Medicare and Medicaid Services). Those amendments, while requiring the adoption of reimbursement or conversion factors, also specified that the legislature was not adopting the Medicare fee schedule and that the Commission was not to adopt conversion factors or other payment adjustment factors based solely on those developed by HCFA (e.g., Medicare).

TWCC originally proposed the Medical Fee Guideline rules at a public hearing held Oct. 18, 2001.  Due to strong TMA comments in opposition to those proposed rules, as well as those of other stakeholders, TWCC withdrew its proposal.  At the request of TWCC Executive Director Dick Reynolds, TMA analyzed and responded to a working draft of fee guidelines developed by the TWCC staff. TWCC failed to address many of the problems identified in TMA's written comments to the first proposed rules.

After TMA's response to TWCC's working draft, the Commission proposed revised Medical Fee Guideline rules at its public meeting held Dec. 13, 2001.  Except for anesthesia, the revised guidelines placed fees for all specialties at 120 percent of Medicare, a significant reduction from their original proposal.  Anesthesia was set at 257 percent of Medicare.  TMA's Workers' Compensation Task Force believed that the proposed fees fell far short of the statutory requirement of "fair and reasonable" and that the rules contained numerous provisions that are incompatible with state law.

Before TWCC's scheduled public meeting on April 25, 2002 in which the Commission was to vote on the adoption of the Medical Fee Guidelines, Michael D. McKinney, MD, chief of staff for Gov. Rick Perry, sent a letter to the TWCC chair requesting that the Commission take no action on the fee rules until the stakeholder process has been given the time and opportunity to work.  Dr. McKinney's letter further stated that the proposed rules, if adopted, could negatively affect physicians and their patients in the Workers' Compensation field.

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TWCC Adopts Medical Fee Guidelines  

There are six TWCC Commissioners. Commissioners Olivares (Chair), Abla, and Moore represent employees. Commissioners Terrill, Smith (newly appointed this week, and Perry's only appointment), and Watson represent employers. Commissioner Abla made a motion that the Medical Fee Guidelines be increased from 120 percent of Medicare to 125 percent. This motion was passed. Eventually, after the Commissioners went into Executive Session, Chairman Olivares called for a vote to adopt the Medical Fee Guidelines at 125 percent of Medicare.

Before the vote, Commissioner Smith asked for the motion to be tabled because: 

  • There were letters in the Commissioners' packet from Senators Truan, Harris, Cain asking for a delay on the vote.
  • There were substantial letters and comments from the doctors stating that the proposed conversion factor was illegal and injurious toward the Workers' Compensation system.
  • Because he was a new Commissioner and had not has adequate time to review the rule.  Commissioner Smith continued that the delay would be a personal consideration to him.

 Commissioners Abla, Moore, and Watson said they were not in favor of delaying the vote because the staff had been working on the rule for about a year, they had pulled down a previous rule, extended the public comment period for this rule, and the staff had meet numerous times with stakeholders. Commissioner Terrill restated these positions and added that although Commissioner Smith had not had a long time to look at the rule, if Governor Perry wanted his appointee to be well informed he could have appointed him over a year ago (Commissioner Smith was appointed to replace Commissioner Lowery whose term had actually expired in Feb. 2001--Commissioners Abla is also continuing a term that expired in Feb. 2001.). Commissioner Terrill also stated that he didn't think that politicians should be micro-managing a state agency.

Chairman Olivares stated that she agreed that there had been ample time for stakeholder comments, and contrary to Senator Harris' plea that an extra 30 days for stakeholders to come to a compromise, she felt that it would have already been accomplished if it were going to happen. In addition, Chairman Olivares said that she would normally extend the courtesy of a delay to a new Commission, but HB 2600 instructed the Commission to adopt a fee guideline by May 1, 2002 and this was really their last chance to adopt and still be in compliance with the statutory requirements. Therefore Commissioner Smith's motion to table died for lack of a second.

The Commissioners then adopted the proposed fee guidelines at 125% of Medicare. Commissioners Olivares, Abla, Watson, and Terrill voted in favor of adoption of the fee schedule. Commissioner Moore voted against adoption, and Commissioner Smith registered present, not voting.

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Statements by Dick Reynolds  

After the vote TWCC Executive Director Dick Reynolds, made a statement that had been contacted by Governor Perry's Chief of Staff who asked him to delay the vote (Mr. Reynolds held up the letter from Dr. McKinney and apparently had not distributed it to the Commissioners). Mr. Reynolds continued stating that although he had extensive interaction with the TMA and received numerous comments from the association, it was appropriate for the Commissioners to adopt the fee guideline at this time.

Apparently agitated, Mr. Reynolds proceeded to list every time that he had received communication from the TMA and every time he or his staff had met with individuals from the TMA (and specified whom he had met with and received communication from) and then noted that he had also met with a group of doctors for over two and a half hours. Mr. Reynolds made the statement that he felt that the TMA was no longer agreeable to going to an RBRVS system as it had agreed to in supporting HB 2600. Mr. Reynolds also mentioned his disapproval of the TMA sending out an alert telling doctors that TWCC was adopting federal price controls. Mr. Reynolds continued that he had no idea what part the federal government played in HB 2600. Finally, Mr. Reynolds stated that he had asked TMA for data and that they had never been able to produce for him.

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Dick Reynolds' Raise  

Before the adoption of the Medical Fee Guideline rules and Mr. Renyolds' statements, the Commissioners voted to give him a $12,000 a year raise. The Commissioners took this action even though TWCC is reportedly under a staff hiring and merit raise freeze do to budget constraints.

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Last Updated On

September 09, 2015

Originally Published On

March 23, 2010

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