LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
Revision 1
April 18, 2001
TO: Honorable Kim Brimer, Chair, House Committee on Business
& Industry
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB2600 by Brimer (Relating to the provision of workers'
compensation benefits and to the operation of the
workers' compensation insurance system; providing
penalties.), Committee Report 1st House, Substituted
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB2600, Committee Report 1st House, Substituted: positive impact *
* of $2,706,958 through the biennium ending August 31, 2003. *
* *
* The bill would make no appropriation but could provide the legal *
* basis for an appropriation of funds to implement the provisions of *
* the bill. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $1,291,701 *
* 2003 1,415,257 *
* 2004 2,098,606 *
* 2005 2,798,009 *
* 2006 3,576,688 *
****************************************************
All Funds, Five-Year Impact:
***********************************************************************
*Fiscal Probable Probable Probable Probable Change in *
* Year Savings/ Savings/ Savings/ Savings/ Number of *
* (Cost) from (Cost) from (Cost) from (Cost) from State *
* General General Federal Other Funds Employees *
* Revenue Revenue Funds - 0997 from FY 2001 *
* Fund Fund Federal *
* 0001 0001 0555 *
* 2002 $2,322,884 $738,550 $288,468 (0.6) *
* $(1,031,183) *
* 2003 (842,408) 2,257,665 778,785 304,184 (12.6) *
* 2004 (881,094) 2,979,700 1,112,997 434,722 (12.6) *
* 2005 (881,094) 3,679,103 1,455,061 568,328 (12.6) *
* 2006 (881,094) 4,457,782 1,835,897 717,078 (12.6) *
***********************************************************************
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*Fiscal Probable Savings/(Cost) from Probable Revenue Gain/(Loss) *
* Year Subsequent Injury Trust Fund from Subsequent Injury Trust *
* 0918 Fund *
* 0918 *
* 2002 $(11,400,000) $8,000,000 *
* 2003 (11,700,000) 8,000,000 *
* 2004 (12,100,000) 8,000,000 *
* 2005 (12,600,000) 8,000,000 *
* 2006 (13,000,000) 8,000,000 *
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Technology Impact
The Texas Workers' Compensation Commission (TWCC) would need to modify
databases to track information on approved doctors and for the
certification of doctors to be added to the approved doctors' list.
Also, TWCC would need modifications to the current systems to include
the collection and reporting of return-to-work data and to comply with
mandatory reporting to the Research and Oversight Council on Workers'
Compensation.
Fiscal Analysis
The bill would replace the current licensure-based Approved Doctor List
(ADL) with a qualification-based voluntary ADL and require all doctors
performing any duty in the workers' compensation system to be on the ADL.
The Texas Workers' Compensation Commission (TWCC) would set standards
for being a treating doctor, designated doctor, peer review doctor, or
for performing utilization reviews.
The bill would formalize the position of Medical Advisor and require the
advisor to set standards and guidelines for practice and review
compliance, as well as deletions, suspensions and practice restrictions
for doctors on the ADL. The bill would authorize the creation of a
Medical Quality Review Panel to assist the Medical Advisor and to
recommend sanctions, as well as additions, deletions or suspensions of
doctors on the ADL.
The bill would establish a medical network advisory committee to provide
input into the creation and standards for workers' compensation regional
health networks. Employee participation in networks of providers would
be voluntary, with employees opting into the network receiving additional
income benefits.
The bill would require employers to notify employees, treating doctors,
and insurance carriers of any return-to-work or modified duty programs
available. The bill would require carriers to provide and notify
employers of return-to-work coordination services available.
The bill would require TWCC to adopt rules for preauthorization and
concurrent review of specific services, and bring spinal surgery under
the current preauthorization process. The bill also directs that a
designated doctor be consulted prior to an insurance carrier requesting a
required medical examination (RME) by a doctor other than the treating
doctor. The designated doctor's opinion would hold presumptive weight.
Medical necessity disputes would be resolved by independent review
organizations.
The bill would direct TWCC to develop a drug formulary requiring generic
prescription drugs be dispensed with doctor approval.
The bill would change the sunset date for TWCC to September 1, 2005, two
years earlier than the current cycle.
The bill would make carriers liable for a claimant's attorney's fees
incurred in a judicial review of an appeals panel decision when the
claimant prevails in the judicial case. The bill would also add third
degree burns over forty percent of the body to the list of injuries
eligible for lifetime income benefits.
The bill would clarify the calculation of Average Weekly Wage (AWW) for
injured employees who are employed part-time or by multiple employers. In
the case of injured workers with multiple employers, the AWW would be
calculated based on the total earned wages, from both subscribing and
non-subscribing employers, rather than only the earned wages from the
employer where the injury occurred. The insurance carrier covering the
employer where the injury occurred would be responsible for all income
benefits awarded by TWCC.
The bill would also allow insurance carriers to apply for and receive
reimbursement annually from the Subsequent Injury Trust Fund (SIF) for
the amount of income benefits paid to injured workers that were based on
other employment. The bill would authorize TWCC to assess a maintenance
tax to insurance carriers, other than governmental entities, in an amount
to generate 120 percent of any projected unfunded liabilities of SIF.
The bill would allow for only partial payment to insurance carriers
should the statutory cap on the maintenance tax be reached prior to all
liabilities of SIF being met. The bill authorizes TWCC to purchase
annuities for the payment of lifetime income benefits from SIF should the
agency determine that to be financially prudent in the management of
SIF.
The bill would require a TWCC actuary or financial advisor to submit a
report biannually to the Research and Oversight Council on Workers'
Compensation (ROC) on the financial condition and project assets and
liabilities of the SIF.
The bill would take effect September 1, 2001. The Medical Network
Advisory Committee would convene by October 1, 2001. TWCC would adopt
rules by December 1, 2002 and return-to-work rules by January 1, 2004.
Regional workers' compensation networks would be established by May 1,
2002.
Methodology
The bill would produce total savings of approximately $20 million over
five years. The overall savings were assumed to occur in General Revenue,
Federal Funds and Other Funds in the same proportion as the current
state expenditures.
The Research and Oversight Council on Workers' Compensation (ROC)
estimates a $60.8 million cost over five years to the Subsequent Injury
Trust Fund (SIF) in benefits reimbursed to insurance carriers provided
for in Article 10, with an increase of $5-8 million each year to the
revenue into SIF through an increased maintenance tax rate.
It has been assumed that regional workers' compensation networks would be
operational to 5 percent of state employees in the first year and an
additional 10 percent each year thereafter. Seventy-five percent of
those covered by the networks are assumed to opt into the network. In
fiscal year 2000, approximately $46 million in workers' compensation
medical claims were paid to injured state employees. Assuming a general
20 percent savings in medical treatment cost to those employees choosing
to participate, and an expanding network system, a savings of $10.4
million is estimated over five years.
The significant reduction in required medical examinations would result
in an estimated one-time cost savings of $718,284 in 2002. Additionally,
the creation of a drug formulary and mandatory generic substitution
would produce an estimated savings of $1.4 million in 2002, and a five
year savings of $9.2 million.
The State Office of Risk Management estimates the need for three FTEs to
implement and maintain the return-to-work services required by the bill
at a cost of $200,383 in 2002 and $177,094 in 2003 and forward.
Texas Workers' Compensation Commission (TWCC) estimated a reduction in
staff of 3.6 FTEs in 2002 and an additional reduction of 12.6 FTEs in
2003. TWCC estimates a cost of $800,000 per year for litigation due to
doctor removal from the approved doctors' list. It is assumed that any
costs incurred at TWCC would be offset by additional revenue from the
workers' compensation maintenance tax.
The Research and Oversight Council on Workers' Compensation (ROC)
estimates a $60.8 million cost over five years to the Subsequent Injury
Trust Fund (SIF) in benefits reimbursed to insurance carriers provided
for in Article 10.
The SIF costs are based on a total of 4,387 claims eligible for such
reimbursement each year, an average of 11.3 weeks of temporary income
benefits (TIBs), $540 per week cap on TIBs benefits, and an average
weekly wage (AWW) of $473 projected for fiscal year 2002. The TIBs
benefit cap is assumed to increase by two percent each year and the AWW
is assumed to increase by four percent each year.
Four groups of claimants would be effected by Article 10 of the bill: 1.
two full-time jobs (175 annual claims); 2. two part-time jobs (1,184
annual claims); 3. a full-time and a part-time job with the injury
occurring on the part-time job (1,029 annual claims); and 4. a full-time
and a part-time job with the injury occurring on the full-time job (1,998
annual claims).
Depending upon the appropriation level of the Texas Workers' Compensation
Commission (TWCC) and current gross premiums remaining constant, the
maintenance tax at its statutory cap of two percent of gross premiums
would generate from $5-8 million in revenue each year for the SIF. As of
April 1, 2001, the SIF has a balance of $24 million. The average income
from death benefits from 1998-2000 has been $3.5 million per year, with
the average benefits being paid out of $2.6 million. With the increased
revenue of $8 million from the increased maintenance tax and the current
SIF revenue and balance, the full projected liabilities could be paid
beyond fiscal year 2006 without insufficient funds.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 503 Texas State Board of Medical Examiners, 454
Texas Department of Insurance, 508 Texas Board of
Chiropractic Examiners, 453 Texas Workers'
Compensation Commission, 479 State Office of Risk
Management, 478 Research and Oversight Council on
Workers' Compensation
LBB Staff: JK, JO, RT, KM