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Texas Monitor, 2:1 (Spring 1997)


FREQUENCY OF CLAIMS 1991-1996

Reported Claims are Down

End-of-year counts of workers' compensation (WC) claims in Texas are reported in the following tables. The tables are constructed in a way that allows comparison between equal periods of time for claims to become established, classified and counted.

There are two major categories of claims in the Texas workers' compensation system. An "indemnity claim" is a claim involving income benefits. A "reportable claim" is any claim not involving income benefits but involving more than one day's absence from work as a result of a compensable injury or an occupational illness. Indemnity claims tend to result from more serious injuries.

The following tables use cut-off dates in order to compare claim counts by injury year. Since claims resulting from injuries occurring in 1996 had only until the end of 1996 to become established within the database, a similar cutoff was used in counting claims from earlier years. Thus, 1996 claim counts can be compared to 1995 claim counts when the time lag from the beginning of the injury year is labeled "1 year" in the tables. Claim counts for 1995 claims can be most accurately compared to claim counts for earlier years by examining a time lag of "2 years", and so forth.

Following are key findings from this analysis:

  • The total number of new claims decreased by 8.3 percent in 1996 from comparable 1995 totals (see Table 1). This is the second year in a row that a decrease has occurred, following increases for 1992, 1993, and 1994 injury years.
  • The number of 1996 indemnity claims, which result from more serious injuries requiring the payment of income benefits, dropped 12.9 percent over the comparable 1995 period (see Table 2). This drop follows two years of relatively little movement.
  • Reportable claims, resulting from less serious injuries not requiring income benefits, are also down for 1996, continuing the downward movement seen in 1995 (see Table 3).

It should be noted that 1991 was an unusual year in which the overhaul of the entire WC information system produced long lags in claim establishment. However, with a 5-year lag now available, it appears that there was a sharp increase in the total number of claims reported for the 1992 injury year. Another substantial increase in total claims reported occurred for the 1994 injury year.

The recent decreases in claim counts cannot be explained by a decrease in the number of covered employees. The size of the labor force has grown between 1 and 3 percent each year since 1991. 1 Surveys indicate that the percent of the labor force covered by workers' compensation has not changed substantially in recent years. 2

The observed decreases in claims may reflect improved safety practices in the workplace. The annual occupational injuries and illnesses survey conducted jointly by the TWCC and the Bureau of Labor Statistics indicates total workplace injury rates dropped from 7.7 per 100 workers in 1991 to 7.3 in 1992 and 7.1 in both 1993 and 1994. 3 Data for 1995 and 1996 are not yet available. Confirmation that decreases in claim counts are due to an increase in workplace safety must await further data.


BACK INJURY CLAIMS IN THE TEXAS WORKERS' COMPENSATION SYSTEM: A LOOK BACK

The Texas Workers' Compensation Act of 1989 became effective in 1991. New processes were installed for gathering data necessary to monitor the functioning of the system. Inadequate information on claims prior to 1991 has made it difficult to conduct fair comparisons between the old system and the new. However, a 1988 study by the Workers Compensation Research Institute (WCRI) of workers' compensation claims resulting from back injuries in Texas 4 provides a valuable opportunity to compare the current workers' compensation system in relation to the system that existed prior to the reforms of 1989. This article is restricted to claims resulting from back injuries for which permanent disability benefits were paid. This is an important group of claims because they absorb much of the medical and indemnity costs of workers' compensation.

The research findings summarized below are based on a study conducted by the Research and Oversight Council (ROC) to compare data from the 1988 WCRI study with those from more recent samples. The sample was drawn from the Detailed Claim Information (DCI) database collected and maintained by the Texas Department of Insurance, and included 789 back injury claims that had been "closed" 5 between March 1, 1995 to May 31, 19 95. These claims were analyzed for: the proportion of back surgeries; the average cost of back injury claims; attorney representation; and the proportion of dispute resolutions. Key findings are as follows:

Average Claim Cost

  • The overall average claim cost for a low back injury in 1986 was $48,452, much higher than the 1995 average claim cost of $38,270.
  • There were fewer surgery claims in 1995 (23 percent) than in 1986 (33 percent). This may be, in part, a function of more stringent medical cost containment strategies implemented under the new law, e.g., the second opinion spinal surgery process. (See Table 4 for more details.)

Dispute Resolution and Attorney Representation

  • Over the 1991-1995 period, 37 percent of workers with back injuries had been involved in a dispute as compared to 69 percent in 1986. This is a reduction of 54 percent in the demand for dispute resolution for back injuries in the new system.
  • Of those claims involved in dispute, only 19 percent of the 1995 cases had attorney representation as compared to about 89 percent in 1986 (See Figure 1 ).

Summary

It is apparent that, overall, the average cost of back injury claims is significantly lower under the new WC law. The elimination of lump-sum payments under the new law, which were identified as a major cost driver under the old system, may have contributed to this drop in costs. Similarly, for these serious low back cases, there has been a substantial reduction in both the demand for dispute resolution as well as the involvement of attorneys under the new law. Lastly, new cost containment procedures have likely contributed to the decline in costs.


MAXIMUM MEDICAL IMPROVEMENT AND THE 104 WEEK RUL E

Injured workers covered under the Texas workers' compensation (WC) system are entitled to income-replacement benefits if the injury results in more than one week of lost work. Weekly income benefits begin to accrue on the eight day of disability. 6

Temporary income benefits (TIBs) continue until the injured worker reaches maximum medical improvement (MMI). By law, MMI means the earlier of:

  1. the earliest date after which, based on reasonable medical probability, further material recovery from or lasting improvement to an injury can no longer reasonably be anticipated; or
  2. the expiration of 104 weeks from the date on which income benefits begin to accrue. 7

Thus the 104 week rule places a limit on the duration of TIBs payments. For those permanently impaired workers who fail to be certified as reaching MMI within the first two years of disability, the 104 week rule serves to force the end of TIBs and the beginning of impairment income benefits (IIBs).

Implicit in the 104 week rule is the assumption that, at least for injuries not resulting in permanent impairment, a maximum of 104 weeks is needed to heal adequately and return to work. Presumably, if injured workers with temporary impairment are adequately treated and monitored by their treating doctor, cases in which MMI is not reached within 104 weeks would be rare.

However, two years may not be adequate time to reach MMI. Most other states have assumed that a longer period may be needed. Thirty-four states pay temporary income benefits for the entire duration of the disability. Of the 16 states that do have limits, only two other than Texas have a 104 week limit. The remaining states have limits that vary from 156 weeks to 500 weeks. 8

Statutory MMI for Temporary Disability Claims

Table 5 shows that, unless the injury results in permanent impairment, less than 1 percent of cases reach the statutory limit of 104 weeks of TIBs. For temporary disability claimants who did not suffer a permanent impairment as a result of their injury, the rule is rarely invoked, which suggests that the rule is working as intended, affecting only cases in which MMI is unusually delayed. A recent survey of Texas doctors experienced with workers' compensation found general agreement that 104 weeks is a sufficient healing period for most injuries. 9

Statutory MMI for Permanent Impairment Claims

With regard to injuries that do have permanent effects, the rule implies that after two years of disability, a stage has been reached in which the worker should adjust, with the help of a limited period of IIBs support, to working with the permanent impairment regardless of any anticipated further medical improvement. About 7 percent of the claimants with permanent impairments have their TIBs terminated by the 104 week rule.

Statutory MMI by Injury Type

Back injuries were more likely to reach the 104 week statutory MMI than other major body part categories. Twenty-two percent of back injuries with a 15 percent or higher impairment rating reached statutory MMI compared to 16 percent of upper extremity and 12 percent of lower extremity injuries with impairment ratings in this range. (See Table 6).

When body part and injury nature categories are further refined, other differences among injury type emerge. Table 7 presents the body part and injury nature categories with the largest percentage of claims reaching statutory MMI at 104 weeks.

Injuries to the nervous system, including brain, and internal organ systems had high rates of statutory MMI. Doctors in the survey cited above specifically mentioned injuries to the spine, head and nervous system as injuries for which a greater healing time may be necessary.

Summary

In conclusion, it is apparent that the 104 week maximum is adequate for nearly all claims (99.6 percent) which did not involve a permanent impairment and most claims (93 percent) for which the injured worker received an impairment rating greater than zero. It is the remaining 7 percent of severely injured workers that should raise concerns about the adequacy of the 104 week limit for all cases.


RETURN-TO-WORK PATTERNS OF SIBs CLAIMANTS ANALYZED

The information in this article is excerpted from Return-to-Work Patterns of Injured Workers Receiving Supplemental Income Benefits. Copies of the full report are available via our electronic order form.

As part of the 1989 workers' compensation (WC) reforms, the Texas legislature implemented a multi-tiered income benefits system, consisting of temporary income benefits (TIBs), impairment income benefits (IIBs), supplemental income benefits (SIBs), lifetime income benefits (LIBs), and death benefits (DBs). This benefit structure went into effect on January 1, 1991.

SIBs are available to injured workers with permanent impairment ratings of 15 percent or higher, who at the expiration of the impairment income benefit period, a) have not returned to work, or b) have returned to work earning less than 80 percent of their pre-injury wages. This benefit is intended to assist injured workers who, after both the healing period (TIBs), and the "adjustment period" (IIBs), are still unable to find employment as a result of their injury.

This article summarizes the findings from a recent report by the ROC that provides the most current information available on the number of SIBs claims which have occurred since 1991 and the employment status of these severely injured workers.

Data and Methodology. The data used in this analysis was drawn from the universe of SIBs claimants injured on or after January 1, 1991, and a random sample of indemnity claims with injury dates in the same period. Indemnity claims are those for which the injured worker has received income benefits. 10 A total number of 5,412 claims from the Texas Workers' Compensation Commission's (TWCC's) administrative database is included in this project dataset. The project dataset is used to provide a profile of the more seriously injured SIBs claimants as they compare to the more general population of indemnity claimants.

A subset of these claims with just 1991 injuries is used to examine return-to-work patterns for SIBs claimants. The claims data for SIBs claimants with 1991 injury dates was merged with the Texas Workforce Commission's (TWC's) quarterly wage data to determine post-injury earnings patterns for these severely injured workers. A total of 1, 148 SIBs claimants is included in this return-to-work analysis dataset.

Profile of SIBs Claimants

Because injured workers are not able to receive SIBs until they have exhausted their TIBs and IIBs, it is not surprising that, as of September 30, 1996, the majority of the claims which resulted in SIBs payments (77 percent) resulted from 1991 (47 percent) or 1992 (30 percent) injuries. (See Figure 2.)

Duration of Temporary Income Benefits

SIBs claimants on average receive TIBs for well over one year (69 weeks) before either returning to work or reaching maximum medical improvement (MMI) and beginning their IIBs payments. 11 This compares to an average TIBs duration of 20 weeks for the less seriously injured indemnity claimants who did not receive SIBs. It is important to recognize that the differences in TIBs duration for SIBs and non-SIBs claimants is expected given that SIBs claims involve some of the most severe injuries in the workers' compensation system.

Body Part and Injury Nature

SIBs claimants were more likely to have back injuries than claimants who did not receive SIBs. One-half of the SIBs claimants had back injuries compared to just 31 percent of the overall indemnity claimants.

SIBs claimants were also more likely to have sprains or strains than claimants not receiving SIBs. Seventy-five percent of those injured workers who received SIBs had an injury which resulted in a sprain or strain compared to 60 percent of indemnity claimants who did not receive SIBs.

Industry

When the industry in which the injured worker was employed is analyzed, a couple of interesting differences emerge. The construction industry accounted for 16 percent of the claims which involved SIBs payments. However, construction only accounts for 8 percent of indemnity claims. This points to the conclusion that some of the more serious injuries in the workers' compensation system are happening on Texas construction sites.

Conversely, the less severely injured indemnity claim population had a larger proportion of injured workers (17 percent) employed in the retail trade sector than the SIBs claimants (11 percent).

Return-to-Work Patterns of SIBs Claimants

In order to determine whether injured workers who have received SIBs are having difficulty returning to work, three measures of return-to-work are used: 1) the percent of injured workers who had earnings (either greater than zero or equal to at least 80 percent of their pre-injury wage) in the most recent quarter (4 1/2 years after the quarter of injury); 2) the number of post-injury quarters in which injured workers earned at least 80 percent of their pre-injury earnings; and 3) the duration of their non-work spell as measured by the n umber of post-injury quarters which passed before the injured worker earned at least 80 percent of his/her pre-injury wages.

The return-to-work measures reported in this article are based on wage data reported to the Texas Workforce Commission for each injured worker. A total of four quarters of wage data prior to the injury and 18 quarters of wage data following the injury are available for each injured worker.

Key findings from this analysis are as follows:

  • Nineteen percent of SIBs claimants injured in 1991 had some earnings in the 4 1/2 years after the injury, and just 9 percent had earnings equal to at least 80 percent of their pre-injury wages after 4 1/2 years. (See Figure 3.)
  • Sixty-nine percent of the SIBs claimants had no post-injury quarters in which they earned at least 80 percent of their pre-injury wages.
  • Of the 31 percent of SIBs claimants who had earnings of at least 80 percent in a post-injury quarter, most (42 percent) showed those earnings in the first post-injury quarter, implying that these claimants were most likely kept on the payroll with either accrued sick or vacation time during the first few months of their disability. 12
  • Characteristics that were associated with better return-to-work patterns included: longer employment tenure prior to the injury, a good pre-injury earnings record, 13 male workers, and employer in a low-risk industry. 14
  • When other factors are held constant, the characteristics that were associated with worse return-to-work patterns included the following: higher impairment ratings, back injuries, older workers, and injuries occurring in South and West Texas.

Concluding Observations

The fact that such a small percentage of SIBs claimants (9 percent) earned at least 80 percent of their pre-injury wages 4 1/2 years after the injury strongly indicates that this is an area which will need to be monitored closely as these injured workers get closer to the 401 week threshold where their income benefits are terminated for good.


EXPERIENCES OF INJURED WORKERS EMPLOYED BY NONSUBSCRIBERS

The information contained in this article is excerpted from Experiences of Injured Workers Employed by Nonsubscribers. Copies of the full report are available via our electronic order form.

Texas is the only state in the country where employers are not required by statute to carry workers' compensation (WC) coverage. 15 In 1996, the Research and Oversight Council on Workers' Compensation (ROC) conducted a survey of employers which found that 39 percent of the employers in Texas do not carry WC coverage and they employ approximately 20 percent of the Texas workforce. 16 With one-fifth of the workers in Texas not being covered through the WC system, it is important to assess how well these workers are being compensated when workplace injuries and illnesses do occur. Since there is very little known about this substantial population of injured workers, the ROC undertook a survey of injured workers employed by nonsubscribers in an attempt to fill that informational void.

The purpose of this study is to evaluate the post-injury experiences of injured workers employed by nonsubscribing employers. Through the use of a telephone survey of injured workers employed by nonsubscribing employers, a wide variety of issues were addressed: the worker's knowledge of his/her employer's workers' compensation coverage status; the payment of medical and income benefits for work-related injuries; duration of benefits; degree of difficulty in obtaining benefits; litigation; and personal hardship experienced by injured workers.

This article focuses on the payment of medical and income benefits for injured workers and identifies some of the differences that emerge when the severity of the injury is taken into account.

Data. The data used in this study come from a random sample of 366 workers employed by nonsubscribers who had a work-related injury on or after January 1, 1993. The sample was selected in such a way as to try to identify the more severely injured workers who are in need of intensive medical treatment and the replacement of lost wages for the time they were unable to work. Thus, in order to be included in the sample, the injured worker had lost eight or more days of work as indicated on the TWCC-7 form (Nonsubscriber Report of Injury) filed with the Texas Workers' Compensation Commission (TWCC). 17

It should be noted that due to the nature of the nonsubscriber injury data collected by the TWCC, the results of this study generally reflect the experiences of injured workers employed by the larger nonsubscribing firms. Ninety-three percent of the injury reports resulting in eight or more days of lost time were filed by firms with 50 or more employees. This resulted in a similar proportion of survey respondents (91 percent) who were employed by these large employers. Previous studies have shown that larger nonsubscribing employers are more likely to provide benefits for on-the-job injuries than smaller nonsubscribing employers. 18 It is also true that these larger firms with 50 or more employees employ the majority of workers not covered under the Texas WC system.

Telephone surveys were conducted by the Survey Research Center at the University of North Texas between January 1 4, 1997 and February 9, 1997.

Findings

Key findings from this analysis revealed that, by and large, workers employed by large firms were being compensation for on-the-job injuries. However, statistically significant differences emerge between workers when the severity of the work-related injury is taken into account.

Medical Benefits. The vast majority (92 percent) of injured workers employed by large non-subscribing firms indicated that their employer/insurance company paid for at least some medical costs related to their on-the-job injury. Eighty-one percent of the surveyed workers said their employer paid all medical costs related to their on-the-job injury. (See Figure 4.)

Injured workers were also asked whether their employer paid for medical treatment for as long as it was medically necessary or did their employer coverage stop at some time before medical treatments were finished. Again, the overwhelming majority of injured workers who had their medical expenses covered (87 percent) indicated that coverage lasted the entire duration.

Income Benefits. Eighty-two percent of injured workers said that their employer paid them for the time they missed work due to their on-the-job injury. When they were asked how much they were paid for their time off work, 42 percent said they were paid about the same as they were earning prior to the injury, and the remaining 58 percent indicated that they earned less than they did before the injury. (See Figure 5.)

Though income benefits were not as comprehensive as medical, the majority (62 percent) of the injured workers surveyed indicated that their employer paid them for the entire period they were off work. The remaining 38 percent said that the replacement period did not cover the entire period of their disability.

Differences By Injury Severity. Injured workers were categorized into two groups based on their survey responses: 1) severe injuries; and 2) minor injuries. Severe injuries included all claims which involved surgery, hospitalization, or more than three months of lost time from work following the injury. All other injuries were categorized as minor.

Key differences between the two groups included:

  • Eighty-four percent of severely injured workers, who said their employer paid for medical costs, indicated that all medical expenses were paid for by their employer, compared to 94 percent of workers with minor injuries. 19
  • Similarly, 84 percent of workers with severe injuries, who said their employer paid for medical costs, indicated that medical expenses were paid for the entire duration of their treatment, compared to 91 percent of workers with minor injuries.
  • Higher percentages of severely injured workers hired attorneys (18 percent vs. 6 percent), and filed lawsuits against their employers (13 percent vs. 3 percent) than workers with minor injuries.

Summary

This study provides information that the majority of injured workers who are employed by large nonsubscribing firms are not being abandoned after their on-the-job injuries. Ninety-two percent obtained medical treatment for their injuries (81 percent for the full duration of the medical episode) and 82 percent had at least some of their wages replaced during their period of recovery. There is, however, some indication that benefits are being prematurely terminated for a significant percentage of longer term injuries (in which the injured employee is off work for more than a year).


Footnotes:

  1. Texas Labor Force Estimates. Texas Workforce Commission, February 1997.
  2. Annual Nonsubscription Survey: 1996 Estimates. Research and Oversight Council on Workers' Compensation, July 1996.
  3. Occupational Injuries and Illnesses in Texas, 1994. Texas Workers' Compensation Commission, July 1996.
  4. Pease, Sara R. (1988) Performance Indicators for Permanent Disability: Low-Back Injuries in Texas. Workers' Compensation Research Institute, Cambridge, Massachusetts.
  5. Claims are closed when the carrier anticipates no more indemnity or medical payments will be made on the claim. Because of the lag between the time of injury and closure of the claim, the 1986 and 1995 samples reflect, on average, injuries occurring in 1984 and 1993 respectively.
  6. Within the statute, "Disability" means the inability because of a compensable injury to obtain and retain employment at wages equivalent to the preinjury wage (Sec. 401.011 of the Texas Workers' Compensation Act, Texas Labor Code). The first week is commonly referred to as the "waiting period." Income benefits retroactively cover the waiting period if the period of unemployment is four weeks or more (Sec. 408.082 of the Texas Workers' Compensation Act, Texas Labor Code).
  7. 401.011 of the Texas Workers' Compensation Act, Texas Labor Code.
  8. Workers' Compensation Benefit Levels: Comparison Between Texas and Other States, Research and Oversight Council on Workers' Compensation (August 1996).
  9. Survey of Texas Doctors Who Participate in the Workers' Compensation System, Research and Oversight Council (December 1996).
  10. In order to construct two discrete groups of injured workers, SIBs claimants (who account for less than 1 percent of the indemnity claims) were removed from the sample of indemnity claims.
  11. Three weeks of IIBs are paid for each percentage point of an injured workers' impairment rating. In order to qualify for SIBs, injured workers must have a permanent impairment rating of 15 percent or more. The minimum number of weeks for IIBs payment for this group of workers is 45 weeks.
  12. This supposition is also supported by the fact that the number of SIBs claims with 80 percent of pre-injury earnings drops from 149 in the first post-injury quarter to 28 in the second, and 12 in the third.
  13. A "good pre-injury earnings record" refers to increased numbers of quarters (in the year immediately preceding the injury) in which the injured worker had recordable earnings greater than zero.
  14. It should be noted that a smaller population of 1991 claims was used in the regression analyses. A total of 993 claims (552 SIBs claims and 441 indemnity claims) with complete information were used in the models.
  15. South Carolina, which was previously the only other non-mandatory WC state with a significant number of employers opting out of the system, made WC mandatory (effective July 1997) in May 1996 th rough the passage of House Bill 3838. New Jersey has a single law with two alternatives: 1) the typical WC statute; and 2) a form of employers' liability based on traditional common law remedies. It is required that employers choose one of the two options and all employers in the state have chosen to carry WC.
  16. See Research and Oversight Council on Workers' Compensation, Annual Nonsubscription Survey: 1996 Estimates (1996).
  17. Effective January 1, 1993, nonsubscribing employers with 50 or more employees were required to report all injuries which result in more than one day of lost time from work, and effective January 1, 1994, nonsubscribing employers with 5 or more employees were required to report all injuries which resulted in more than one day of lost time from work.
  18. See Research and Oversight Council on Workers' Compensation, Annual Nonsubscription Survey: 1996 Estimates (1996) and Texas Workers' Compensation Research Center, A Study of Nonsubscription to the Texas Workers' Compensation System (1993).
  19. It is interesting to note that for the small percentage of injured workers who were off work for more than a year due to their injury, just two-thirds said medical coverage lasted for as long as was medically necessary and only 42 percent of these injured workers had their wages replaced for the entire period of time they were off work due to their injury. Time limit for coverage was the primary reason listed for having benefits terminated.

This page was last updated on December 9, 2002.



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