1 Overview of Recent Workers’ Compensation Research Findings Amy Lee, Director Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group 

2 This presentation will highlight: Return-to-work rates using Texas Workforce Commission (TWC) wage data; Updates on WC network participation; Recent pharmacy descriptive statistics; and Descriptive statistics on recipients of permanent impairment income benefits.

3 Return-to-Work Rates Using Texas Workforce Commission (TWC) Wage Data

4 Initial Return-to-Work Rate Percentage of Injured Workers Back At Work for the First Time 6 Months to 3 Years Post-Injury Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, Note 1: The study population includes 329,986 workers injured in who also received temporary income benefits (TIBs). Note 2: Although the increases of initial RTW rates were small, they were statistically significant at the 0.01 significance level. While this reflects a improvement in the percentage of workers who have initially returned to work, the difference is not big enough to conclude that the WC system improved substantially during this time. Injury Year Within 6 Months Post Injury Within 1 Year Post Injury Within 1.5 Years Post Injury Within 2 Years Post Injury Within 3 years Post Injury %79%83%85%88% %80%84%86%89% %81%85% 87%90% % 83%86% 88% % 84%

5 Sustained Return-to-Work Rate Injury Year Within 6 Months Post Injury Within 1 Year Post Injury Within 1.5 Years Post Injury Within 2 Years Post Injury Within 3 years Post Injury %68%73%76%80% %70%74%77% 81% %71% 76%79% %73% 78% % Percentage of Injured Workers Back At Work and Remained for Three Successive Quarters Beginning With the Initial RTW Quarter 6 Months to 3 Years Post-Injury Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, Note 1: The study population includes 329,986 workers injured in who also received temporary income benefits (TIBs).

6 Mean and Median Days Off Work for Injured Workers Who RTW At Some Point Post Injury, Injury Years Injury Year Mean days off work Median days off work *26* Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, Note1: The mean and median days off work in 2004 may be under-estimated due to data maturity and should be viewed with caution. Note2: “Days Off Work” was defined as days from the injury date to the initial RTW date. Please note that these numbers do not take into account any additional time off work that may have occurred after the initial RTW date. Note3: The analysis was based on the claimants who returned to work, and did not include those who did not return by the end of Injury year 2005 was excluded because of insufficient data.

7 Updates on WC Network Participation

8 Carrier Data Calls In Sept 2006, March 2007 and November 2007 TDI issued a data call to the top 13 insurance carrier groups (in terms of premium market share) to ask about WC health care network participation; The top 13 groups represent approximately 82% of the WC premium written in Texas; Network Data Call In February 2007, October 2007 and February 2008 TDI issued a data call to all WC certified networks; Data call included two parts: 1)Info on how many workers have been treated in network; 2)Info on how many insurance carriers the network has contracted with and for how long; and

9 Results of Carrier Data Call 12 out of 13 carrier groups have contracted with or established a certified WC network (an increase from 9 in Sept 2006); 11 of the 12 carrier groups with a network have already begun offering it to policyholders along with a premium credit; Most premium credits offered for network participation are 10-12%; Network participation among policyholders varies widely for carriers –as of March 1 st, 2007– approx 29,000 policyholders agreed to participate in networks compared to only 7,500 as of Sept 1 st, 2006 –Most of these policyholders (81% were small and mid-sized employers) –These carriers estimated that the number of claims treated in network would grow to over 100,000 by CY 2009.

10 Results of Network Data Call 18 of the 31 networks certified by TDI had treated injured workers as of Feb 1 st, 2008; A total of 39,991injured workers treated by these 18 networks (2 networks alone treated 77% of these workers); About 6 percent of the workers treated in network had legacy claims (i.e., injuries prior to the network cert date); About 40 percent of the workers treated in network had “lost-time” claims, meaning at least one day of lost time was recorded As of Feb 1 st, 9 of the 31 networks certified by TDI did not have any insurance carrier contracts in place;

11 Geographic Distribution of Lost-Time Claims Treated by TDI-Certified Networks as of February 1, 2008 DWC Field OfficePercentage of Lost-Time Network Claims DWC Field OfficePercentage of Lost-Time Network Claims Abilene1%Lubbock1% Amarillo2%Lufkin1% Austin6%Midland/Odessa5% Bryan/College Station1%Missouri City1% Beaumont1%San Angelo<1% Corpus Christi2%San Antonio10% Dallas11%Tyler3% Denton4%Victoria5% El Paso3%Waco3% Fort Worth14%Weslaco4% Houston20%Wichita Falls<1% Laredo<1% Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, Note: “Lost-time” claims are claims in which at least one day of lost-time was recorded.

12 Pharmacy Descriptive Statistics

13 Distribution of Medical Payments in the Texas Workers’ Compensation System, Service Years Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, Note 1: Percent of Total Payments may not add up to 100% because of rounding. Note 2: The California Workers’ Compensation Institute (CWCI) estimates that in 2005 California’s Pharmacy cost was 7 percent of that state’s medical costs. Medical Type Service Year 2005 Service Year 2006 Total Payments Percent of Total Payments 1 Total Payments Percent of Total Payments 1 Professional $626,309,00062% $535,603,000 57% Hospital $250,938,00025%$275,923,00029% Pharmacy $132,973,00013% 2 $131,647,00014% 2 Dental $580,000<1%$1,049,000<1%

14 Injured Employees Receiving Prescriptions in the Texas Workers’ Compensation System Prescription Years Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2008.

15 Distribution of Pharmaceutical Utilization and Payments by Injury Year Prescription Year 2006 Injury Years % of Injured Employees % of Prescriptions % of Drug Days % of Payments %33%40%46% %28%31%29% %15%14%11% %24%15%13% Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2008.

16 Distribution of Pharmaceutical Prescriptions by Therapeutic Classification Group Prescription Year 2006 Therapeutic Classification Group Number of Prescriptions Cum % Total Payments Cum % ANALGESICS - OPIOID 522,521 32% $43,046,83733% ANALGESICS – ANTI- IFLAMMATORY 257,092 48% $18,637,70547% MUSCULOSKELETAL THERAPY 225,173 62% $17,141,16860% ANTIDEPRESSANTS99,189 68% $9,164,64467% ANTICONVULSANTS96,298 73% $14,362,71278% HYPNOTICS64,116 77% $6,315,28282% ANTIANXIETY AGENTS % $2,030,15384% OTHER GROUPS *343, % $20,948,958100% Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, Note*: Texas WC prescriptions in 2006 were for 6,001 unique Drug Names from 626 Subclasses. The Subclasses fall into 89 distinct Therapeutic Classification Groups as defined by the Medi-Span classification system

17 Generic Substitution Rate Where Generics Were Available * Prescription Year 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, Note* : Approximately 85,000 prescriptions (5 percent) did not have generics available

18 Generic Substitution Rates Therapeutic Classification Groups Prescription Year 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2008.

19 Descriptive Statistics on Recipients of Permanent Impairment Income Benefits in the Texas WC System

20 Five types of income benefits are payable under the Texas Workers’ Compensation Act Temporary Income Benefits (TIBs) – paid during the period of temporary disability (lost time from work) while the worker is recovering from an on- the-job injury; Impairment Income Benefits (IIBs) – paid to injured workers for permanent impairment (impairment evaluations are currently based on the Guides to the Evaluation of Permanent Impairment, 4th Edition, published by the American Medical Association); Supplemental Income Benefits (SIBs) – paid to injured workers for ongoing disability after IIBs have been exhausted, with all eligibility for SIBs ending at 401 weeks after the date of injury; Only workers with a 15 percent impairment rating and who are unemployed or underemployed as a result of their work-related injuries are eligible to receive SIBs; Lifetime Income Benefits (LIBs) – paid for the life of the injured worker for specific catastrophic injuries as set forth in Section of the Texas Labor Code; and Death Benefits (DBs) and Burial Benefits – paid to the deceased workers’ spouse or eligible beneficiaries as a result of a death from a compensable injury.

21 Purpose of This Analysis This study aims to provide basic descriptive information regarding the frequency and amount of Impairment Income Benefits (IIBs) and Supplemental Income Benefits (SIBs) received by injured workers in the Texas workers’ compensation system from 1996 to This analysis focuses on IIBs and SIBs since these benefits are paid to severely injured workers who generally have the hardest time going back to work after an injury.

22 Total Number of Injured Workers Who Received IIBs* Injury Years Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, Note 1: Injury year 2005 data should be interpreted with caution since data may not be complete. Note 2: Claims that did not have a valid claim, benefit and impairment rating record on file with the Division of Workers’ Compensation were excluded from this analysis. *

23 Percentage of Workers Receiving Medical Services in 2003 Who Also Received IIBs or SIBs Type of Injured Worker Percent of Workers Receiving Medical Services Average Medical Payment Per Worker for Services Rendered in 2003 Total Medical Payments for Services Rendered in 2003 Percent of Total Medical Payments IIBs and SIBs Recipients 25%$6,930$706,735,38057% All Other Injured Workers 75%$1,759$533,691,85043% Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, Note: Medical services include professional and hospital services rendered during Pharmacy services are excluded from this analysis since pharmacy data was not available for 2003.

24 Average IIBs Duration Per Worker Injury Years * Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, Note 1: Injury year 2005 data should be interpreted with caution since data may not be complete. Note 2: Claims that did not have a valid claim, benefit and impairment rating record on file with the Division of Workers’ Compensation were excluded from this analysis.

25 Distribution of Most Recent Impairment Rating Received by IIBs Recipients, Injury Years * Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, Note 1: Injury year 2005 data should be interpreted with caution since data may not be complete. Note 2: Claims that did not have a valid claim, benefit and impairment rating record on file with the Division of Workers’ Compensation were excluded from this analysis.

26 IIBs Recipients Who Received Statutory Maximum and Minimum Weekly IIBs The statutory maximum IIBs benefit payable to injured workers is 70% of the State Average Weekly Wage (SAWW) The SAWW for WC purposes is based on 88% of the average weekly wage for all covered employment as calculated by the Texas Workforce Commission (TWC) As of 2006, approximately 21% of workers receiving IIBs were capped at the statutory maximum weekly IIBs rate – currently $498/week As of 2006, approximately 2% of workers receiving IIBs received the statutory minimum weekly IIBs rate – currently $107/week Statutory changes made by HB 7 in 2005 to the calculation of the statutory maximum weekly benefit increased the maximum weekly IIBs payment from $378 in FY 2006 to $498 in FY 2008, which should result in a lower percentage of workers being capped at the statutory maximum in future years

27 Total Number of Injured Workers Who Received SIBs* Injury Years * Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, Note 1: Injury year 2004 data should be interpreted with caution since data may not be complete. Injury Year 2005 was excluded from this analysis since few workers injured in 2005 have exhausted their IIBs and are eligible to receive SIBs. Note 2: Claims that did not have a valid claim, benefit and impairment rating record on file with the Division of Workers’ Compensation were excluded from this analysis.

28 SIBs Recipients Who Received Statutory Maximum SIBs The statutory maximum SIBs benefit payable to injured workers is 70% of the State Average Weekly Wage (SAWW) The SAWW for WC purposes is based on 88% of the average weekly wage for all covered employment as calculated by the Texas Workforce Commission (TWC) As of 2006, approximately 19% of workers receiving SIBs are currently capped at the statutory maximum weekly SIBs rate – currently $498/week There is currently no minimum weekly SIBS rate payable to injured workers Statutory changes made by HB 7 in 2005 to the calculation of the statutory maximum weekly benefit increased the maximum weekly SIBs payment from $378 in FY 2006 to $498 in FY 2008, which should result in a lower percentage of workers being capped at the statutory maximum in future years

29 Estimated Number and Percent of SIBs Recipients Who Reached 401 Weeks Statutory Benefit Maximum Duration, Injury Years Injury YearsNumber of SIBsNumber of Workers Reached 401 weeks Percent % % % % % * Source: Texas Department of Insurance Workers’ Compensation Research and Evaluation Group, Note 1: Injury year 2000 data should be interpreted with caution since data may not be complete. Injury Years was excluded from this analysis since workers injured in have not had the opportunity to receive 401 weeks of SIBs. Note 2: Claims that did not have a valid claim, benefit and impairment rating record on file with the Division of Workers’ Compensation were excluded from this analysis.

30 Upcoming Research Reports Update on claim and medical denial rates; Update on use of medical peer reviews (results from recent data call); Analysis of access to care for non-network claims; Update of employer participation estimates in the Texas WC system and employee coverage rates; Next WC network report card (due in Sept); Biennial report on impact of HB 7 on affordability and availability of WC insurance for Texas employers (due December 1, 2008); Biennial report on impact of HB 7 on medical costs, quality of care and medical dispute resolution (due December 1, 2008).