March 1999 Volume 4, No. 3 ©1999 - Flahive, Ogden ...conditions as carpal tunnel syndrome, low back...

FOLFOLFOLFOLFOLFOLClient Newsletter by Flahive, Ogden & Latson

FOLIO©1999 - Flahive, Ogden & LatsonMarch 1999 Volume 4, No. 3

Claims Service Rules Published

Continued on p. 6

TWCC Commissioners have voted to publishClaims Service Taskforce Rules having to do withgeneral practices and procedures of Carriers and EDIfilings

Among the changes is a redefinition of the word“day.” If the rules specify a “working day,” thenSaturdays, Sundays and holidays are excluded.Otherwise, they are to be counted. Communicationsreceived by the Commission after normal businesshours at 5:00 p.m. are deemed to be received on thenext working day.

The rules require insurance carriers to provide tollfree numbers for communication from claimants andrequires a “sufficient quantity” of telephone and faxlines to service their volume of business. Carriers arerequired to “insure effective and timely communicationwith claimants and must respond to claimant inquirieswithin five working days of receiving Requests forInformation. These rules further require that insuranceCarriers “provide sufficient numbers of adjusters” sothat calls may be handled appropriately.

One of the controversial features is a requirementthat Carriers maintain adjuster notes on activities andverbal communication during the administration of theclaim. They do not specify that it should contain asummary of the activity or communication.

The rules require that claimants represented byattorneys shall have copies of all writtencommunications sent to the claimant and to the attorney.

To address a problem with some Austin CarrierRepresentatives who are not picking up mail daily, theCommission has proposed a rule that would require atleast one pick up per day (FO&L generally picks upmail twice per day, and never fails to have at least onedaily pickup).

A number of rules pertain to EDI transmission.The Commission is making it clear that a document isfiled when it passes the required edit checks and theCommission has accepted it as complete. If it isrejected by the Commission, and subsequently filed,the document is considered to be first filed whenactually accepted. Carriers will be required to submitthe original TWCC-1 to the Commission not later thanthe 7th day after receipt of the report. TWCC-21 (A1/A2) information shall be electronically filed within tendays after the change of payment.

Session Produces Mix of Comp Bills

Continued on p. 7

Gov. Bush Appoints Two New Commissioners See p. 9

The House Business and Industry Committeescheduled hearings on a number of workers’compensation bills, among which is the controversialHB 2505 providing for changes in treating doctors.Under this bill, an employee’s choice of treating doctorwould be limited to a list provided to the employee bythe employer. The employee would be allowed tochange treating doctors only on the expiration of 100days. For the first time since 1989, pickets marchedaround the outside of the capitol protesting proposedworkers’ compensation legislation.

Although it is only one of a number of proposedcorrective measures, this bill, along with HB 2506, itsancillary services companion, are clearly the mostcontroversial. Over 300 people filed witnessaffirmations requesting the opportunity to speak about

Treating Doctor ChangesProvoke Angry Outcry

CLIENT NEWSLETTER BY FLAHIVE, OGDEN & LATSON

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Flahive, Ogden & Latson, a 25 lawyer firm,defends contested workers’ compensation casesstatewide every day. The firm has representedinsurance companies and employers before theTexas Workers’ Compensation agency for morethan 50 years.

For general questions concerning the news-letter call (512) 435-2225. FOLIO's editor-in-chiefis Jack W. Latson.

FO&LFO&L

Flahive, Ogden & LatsonP.O. Box 13367Austin Texas 78711

A good economy produces good news. TheBoard of Directors for the Texas Workers’Compensation Insurance Fund has pledged to commitadditional money to satisfy outstanding revenue bondsissued to capitalize the Fund. The bonds were issuedin 1991. The board’s vote will affect the maintenancetax surcharge annually assessed against insurancecarriers. That tax is used to service the bond debt.(See FOLIO, December 1998).

Elimination of the bond debt should eliminate themaintenance tax surcharge. A similar move by theFund last year allowed the TDI to waive themaintenance tax surcharge for 1998. The Office ofthe Comptroller of Public Accounts, which collectsthe maintenance tax surcharge, refunded the 1998taxes that had been collected.

The Fund is cooperating with the Texas PublicFinance Authority and the TDI to complete the finaldischarge of the bonds. Observers expect the debt tobe paid off in the second quarter of 1999. When thatoccurs, the Comptroller is expected to refund 1999collected surcharges to carriers.

TWCIF Directors Discharge Debt

The Occupational, Safety and Health Administrationhas proposed rules that require employers to redesignjobs and alter work stations to accommodate workerssuffering injuries to the neck, back, arms and hands andto help prevent such injuries. On February 19, 1999,OSHA issued a draft of proposed rules affecting suchconditions as carpal tunnel syndrome, low back pain,muscle strains, sciatica and tendonitis. OSHA said ithopes the rules will be adopted in the year 2000 afterreceipt of public comment.

Charles Jeffress, Assistant Secretary of Labor, incharge of the Occupational Safety and HealthAdministration, said that the rules are meant to increasethe productivity and morale of workers. “Recognition ofmusculoskeletal disorders has been slow in coming,”Mr. Jeffress said. “For many years, it was just considereda cost of doing business. If you did certain jobs, you

OSHA DraftsErgonomic Rules would end up with hands crippled at the end of your

career. That’s not acceptable in this countryanymore.”

Employers covered by the rules would be requiredto adopt ergonomic plans to identify hazards andrespond to worker complaints. These would includea requirement to provide employees with promptaccess to health-care professionals who could treatwork-related medical problems, at no cost to theemployees. Doctors could recommend workrestrictions or reassignments for employees, and theemployer would be required to follow therecommendation. The rules mandate that an employer“maintain the employee’s total normal earnings,seniority, rights and benefits when work restrictionsare prescribed.”

An ergonomic program, as outlined by the rule,must provide several things. A company must establish

Continued on p. 5


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Our regular office hours are 8:15 a.m. to 4:45 p.m.If you need to call after 4:45, please call Patsy Sheltonat (512) 435-2234, or Susan Quinn at (512) 435-2216.They will be on duty until 6:00 p.m. daily.

DON’T WAIT UNTIL THE LAST HOUROF THE DAY FOR DEADLINE FILING. ANYFAXES WITH INFORMATION DUE MUSTBE RECEIVED BY 4:00 p.m. for any deadlinehandling for same day delivery to theCommission, and faxed according to the faxdirectory listed on the last page of FOLIO .Furthermore, if you have a last minute deadlinecall our office by 3:00 p.m. and speak with JoyceReagan, Tillie Aguirre, Margo Davis, or PatsyShelton to advise that a last minute filing isnecessary to meet a deadline. We will bewatching and waiting for the fax. Otherwise, lastminute faxes could delay receipt. Our last dailyrun to the Commission will be at 4:15 p.m., inorder to get across town to meet their 5:00closing time.

FO&L OFFICE HOURS

The United States Supreme Court quicklydispatched its answer to the question whether privateinsurance companies are state actors for purposes ofthe due process clause. In American ManufacturersMutual Insurance Co. v. Sullivan, the Court held thatthey are not state actors. The March 4, 1999, decisioncleared the way for the Court’s conclusion that, underPennsylvania law, employees do not have aconstitutional right to be provided with notice and anopportunity to be heard before medical payments aresuspended. Chief Justice Rehnquist authored theopinion for the Court. The case was argued andsubmitted January 19, 1999.

The Court rested its decision on two principalholdings. Those are first, that a private insurer’sdecision to withhold payment and seek utilizationreview of the reasonableness and necessity ofparticular medical treatments is not fairly attributableto the State so as to subject the insurer to theFourteenth Amendment’s constraints and second,that the Pennsylvania system does not deprive disabledemployees of “property” within the meaning of theDue Process Clause of the Fourteenth Amendment.

The Pennsylvania Workers’ Compensation Actpermits employers and insurers to withhold paymentfor treatment of an employee’s work-related injuriespending a utilization review process that will determinewhether the employee’s treatment is reasonable andnecessary. The Respondents challenged that system,arguing that that due process requires presuspensionnotice to the employee. They argued that, once thecarrier initiated medical payments, it had, in effect,conferred a property right that cannot be terminatedwithout following due process procedures.

To bring themselves within the protection of thedue process clause, the Respondents first needed toestablish that the private insurers’ conduct constituted“state action.” The Court rejected this notion. “TheState’s decision to allow insurers to withhold paymentspending review can just as easily be seen as stateinaction, or more accurately, a legislative decision notto intervene in a dispute between an insurer and anemployee over whether a particular treatment isreasonable and necessary” wrote the Court. “The

most that can be said of the statutory scheme,therefore, is that whereas it previously prohibitedinsurers from withholding payment for disputed medicalservices, it no longer does so. Such permission of aprivate choice cannot support a finding of stateaction.”

The Court reviewed the history of the Pennsylvaniaact, and compared the nature of dispute resolutionbefore and after the creation of the workers’compensation remedy noting that “beforePennsylvania ever adopted its workers’ compensationlaw, an insurer under contract with an employer topay for its workers’ reasonable and necessary medicalexpenses could withhold payment, for any reason orno reason, without any authorization or involvementof the State.” The Court rejected Respondents’argument that the decision to suspend benefits wasattributable to the state, simply because the traditionaltort system had been replaced by a workers’compensation system.

The claimants had also contended that medicalbenefits are a state-created entitlement, and thus aninsurer cannot withhold payment of medical benefits

Supremes ReversePrivate Insurers Are Not State Actors

Continued on p. 5

Sullivan Decision


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Interest/Discount Rate for 1st Quarter ACCUMULATED VALUE OF UNPAID WEEKS ACCUMULATED VALUE OF UNPAID LUMP SUM

WITH INTEREST AT A GIVEN INTEREST RATE: WITH INTEREST AT A GIVEN INTEREST RATE:4.31% 4.31%

# of WeeksValue

W/Interest # of WeeksValue



W/Interest

1 1.00 51 52.07 1 1.00 51 1.042 2.00 52 53.11 2 1.00 52 1.043 3.00 53 54.16 3 1.00 53 1.044 4.00 54 55.20 4 1.00 54 1.055 5.01 55 56.25 5 1.00 55 1.056 6.01 56 57.30 6 1.00 56 1.057 7.02 57 58.34 7 1.01 57 1.058 8.02 58 59.39 8 1.01 58 1.059 9.03 59 60.44 9 1.01 59 1.0510 10.04 60 61.49 10 1.01 60 1.0511 11.05 61 62.54 11 1.01 61 1.0512 12.05 62 63.59 12 1.01 62 1.0513 13.06 63 64.65 13 1.01 63 1.0514 14.08 64 65.70 14 1.01 64 1.0515 15.09 65 66.75 15 1.01 65 1.0616 16.10 66 67.81 16 1.01 66 1.0617 17.11 67 68.87 17 1.01 67 1.0618 18.13 68 69.92 18 1.02 68 1.0619 19.14 69 70.98 19 1.02 69 1.0620 20.16 70 72.04 20 1.02 70 1.0621 21.17 71 73.10 21 1.02 71 1.0622 22.19 72 74.16 22 1.02 72 1.0623 23.21 73 75.22 23 1.02 73 1.0624 24.23 74 76.28 24 1.02 74 1.0625 25.25 75 77.35 25 1.02 75 1.0626 26.27 76 78.41 26 1.02 76 1.0627 27.29 77 79.48 27 1.02 77 1.0728 28.32 78 80.54 28 1.02 78 1.0729 29.34 79 81.61 29 1.02 79 1.0730 30.36 80 82.68 30 1.03 80 1.0731 31.39 81 83.75 31 1.03 81 1.0732 32.41 82 84.81 32 1.03 82 1.0733 33.44 83 85.88 33 1.03 83 1.0734 34.47 84 86.96 34 1.03 84 1.0735 35.50 85 88.03 35 1.03 85 1.0736 36.53 86 89.10 36 1.03 86 1.0737 37.56 87 90.17 37 1.03 87 1.0738 38.59 88 91.25 38 1.03 88 1.0839 39.62 89 92.33 39 1.03 89 1.0840 40.65 90 93.40 40 1.03 90 1.0841 41.69 91 94.48 41 1.03 91 1.0842 42.72 92 95.56 42 1.04 92 1.0843 43.76 93 96.64 43 1.04 93 1.0844 44.79 94 97.72 44 1.04 94 1.0845 45.83 95 98.80 45 1.04 95 1.0846 46.87 96 99.88 46 1.04 96 1.0847 47.91 97 100.96 47 1.04 97 1.0848 48.95 98 102.05 48 1.04 98 1.0849 49.99 99 103.13 49 1.04 99 1.0950 51.03 100 104.22 50 1.04 100 1.09


FOLIO - 5 -

Interest RatesQuarter/Year Interest Rate

1st/1999 4.314th/1998 4.513rd/1998 5.132nd/1998 5.11

clear procedures for employees to report musculoskeletalproblems. It must also inform employees of any knownhazards. Moreover, the employer is required topinpoint the causes of injury and take steps to controlthem. It must furnish safety training to employees aswell as medical care. Finally, the employer mustevaluate the effectiveness of its program by analyzinginjury rates or other data.

One estimate states that the proposed rules wouldaffect at least 25 million workers in production jobsand “manual handling operations”. The standardswould apply to assembly-line workers, machineoperators, cooks and bakers, meatpackers, custodialcrews and warehouse workers. The rules would alsocover nurses and physical therapists, grocery stockers,flight attendants, baggage handlers, and delivery workers.

In addition, the standards would apply to anyemployer in industries if it had even one employeewith a musculoskeletal disorder. Under this rule, therequirements could be made to apply to companieswith employees who work at computer terminals,enter transactional data, or who engage in telephonesales or marketing. The guidelines would not apply tothe construction or maritime industries or to agriculturalworkers.

without affording an injured worker due process. TheCourt rejected the argument that Pennsylvania’sworkers’ compensation law confers a protectedproperty interest in workers’ compensation medicalbenefits. “Respondents’ property interest in this case. . . is fundamentally different,” the Court wrote.“They do not have a property interest” it reasoned “inhaving their providers paid for treatment that has yetto be found reasonable and necessary.”

The Court’s opinion does recognize one area ofstate action that has previously only been assumed toexist. As the cost of the medical care component ofworkers’ compensation benefits escalated during the1980s and 1990s, many states enacted “utilizationreview” measures and other reforms to contain thesecosts. The Court recognized that the role of a utilizationreview agent was a permissible one. However, itdistinguished decisions made by UROs from those ofprivate insurers, writing that “the decision of a URO,like that of any judicial official, may properly beconsidered state action.”

The Sullivan decision reverses the judgment ofthe U.S. Court of Appeals for the Third Circuit.

Ergonomic Rules Cont'd from p. 2

Sullivan Decision Cont'd from p. 3

Thomas H. Gemoets, M.D. and Peter B. Fisher,M.D., both of Houston, were deleted from theTWCC’s Approved Doctor List (ADL). On January7, 1999, the TWCC Commissioners issued an Orderof Deletion notifying these doctors that they will notbe compensated by insurance carriers for medicaltreatment to claimants with compensable injuries. Inother words, Drs. Gemoets and Fisher are not entitledto payment for any medical treatment provided on orafter January 7, 1999.

The Texas License Numbers for these doctorsare C-5678 and C-7448, respectively. If you have anyfurther questions concerning this deletion, you maycontact FO&L at (512) 477-4405 or Missy Villasenorat (512) 440-3574.

TWCC Deletes TwoDoctors from the ADL

The injuries affected by the proposed rules accountfor one-third of all serious workplace injuries and afflictmore than 640,000 workers each year, according toLabor Department studies. The Department has not yetestimated the business cost of compliance with theproposed rules. However, it contends that musculo-

skeletal disorders cost employers $15 billion to $20billion a year in workers’ compensation costs to saynothing of the cost of reduced productivity. Mr. Jeffresssaid he believes the compliance costs will be less thanthe costs employers now incur because of workdayslost to injury and illness.


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For Notice of Injury, carriers will be required tocreate a written record of the earliest notice of injuryif received by teleclaims reporting or electronictransmission.

The Commission has proposed a number ofchanges for Notice of Refusals. They will now befiled electronically and by paper. They will not betimely unless the paper copy is timely filed. In additionto the Notice of Refusal, insurance carriers will berequired to notify claimants in “plain language notices”that will be prescribed by the Commission. We will berequired to provide a full and complete statementdescribing the reasons for our actions and mustsubmit sufficient claim-specific substantiveinformation to enable the employee to understand thecarrier’s position or action taken on the claim. Similarnotices will be required for change of payments andthe expiration of 401-week rule.

These rules have been published. They are notadopted and they are not in effect. If these rules areobjectionable, or if you hope to change them, youshould prepare a public comment and forward it to theCommission at your earliest convenience. We shouldhave approximately 30 days in which to file thiscomment. Actual copies of the rules have beenprovided to each client of the firm. If you do not havea copy available, then you may access the actualproposed rule by opening the Texas Register hyperlinkon our website, scroll down to the Texas Workers’Compensation Commission and the full text of therule will be published on that site.

Rules Published Cont'd from p. 1

The Commission is expanding the EDI initiative toincluded electronic reporting for all Subsequent ReportMaintenance Type Codes (MTC’s.) These MTC’sare used when filing TWCC-21’s/A49’s. The MTC’sinclude CA, CB, FN, RB, RE, S1, S4, S5, S6, S7, &S8. A comprehensive list of MTC’s and theirdescriptions can be found in the EDI ImplementationGuide (pp5-8, 5-9) that has been distributed to all EDITrading Partners.

The Commission is using an assigned scheduleapproach that efficiently uses TWCC EDI testingand production capacity. The Commission’s goal is tohave carriers and carrier groups in full EDI reportingproduction between July 1999 and July 2000. Theschedule approach being used is based on carrierclaim volume observed in 1998. Please refer toTWCC Advisory 98-02 and FOL Advisory 235 forclarification on the Commission’s goals and objectivesfor EDI production.

The current testing cycle is beginning on 07/15/99for selected carriers. The current test and productionformat follows the basic outline listed below:

Selected carriers are subject to testing beginning07/15/99, on the Assigned Test Date. The ExpectedEDI Production Date is 09/01/99. This Expected EDIProduction Date is dependent on Carrier complianceand results achieved during the testing process.Compliance is considered in both percentage ofclaims information electronically filed (min. 50%) anddata field accuracy (90% on mandatory fields and75% on conditional fields). There will not be penaltieslevied for non-compliance during the initial test phase,covering 07/15/99-09/01/99.

Following the expected date of EDI production isthe Benchmark Audit Phase. In this phase carriersare expected to be in full compliance. Carriers shouldfile 50% of claims information electronically; andmaintain an accuracy rate of 90% in mandatory fieldsand 75% in conditional fields. Following the Audit, theCommission’s Compliance and Practices Divisionmay penalize carriers if EDI compliance has not beenobserved.

Carriers must confirm and begin the test phasewithin 5 days after the scheduled test date. Failurewill result in the carrier being removed from the testschedule. This will make it difficult for the carrier to

achieve performance requirements before undergoingthe Benchmark Audit. Noncompliance during theBenchmark Audit may result in penalties for the carrier.Test requirements and schedules will be distributed tocarriers via Austin Carrier Representatives. Carriersare responsible for distribution of this schedule noticeto all entities submitting electronic data on theirbehalf. The scheduled implementation criteria hasbeen adjusted to allow a Carrier/Trading Partner tocompleted the test process within 45 calendar daysfrom the test start date.Carriers should be prepared for the test phase cyclebeginning on July 15th. If you have any questionsabout this EDI test cycle contact the Commission’sEDI Development and Information Team. You mayalso contact FO&L for clarification on this matter.

TWCC AnnouncesEDI Schedule


FOLIO - 7 -New Legislation Cont'd from p. 1this bill. As a result, the Committee met from 2:00p.m. on Tuesday afternoon, March 16th, until 3:00a.m., on March 17th. Most of the audience consistedof chiropractors and their patients. The audiencecheered the fairly frequent sniping at employers andthe insurance industry. Notwithstanding this, ChairmanBrimer was very direct in reminding the audience thatthe Bill was not so much about choice as it was aboutmaking the system viable and creating jobs in thestate. He invited them to propose a different meansof dealing with the problem, but was very clear thatthe problem would be addressed.

This testimony was countered by the TexasAssociation of Business and Chamber of Commerce.TABCC emphasized that Texas Medical costs are50% higher than the U.S. average. Multi-statecompanies like American Airlines, UPS, DiamondShamrock and Foley’s presented testimony showinghow out of line their Texas costs are in comparisonwith their identical facilities and operations in otherparts of the country.

A number of other bills have been filed and areunder consideration. House Bill 739 would add abroadly-worded provision to the existing lifetimeincome benefits statute, Sec. 408.161 of the LaborCode. In addition to the six types of injuries for whichLIBs are currently payable, this house bill would addthe following: “an injury resulting in a disablingneurological or psychiatric condition that substantiallylimits at least one major life activity of the employee.”

House Bill 519 proposes a pilot program tointroduce telemedicine for the first time to workers’compensation in Texas. “Telemedicine” is defined bythe legislation as “the use of interactive audio, video,or other electronic media to deliver health care...theterm includes the use of electronic media for diagnosis,consultation, treatment, transfer of medical data, andmedical education.” The program would provide fordesignated doctor examinations and second opinionspinal surgery evaluations to be done through audio/visual teleconferencing, with the claimant and his/herdoctor in one location and the evaluating doctor inanother location. The program is limited to the Houstonand Galveston area until April of 2000, at which timeit opens statewide.

The current method of calculating average weeklywage for claimants with multiple employers wouldchange if House Bill 634 passes. A claimant withmultiple employment is one “who, at the time of theinjury, earned wages from more than one employer.”

This bill requires that the AWW of such an employeebe based upon the wages earned by the employee(from all employers) during the 12 months immediatelypreceding the date of the injury. This will substantiallyincrease the AWW of many claimants.

House Bill 1826 addresses SIBs. The bill providesthat on or after the second anniversary of the date thecommission makes the initial award of SIBs, theemployee would be allowed to file an annual “report”if in the one-year period preceding the date of thereport being filed the employee has shown noimprovement. It is presumed that a “report” in thissense is a reference to the TWCC-52, and that theannual filing requirement could, in some cases, takethe place of the quarterly filing requirement. Inaddition, on or after the second anniversary of thedate of the TWCC’s initial award of SIBs, an insurancecarrier would not be permitted to require an employeewho is receiving SIBs to submit to a medicalexamination more than annually if, in the precedingyear, the employee’s medical condition resulting fromthe compensable injury has not improved.

House Bill 2508 addresses several changes. First,it mandates that all weekly income benefits (i.e., allbenefits excluding SIBs), automatically be paid withinterest. It would also allow, through agreementbetween the carrier and claimant, for all incomebenefits to be paid monthly. Second, it would mandatethat the TWCC adopt the Fourth Edition of the AMAGuides to the Evaluation of Permanent Impairment.Third, the bill would authorize the TWCC by rule toadopt later editions of the Guides as necessary.

Finally, one of the best pieces of news from the76th Legislature is House Bill 2512. This bill wouldoverhaul the current interlocutory order/subsequentinjury fund reimbursement process. It would maintaininterlocutory authority in the hands of the benefitreview officers, while extending it to hearing officersat the CCH level. This includes the power to orderinitiation and suspension of benefits. Further, andmost importantly, this bill would allow forreimbursement from the Subsequent Injury Fund forany overpayments of benefits made under aninterlocutory order or decision (whether issued by theBRO, the HO, or the Appeals Panel) if that order ordecision is reversed or modified by final arbitration,order, or decision of the commission or a court. The 76th Legislature adjourns May 31, 1999. FOLIOwill continue to update the status of all relevant billsas they make their way through the legislative process.


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The Commission has published proposed newrules for its Rejected Risk: Injury Preventions Servicesprogram. The proposed rules preserve the overallscheme of the program which provides foridentification and targeting of policyholders, access tothe employer’s premises, approval of professionalsafety consultants, accident investigation,implementation and monitoring of accident preventionplans, follow-up investigations, administrative penaltiesfor noncompliance, and charges to policyholders forservices provided. The proposed rules provide forreplacement of all the existing rules with reworkedand renumbered rules.

The proposed rules separate the Rejected RiskProgram from the similar scheme under the Extra-Hazardous Employer Program. The existing rulesincluded employers designated as extra-hazardous inboth programs. The proposed rules set up the RejectedRisk Program as a stand alone program for identifiedpolicyholders.

Participation in the program is mandatory for allpolicyholders that the Texas Workers’ CompensationFund identifies as requiring accident preventionservices. This designation is made pursuant toprovisions of the Texas Insurance Code, Article 5.76-3, Section 10, and criteria established by the Fund.The Fund is to provide notices to these policyholdersof their required participation in the program.

Identified policyholders who have not had aaccident plan implemented in the prior six monthsmust complete a safety consultation using an approvedprofessional source within thirty days of the effectivedate of the policy or receipt of notice of identificationas a Rejected Risk employer. The identifiedpolicyholder can request a safety consultation fromthe Commission’s Division of Workers’ Health andSafety for a fee, the Fund can provide the service, orthe policyholder may use another approvedprofessional source for this consultation. An accidentprevention plan must be developed within 30 days ofthe safety consultant’s initial report. The proposedrules provide a specific format for this plan andprovisions for challenges to the plan provisions. Theplan must include provisions for implementation withinthree months.

Policyholders who had an accident preventionplan implemented in the prior six months must obtaina review of the program and an on-site follow-up visitby the Commission’s Division of Workers’ Healthand Safety.

The Commission Division of Workers’ Healthand Safety will conduct a follow-up inspection of thepolicyholder’s premises between ninety days and sixmonths after the accident plan is submitted to thedivision. If the accident prevention plan has not beenimplemented, the policyholder is subject to anadministrative penalty of up to $5,000 for each day ofnoncompliance.

These rules have been published for publiccomment in the Texas Register. Comments are dueby March 22, 1999, by 5:00 p.m. at Office of theGeneral Counsel, Mailstop #4-D, Texas Workers’Compensation Commission, Southfield Building, 4000South IH-35, Austin, Texas 78704-7491.

Rejected Risk is the term used when anemployer is unable to obtain workers' compensationinsurance because of a poor claim or safetyhistory. These employers can apply for insurancethrough a high risk pool as an insurer of last resort.Under the old law, the Texas Workers’Compensation Facility, commonly referred to as“the Facility,” provided this coverage. Under thenew law, the Texas Workers’ CompensationInsurance Fund now provides this higher riskinsurance. The transition from the Facility to theFund is complete and the Facility has ceased toexist.

The Commission’s Rejected Risk Program isan injury prevention program aimed thesepolicyholders. The goal of the program is to assistemployers that were unable to obtain workers’compensation insurance on the voluntary marketwith injury prevention programs, thereby reducinginjuries, reducing costs to the workers’ compensationsystem, and reducing the number of employers in therisk pool.

New Rejected RiskRules Proposed

What is the RejectedRisk Program?


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Preauthorization is the prospective review for medical necessity for sixteen specific items of health care.Rule 134.600 is the pertinent rule, which lists the basic procedure and the items requiring preauthorization. Thisarticle will outline some of the finer points of the preauthorization process.

· There is no form of prospective review other than preauthorization. In other words, you may not deny allfuture medical treatment at any point during a claim. Each preauthorization request must be based ondocumentation received from the requester at the time.

· Hospitalization for an approved spinal surgery does not require preauthorization.· Manipulations, including chiropractic and physical therapy, do not require preauthorization.· The new utilization review rules require you to have a toll-free telephone number for providers to access

during normal business hours, in both Texas time zones. The number must be able to accept requests afterbusiness hours. If you receive an after-hours request, you must acknowledge the request within twoworking days. You still have the three days to make your determination.

· The new utilization review rules require any person receiving health care information during a preauthorizationrequest to be a qualified health care provider.

· The three working days for response to a preauthorization request start with the first telephone call. Youmay not postpone the deadline by telling the provider to submit the request in writing, or by telling theprovider to call back with more information.

· The new utilization review rules require that before you issue a denial of preauthorization (called an“adverse determination”), your physician advisor must attempt to contact the requesting health careprovider. The rule states that the provider must be given a “reasonable opportunity” to discuss thedetermination with the physician advisor before the determination is finally made. Document carefully yourattempts to comply with this rule.

· If you fail to respond within the deadline, the provider is to treat your silence as a denial, and may reportyou to Compliance and Practices for an administrative violation.

· Under the new utilization review rules, your preauthorization denials must be from a doctor. The doctordoes not need to be licensed in Texas, as long as he is licensed in the appropriate state.

· Under the Mental Health Treatment Guidelines, you may not ask for psychotherapy session notes. Youmay ask for a general treatment plan or a summary of the sessions, but you may not require the raw progressnotes. If you need the information contained in the notes to make a determination of compensability, havea like-specialty provider make the phone call, so there is no violation of confidentiality.

Preauthorization Pointers

Kenneth Moore is the unionrepresentative at Seafarers InternationalUnion. He served previously as the servicerepresentative and U.I.W. servicerepresentative. He is an AFL-CIOdelegate to both the Harris County andSabine Area Labor Councils. Moore is amarine engineer and a graduate of theHarry Lundeberg School of Seamanship.

Gov. Bush Appoints Watson & MooreGov. George W. Bush has named two new members to the Texas Workers’ Compensation Commission.

Appointed by Bush were Lonnie Watson, Cleburne, an employer representative who replaced Royce Faulkner,Austin, and Kenneth Lee Moore, and employee representative who replaces O.D. Kenemore, Lake Jackson.Watson & Moore will serve until their terms expire on February 1, 2005.

Lonnie Watson is President of Watson and Son, Inc., a 20-employee janitorial service company servicing 350 clients. Watsonis a former member of the Cleburne City Council, and served onthe Cleburne School Board from 1995-1997. His military careerincluded active service with the U.S. Army and Army Reserve.Watson was employed by the U.S. Soil Conservation Service for31 years. He received his bachelor’s degree in agronomy fromSouthern University A&M in Baton Rouge, La., and an associate’sdegree in personnel management from Odessa Junior College.


FOLIO - 10 -

Lt. Governor NamesEconomic Development

CommitteeTexas Lt. Gov. Rick Perry (R) has named Senate

committee assignments. His announcement affectsthe Economic Development Committee significantly.This committee has, in past sessions, received andconsidered most legislation related to workers’compensation issues.

The Committee membership has been reducedfrom 11 members to 7 members. Below are listed themembers of Economic Development for the 76th

Legislative Session.

Sen. David Sibley (Chairman) R-WacoSen. Ken Armbrister (Vice Chair)D-VictoriaSen. John Carona R-DallasSen. Mike Jackson R-PasadenaSen. Frank Madla D-San AntonioSen.Troy Fraser R-Marble FallsSen. John Whitmire D-Houston

Texans have a generally positive attitude aboutlawyers, judges, and the legal system, according to arecent survey completed by the Office of CourtAdministration, in conjunction with the State Bar andthe Texas Supreme Court.

Texas is one of only 17 statesto survey its inhabitants in aneffort to improve the legal system.The survey was conducted bytelephone of a random sample of1,215 Texas adults. The marginof error at the 95% confidencelevel is +/-2.8%, which means it isvalid to consider the survey results to be typical ofTexas residents.

The survey revealed that 52% of Texans have apositive overall impression of the court system, and27% have a negative impression. Over 70% of

Survey Touts Lawyers

Texans feel that judges and court personnel arecourteous and respectful, although they areoverworked. Of Texans with courtroom experience,82% were satisfied with the process and the judgesthey observed.

Lawyers fared fairly well in this survey. Slightlymore than half the Texans surveyed had a positivegeneral opinion toward lawyers. According to 77% ofthe people surveyed, lawyers are very competent and89% feel that lawyers are necessary to protect therights of the people. Positive reactions to lawyerswere stronger among the respondents who had first-hand experience with lawyers. Lawyers providegood quality services (74%), but the general impressionis that the average person cannot afford a lawyer’sservices (71%). Nearly two-thirds of the peoplesurveyed think there are too many lawyers.

Interestingly, Hispanics had the highest opinionsof the legal system and African-Americans had thelowest. Significant differences between racial andethnic groups were found in nearly every category ofthe survey. Both Hispanics and African-Americanshave a higher opinion of lawyers than do Caucasians.

Rural residents tend to think that courts treatpeople alike regardless of gender or race, and thatjudges are too lenient with criminals. Urban residentshave a higher opinion of lawyers than rural residentsdo.

In general, women tend to view the Texas legalsystem more favorably than men do, but men tend tohave a higher opinion of lawyers. Income level has a

direct inverse relationship tofavorable opinions in nearly everycategory. Education level has verylittle effect.

The State Bar and theSupreme Court plan to use thesurvey results to target areas forimprovement in the system. Areasof concern include the cost of

legal services, the perceived excessive interest oflawyers in money, and the perceived lack of free legalservices for those who cannot afford legal fees.Other areas of concern include protection of societyfrom criminals and victims’ rights.

"Texans have apositive impression

of the courtsystem."


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The TWCC Fort Worth field office moved toward the mid-cities February 26, 1999. The office on CampBowie Road is closed. The Commission has opened its new office in the Walton Building, located at 6900Anderson Boulevard, Fort Worth, Texas 76120. Commission offices are located on the second floor. Theoffice is located near the intersection of East Loop 820 and IH-30. The main phone number for the new officeis 817-446-4488. The fax number is 817-735-4418.

Fort Worth Field OfficeCompletes Relocation

Directions From DFW Airport1. Start by going North on N. service Rd.

towardsCrossunder No. 3 Rd.2. Turn (slightly right) onto ramp.3. Take the exit on the left towards

(TX-121N).4. Merge onto International Pkwy N.5. Take the TX-114W. exit towards

TX-121S./FT Worth.6. Merge onto SR-114W.7. Stay straight to go onto SR-121 S.8. SR-121 S. becomes SR-183W.9. Stay straight to go onto I-820S.10. Take the exit11. Stay straight to go onto E. Loop 820N.12. Turn (left) onto John T. White Rd.

13. Turn (right) onto Anderson Blvd.

Directions From Dallas (Love Field) Airport1. Start out going Southeast on Cedar Springs Rd. towards Tom Braniff Ln.2. Turn (slightly right) onto W. Mockingbird Ln.3. Turn (right) onto Harry Hines Blvd.4. Turn (left) onto Empire Central.5. Turn (right) onto E. John W. Carpenter Frwy.6. Turn (slightly left) to take the TX-183W ramp.7. Merge onto SR-183W.8. Turn (slightly left) at the intersection of SR-114W to stay on SR-183W.9. Merge onto I-820 S.10. Take the exit11. Stay straight to go onto E. Loop 820N.12. Turn (left) onto John T. White Rd.13. Turn (right) onto Anderson Blvd.


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SUMMARIES OF BILLS FILED IN THE 76TH LEGISLATURE

Your Eye on the 76th Legislature

ON THE LEGE

House Bill No. 1778 Author: GiddingsThis bill relates to the establishment of a medical advisor at the TWCC.

Chapter 413 of the Labor Code would be amended to provide that the TWCC would employ a medicaladvisor, defined as a licensed individual who has extensive educational and clinical experience and training inhealth care.

The medical advisor would develop, maintain and review medical policies and fee guidelines, includingmedical policies regarding the determination of impairment ratings, and to review compliance with thosemedical policies and fee guidelines. He or she would be permitted to establish a panel of physicians forassistance.

House Bill No. 1826 Author: HochbergThis bill relates to supplemental income benefits under the workers’ compensation system.

Sec. 408.143 of the Labor Code (the SIBs statute) would be amended broadly by this bill. On or after thesecond anniversary of the date the commission makes the initial award of SIBs, the employee would be allowedto file an annual “report” if in the one-year period preceding the date of the report being filed the employee hasshown no improvement. It is presumed that a “report” in this sense is a reference to the TWCC-52, and thatthe annual filing requirement could, in some cases, take the place of the quarterly filing requirement.

Further, on or after the second anniversary of the date of the TWCC’s initial award of SIBs, an insurancecarrier would not be permitted to require an employee who is receiving SIBs to submit to a medical examinationmore than annually if, in the preceding year, the employee’s medical condition resulting from the compensableinjury has not improved.

House Bill No. 2096 Author: Davis of HarrisThis bill relates to the control of health insurance fraud.

The Insurance Code would be amended by this bill in an attempt to allow the Department of Insurancelatitude to “more effectively investigate and discover insurance frauds, to halt fraudulent activities, and to assistand receive assistance from law enforcement agencies in prosecution of persons who are parties in insurance frauds.”

The bill would require that notice be given on claim forms advising claimants of the fact that insurance fraudis a criminal offense punishable by fines and confinement in state prison. It would permit the insurancecommissioner to order an insurer to retain amounts that otherwise would be owed to a health care provider ifthe commissioner determines that such insurer has been defrauded by the actions of that health care provider.It would further require most insurers to set up anti-fraud investigative units. Finally, it would provide immunityfrom defamation actions to insurers sharing information with other insurers regarding health care providers.

House Bill No. 2451 Author: DunnamThis bill relates to a bar on certain defenses available in an action against a non-subscriber.

Section 406.033 of the Labor Code would be amended by this bill to prohibit a court from considering anycomparative responsibility of the employee (to reduce or bar the employee’s recovery) in an action by thatemployee against his non-subscribing employer.


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House Bill No. 2505 Author: BrimerThis bill relates to medical benefits under the workers’ compensation system.

This bill would amend the treating doctor statute (Sec. 408.022) in a manner that would give the employermore control over the claimant’s initial medical treatment. Specifically, it would mandate that the employeechoose his or her treating doctor from a list of doctors and providers supplied by the employer or the employer’sdesignee for at least the first 100 days after the date the injury is reported to the employer. The employee wouldbe allowed to change treating doctors only on the expiration of that 100 day period.

House Bill No. 2506 Author: SolomonsThis bill relates to ancillary medical benefits under the workers’ compensation system.

As in HB 2505 (above), this bill would mandate that an employee shall receive all medical services ancillaryto the medical treatment provided pursuant to the Act at the direction of the employer or the employer’sdesignee. “Ancillary services” in this sense refers to physical and occupational therapy, work hardening, painmanagement, functional capacity evaluations, and the like.

House Bill No. 2507 Author: GeorgeThis bill relates to the named insured on a workers’ compensation policy.

The statutory immunity provision of the Act (Sec. 408.001) provides that workers’ compensation is theexclusive remedy of an employee or his/her beneficiary against their subscribing employer. This bill wouldextend such protection to the employers’ parent corporation, subsidiary corporation, or subsidiary of the parentcorporation, as long as they are named insured on the same policy of workers’ compensation insurance.

House Bill No. 2508 Author: GeorgeThis bill relates to the determination and payment of certain workers’ compensation benefits.

This bill provides for a number of amendments to a variety of different Labor Code provisions.To begin with, it would mandate that all weekly income benefits (i.e., all benefits excluding SIBs),

automatically be paid with interest. It would also allow, through agreement between the carrier and claimant,for all income benefits to be paid monthly.

Secondly, it would mandate that the TWCC adopt the Fourth Edition of the AMA Guides to the Evaluationof Permanent Impairment. Further, the bill would authorize the TWCC by rule to adopt later editions of theGuides as necessary.

Finally, HB 2508 would allow insurance carriers to pay lifetime income benefits (LIBs) through an annuity.

House Bill No. 2510 Author: DukesThis bill relates to the administration and operation of the workers’ compensation program.

This house bill also provides for a variety of different amendments to existing Labor Code provisions.Of most importance is its proposed amendment to Section 401.023(b) of the Labor Code. Specifically, this

provision would automatically add seven (7%) percent to the prevailing interest rate. Thus, for example, thecurrent interest rate (4.51%) would automatically be increased to 11.51%. Seven percent would be added eachtime the interest rate is calculated quarterly by the TWCC.

House Bill No. 2512 Author: GiddingsThis bill relates to interlocutory orders and reimbursement from the Subsequent Injury Fund.

Currently, the Act provides that Benefit Review Officers (BROs) may enter interlocutory orders forpayment of medical and/or income benefits pending a decision from the Hearing Officer (HO) at the ContestedCase Hearing level. If the HO overturns the BRO’s interlocutory order, the Carrier is permitted to seekreimbursement from the Subsequent Injury Fund. If the Appeals Panel overturns an HO’s order to pay benefits,however, reimbursement from the Subsequent Injury Fund is not permitted

ON THE LEGE


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This bill would authorize Benefit Review Officers to enter interlocutory orders for accrued and/or futurebenefits. It would further authorize Hearing Officers at the CCH level to enter interlocutory orders pendingtheir final Decision and Order, and both of such orders would also be permitted to include accrued and/or futurebenefits. Most importantly, this bill would allow for reimbursement from the Subsequent Injury Fund for anyoverpayments of benefits made under an interlocutory order or decision (whether issued by the BRO, the HO,or the Appeals Panel) if that order or decision is reversed or modified by final arbitration, order, or decision ofthe commission or a court.

This bill would also authorize the executive director of the TWCC to enter an interlocutory order for thepayment of medical benefits, to ensure that essential medical benefits are provided pending the outcome of aformal hearing. A carrier making payments under this order would have the right to seek reimbursement fromthe Subsequent Injury Fund if the director’s order is subsequently overturned.

House Bill No. 2513 Author: RitterThis bill relates to workers’ compensation return-to-work programs.

This proposed legislation would require the TWCC to implement, by January 1, 2000, a program to encourageemployers and treating doctors to discuss the availability of modified duty to encourage safe and more timely return-to-work for injured employees. The TWCC may require a treating or evaluating doctor to perform an evaluationand report on the claimant’s functional capacity upon the request of the employer, carrier, or the TWCC.

House Bill No. 2545 Author: BrimerThis bill relates to requirements imposed on medical providers under the Workers’ Comp system.

Section 408.022 (the treating doctor statute) would be modified to provide that, before the TWCC deniesa claimant’s request to change treating doctors, the TWCC shall consider whether an independent medicalconsultation is necessary to evaluate the appropriateness of the treating doctor’s diagnosis or treatment.

House Bill No. 2842 Author: BrimerThis bill relates salary continuation and workers’ compensation benefits.

This bill would add to the definition section of the act (Sec. 401.011) a statutory definition for the term “salarycontinuation.” Such definition would allow an employer to continue to pay the employee’s salary as areplacement for TIBS under the Labor Code, if so desired. Salary continuation could include wagesupplementation, where no employer reimbursement is sought from the carrier as provided by the Act.

Further amendments would provide that salary continuation payments made by the employer for disabilityshall be considered payment of income benefits for purposes of determining the accrual date of any subsequentincome benefits under the Act. Finally, payment of salary continuation would not affect the employer’sstatutory immunity under the Act.

House Bill No. 3260 Author: BosseThis bill relates to workers’ compensation claims filed for hearing loss.

This proposed legislation would create a specific Labor Code provision for hearing loss claims. ProposedSection 409.014 would provide that a hearing loss claimant is entitled to receive benefits without being requiredto file a subsequent claim for benefits regarding a progressive deterioration in the claimant’s hearing if theclaimant: (1) shows that his permanent impairment has increased since the last rating; and (2) remains in theemploy of the same employer.

It would also provide that a hearing loss claimant may not be certified at maximum medical improvement(MMI) until the date the employee is no longer employed by the employer. It would further prevent hearingloss claimants from ever reaching statutory MMI. It would not prevent a carrier from paying benefits to ahearing loss claimant periodically as the employee’s hearing progressively deteriorates.

ON THE LEGE


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Bills On The HillPreviously Summarized Legislation And Current Status

Bill Author Description FOLIOSummary

Legislative Status

HB 27 Goolsby Relates to the providing of medical records tosubsequent or consulting physicians

January ‘99 In Committee (Public Health)

HB 38 Corte Relates to providing personal leave for publicschool employees who are assaulted at work

January ‘99 In Committee (PublicEducation)

HB 85 Goolsby Requires plastering contractors to carry workers’compensation or related coverage

January ‘99 In Committee (Licensing &Administrative Procedures)

HB 170 Garcia Prohibits non-subscribing employers fromengaging in certain discriminatory acts andpractices

January ‘99 In Committee (Business &Industry)

HB 210 Hochberg &Gutierrez

Re-defines the term “intoxicated” by reducingstatutory level of alcohol concentration to “0.08 ormore”

January ‘99 In Committee (CriminalJurisprudence)

HB 328 Garcia Creates liability under Labor Code Section 451.001(discriminatory discharge) for non-subscribingemployers

January ‘99 In Committee (Business &Industry)

HB 432 Turner, Bob& Madden

Relates to legislative review and gubernatorialsuspension of certain rules of state agencies.

January ‘99 In Committee (State Affairs)

HB 452 Gutierrez Requires that certain entities licensed by the TexasBoard of Private Investigators and Private SecurityAgencies have workers’ compensation coverage

January ‘99 In Committee (Public Safety)

HB 459 McClendon Provides that information on a workers’compensation claim may be released to “a litigantin a subsequent lawsuit in which the employee’sprior injury information may be relevant”

January ‘99 In Committee (Public Safety)

HB 519 Gray Relates to the creation and operation of atelemedicine pilot program to provide certainworkers’ comp benefits

February ‘99 In Committee (Business &Industry)

HB 634 Hochberg Relates to the payment of workers’ compensationbenefits to certain claimants with multipleemployment

February ‘99 In Committee (Business &Industry); scheduled for publichearing

HB 645 Nixon Relates to the liability of the defendant in certaincivil actions (comparative responsibility)

February ‘99 In Committee (Civil Practices)

HB 729 Hochberg Relates to the payment of benefits by electronicfunds transfer

February ‘99 In Committee (Business &Industry); scheduled for publichearing

HB 739 Eiland Relates to lifetime income benefits for workers’compensation claimants

February ‘99 In Committee (Business &Industry)

HB 817 Jones Requires proof of workers’ compensation benefitsfor persons installing headstones or grave markers

February ‘99 In Committee (State, Federal &International Relations)

HB 946 Farrar Prohibits waiver of workers’ compensation benefitsby the acceptance of the payment of wages

February ‘99 In Committee (EconomicDevelopment)

HB 1023 Garcia Requires a certificate of proof of workers’compensation coverage for wall and ceilingcontractors

February ‘99 In Committee (Licensing &Administrative Procedures);scheduled for public hearing

ON THE LEGE


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Comp’s Top Cop

Senator Ken Armbrister

By the end of the 76th Session, State Senator Ken Armbrister, (D-Victoria) may need every bit of his FBI Academy training to stay on top ofhis responsibilities in Austin. From his post as Vice-Chair of the Research andOversight Council on Workers Compensation, Sen. Armbrister has developeda thorough understanding of the workers’ compensation process. Heunderstands the arguments for and against modifying the system. His will bea critical vote on any bill affecting the Workers’ Compensation Act thissession. As Chair of the Senate State Affairs Committee, and Vice-Chair of theSenate Economic Development Committee, Sen. Armbrister will have thechance to closely review most of the comp-related legislation that lands in theSenate. Economic Development has, in past sessions, been the provinggrounds for legislation affecting the state workers’ compensation system.

This session, Lt. Gov. Rick Perry (R) reduced that committee’s membership from 11 members to seven,effectively increasing the power of each member who remained. Sen. Armbrister’s knowledge of the ins and outs of the comp process comes largely from his ROCservice. The ROC is a state agency that conducts professional studies and research; monitors, assesses andmakes recommendations concerning the workers’ compensation operational system; and provides the publicwith information. His experience on the ROC should give his opinions special weight in the EconomicDevelopment Committee’s deliberations. In addition, Sen. Armbrister derives power from his membership on the State Legislative Budget Board.He also serves on the Legislative Audit Committee, Council on Competitive Government, UniversityInterscholastic League Advisory Council, Department of Information Resources, Edwards Aquifer OversightPanel, and the Sunset Advisory Commission. The Victoria resident is a former police captain with 14 years of law enforcement experience and over10 years of service as the director for the Victoria Regional Police Academy. Before being elected to theLegislature, he served as vice-president of the Victoria School Board. Armbrister has been named as one ofthe Ten Best Legislators by Texas Monthly. Sen. Armbrister served two terms in the Texas House ofRepresentatives before being elected to the Texas Senate in 1986. He is the immediate past President ProTempore of the Texas Senate, and he served as Governor For A Day on September 14, 1996.

ON THE LEGE

CAPITOL FOCUS

þ January 12, 1999 76th Legislature convenesþ January 19, 1999 Inauguration of Governor and Lieutenant Governorþ March 12, 1999 Deadline for filing non-local, non-emergency billso May 31, 1999 Last day of 76th Regular Sessiono June 20, 1999 Last day governor can sign or veto bills passed during the 76th Regular Sessiono August 30, 1999 Date that bills without specific effective dates become law

Legislative Calendar


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CASE DECISIONSSUPREME COURT OF THE UNITED STATES

American Manufacturers Mutual Insurance Co. et al. v. Sullivan et al., (No. 97—2000). ArguedJanuary 19, 1999–Decided March 3, 1999A private insurer’s decision to withhold payment and seek utilization review of the reasonableness andnecessity of particular medical treatments is not fairly attributable to the State so as to subject theinsurer to the Fourteenth Amendment’s constraints.

Facts: Under Pennsylvania’s Workers’ Compensation Act, once an employer becomes liable for anemployee’s work-related injury–because liability either is not contested or is no longer at issue–the employeror its insurer must pay for all “reasonable” and “necessary” medical treatment. To assure that only medicalexpenses meeting these criteria are paid, and in an attempt to control costs, Pennsylvania has amended itsworkers’ compensation system to provide that a self-insured employer or private insurer (collectively insurer)may withhold payment for disputed treatment pending an independent “utilization review,” as to which, amongother things, the insurer files a one-page request for review with the State Workers’ Compensation Bureau(Bureau), the Bureau forwards the request to a “utilization review organization” (URO) of private health careproviders, and the URO determines whether the treatment is reasonable or necessary. Respondents,employees and employee representatives, filed this suit under 42 U.S.C. § 1983 against various Pennsylvaniaofficials, a self-insured public school district, and a number of private workers’ compensation insurers, alleging,inter alia, that in withholding benefits without predeprivation notice and an opportunity to be heard, the stateand private defendants, acting “under color of state law,” deprived respondents of property in violation of dueprocess. The District Court dismissed the private insurers from the suit on the ground that they are not “stateactors,” and later dismissed the state officials and school district on the ground that the Act does not violatedue process. The Third Circuit disagreed on both issues, holding, among other rulings, that a private insurer’sdecision to suspend payment under the Act constitutes state action. The Court also noted the parties’assumption that employees have a protected property interest in workers’ compensation medical benefits, andheld that due process requires that payment of medical bills not be withheld until employees have hadan opportunity to submit their view in writing to the URO as to the reasonableness and necessity of thedisputed treatment.

Holding: Reversed. A private insurer’s decision to withhold payment and seek utilization review of thereasonableness and necessity of particular medical treatments is not fairly attributable to the State so as tosubject the insurer to the Fourteenth Amendment’s constraints. State action requires both an allegedconstitutional deprivation caused by acts taken pursuant to state law and that the allegedly unconstitutionalconduct be fairly attributable to the State. E.g., Lugar, v. Edmondson Oil Co., 457 U.S. 922, 937. Here, whileit may fairly be said that the first requirement is satisfied, respondents have failed to satisfy the second. Themere fact that a private business is subject to extensive state regulation does not by itself convert its action intothat of the State. See, e.g., Blum v. Yaretsky, 457 U.S. 991, 1004. The private insurers cannot be held toconstitutional standards unless there is a sufficiently close nexus between the State and the challenged actionso that the latter may be fairly treated as that of the State itself. Ibid. Whether such a nexus exists, dependson, among other things, whether the State has provided such significant encouragement, either overt or covert,that the choice must in law be deemed to be that of the State. E.g., ibid. That the statutory scheme previouslyprohibited insurers from withholding payment for disputed medical services and no longer does so merely showsthat the State, in administering a many-faceted remedial system, has shifted one facet from favoring theemployees to favoring the employer. This sort of decision occurs regularly in the legislative process and cannotbe said to “encourage” or “authorize” the insurer’s actions. Also rejected is respondents’ assertion that the


FOLIO - 18 -

challenged decisions are state action because insurers must obtain “authorization” or “permission” from theBureau before withholding payment. The Bureau’s participation is limited to requiring submission of a form andrelated functions, which cannot render it responsible for the insurers’ actions. See id., at 1007. Respondents’twofold argument that state action is present because the State has delegated to insurers powers traditionallyreserved to itself also lacks merit. First, the contention as to delegation of the provision of state-mandated“public benefits” fails because nothing in Pennsylvania’s constitution or statutory scheme obligates the Stateto provide either medical treatment or workers’ compensation benefits to injured workers. See, e.g., Jacksonv. Metropolitan Edison Co., 419 U.S. 345, 352; West v. Atkins, 487 U.S. 42, 54—56, distinguished. Second,their argument as to delegation of the governmental decision to suspend payment for disputed medical treatmentis supported by neither historical practice nor the state statutory scheme. That Pennsylvania originallyrecognized an insurer’s traditionally private prerogative to withhold payment, then restricted it, and now (in onelimited respect) has restored it, cannot constitute the delegation of an exclusive public function. See Flagg Bros.,Inc. v. Brooks, 436 U.S. 149, 162, n. 12. Finally, respondents misplace their reliance on a “joint participation”theory of state action. Privately owned enterprises providing services that the State would not necessarilyprovide, even though they are extensively regulated, do not fall within the ambit of that theory. E.g., Blum, supra,at 1011; Burton v. Wilmington Parking Authority, 365 U.S. 715, and Lugar, supra, distinguished.

The Pennsylvania regime does not deprive disabled employees of “property” within the meaning of the DueProcess Clause of the Fourteenth Amendment. Only after finding deprivation of a protected property interestdoes this Court look to see if the State’s procedures comport with due process. Mathews v. Eldridge, 424 U.S.319, 332. Here, respondents contend that state law confers upon them such a protected interest in workers’compensation medical benefits. However, under Pennsylvania law, an employee is not entitled to payment forall medical treatment once the employer’s initial liability is established, as respondents’ argument assumes.Instead, the law expressly limits an employee’s entitlement to “reasonable” and “necessary” medicaltreatment, and requires that disputes over the reasonableness and necessity of particular treatment be resolvedbefore an employer’s obligation to pay, and an employee’s entitlement to benefits, arise. Thus, for anemployee’s property interest in the payment of medical benefits to attach under state law, the employee mustclear two hurdles: He must prove (1) that an employer is liable for a work-related injury, and (2) that theparticular medical treatment at issue is reasonable and necessary. While respondents have cleared the firsthurdle, they have yet to satisfy the second. Consequently, they do not have the property interest they claim.Goldberg v. Kelly, 397 U.S. 254, 261—263, and Mathews, supra, at 332, distinguished.

Editor’s Note: Rehnquist, C. J., delivered the opinion of the Court, Parts I and II of which were joinedby O’Connor, Scalia, Kennedy, Souter, Thomas, and Breyer, JJ., and Part III of which was joined byO’Connor, Kennedy, Thomas, and Ginsburg, JJ. Ginsburg, J., filed an opinion concurring in part andconcurring in the judgment. Breyer, J., filed an opinion concurring in part and concurring in thejudgment, in which Souter, J., joined. Stevens, J., filed an opinion concurring in part and dissentingin part.


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Albertson’s v. Sinclair, No. 98-0945, 42 Tex.Sup.Ct.J. 358 (February 6, 1999).When a party seeks judicial review from a TWCC Appeals Panel decision, the petition must be filed withthe Commission and the trial court with the mailbox rule if effect. Jurisdiction of the trial court is notwaived by a late filing with the Commission.

Facts: Sinclair filed a compensation claim against Albertson’s which Albertson’s contested. The HearingOfficer and the Appeals Panel ruled in favor of Albertson’s, so the next day Sinclair filed with the trial courtseeking judicial review. Albertson’s moved to dismiss alleging that the Commission did not receive the petitionwithin forty days of the Appeals Panel decision. The trial court dismissed for want of jurisdiction, and the Courtof Appeals reversed finding in favor of Sinclair and the “mailbox rule.” The Texas Supreme Court consideredthree issues on review: 1) when is a party seeking judicial review of a TWCC Appeals Panel decision requiredto file a copy of its petition with the Commission, 2) whether the “mailbox rule” applies to these filings, and3) whether untimely filing with the Commission takes away jurisdiction from the trial court.

Holding: The Court affirmed the Court of Appeals holding that 1) Ssection 410.253 of the Texas LaborCode does require a party to file a copy of its petition with the Commission on the same day that the party fileswith the trial court, 2) the “mailbox rule” applies, and 3) untimely filing with the Commission does not deprivethe trial court jurisdiction. The Court looked to the legislative intent and found that the legislature merely intendedthat the Commission receive a copy of the petition “simultaneously” which means it is mandatory to file themboth on the same day; however, since the Court concludes that the Texas Rule of Civil Procedure 5 (“mailboxrule”) applies, mailing the Commission a copy on the same day it is filed with the trial court is sufficient. Further,untimely filing with the Commission precludes jurisdictional interpretation because of the necessary liberalinterpretation of the workers’ compensation laws. The Court made its decision based on a liberal constructionof “workers’ compensation legislation to carry out its evident purpose of compensating injured workers andtheir dependents.”

Benavidez v. Travelors Indemnity Company of Conneticut, No. 98-0314, 42 Tex.Sup.Ct.J. 354(February 6, 1999).A party seeking judicial review must file within forty days of the Appeals Panel final decision, butuntimely filing does not deprive the trial court of jurisdiction on review.

Holding: As with Albertson’s v. Sinclair, the Court issued a per curium opinion without oral argumentholding that section 410.253 requires parties seeking judicial review to file a copy of the petition with theCommission on the same day that it files its petition with the trial court. Further, filing with the Commission ismandatory but not jurisdictional.

SUPREME COURT DENIES PETITION FOR REVIEW:Ector County Independent School District v. Adkins, No. 98-0785, 42 Tex.Sup.Ct.J. 361 (February6, 1999).The mailbox rule applies to the filing of a petition with TWCC.

Holding: The Court again followed Albertson’s v. Sinclair ruling that the “mailbox rule” applies.Accordingly, ECISD’s petition for review was denied.

CASE DECISIONSSUPREME COURT OF TEXAS


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CASE DECISIONSTEXAS COURTS OF APPEALS

Galpin v. Zenith Insurance, No. 04-98-00271-CV (Tex. App. –San Antonio 1999).Petitioner must file with TWCC and the trial court within forty days of the Appeals Panel decision inorder to get judicial review. However, this case may be overruled by the recent Supreme Court decisionAlbertson’s v. Sinclair (summarized in this issue) which finds that untimely filing with the Commissionmay not bar the trial court from judicial review of an Appeals Panel decision.

Facts: Galpin was injured in an accident and sought recovery of workers’ compensation benefits whichwere denied because he was intoxicated at the time of the injury. The Appeals Panel affirmed this decision.Galpin sought judicial review and mailed his copy of the petition on July 22, 1997, but TWCC records indicatethat the copy did not arrive until August 5, 1997. The trial court found that the copy of the petition was not timelyand dismissed the case for want of jurisdiction.

Holding: In order to seek judicial review, a party must file a copy of the petition within forty days of thedate of the Appeals Panel decision and must file a copy with the Commission simultaneously. Following the“mailbox rule” so long as the petitioner sends a copy of the petition to TWCC by first class mail before the lastday of filing and the petition is received no later than ten days later, the petitioner will have met the filingdeadlines. However, here, Galpin’s petition arrived fourteen days after mailing. Finding that Galpin failed tofile a copy of the petition with TWCC within forty days, the judgment of the trial court to dismiss the case wasaffirmed.

Cooper v. St. Paul Fire & Marine Insurance, No. 07-98-0023-CV (Tex. App. –Amarillo 1999).The definition of an injury includes aggravation of an injury and occupational injuries with the focusbeing on whether damage or harm to the physical structure of the body has occurred.

Facts: Cooper sustained a work related injury and underwent back surgery. Over sixteen months later,Cooper again injured her back by falling over some boxes and requested compensation benefits from the carrierSt. Paul. The hearing officer granted relief claiming that this was a new injury, and the appeals panel affirmed.The trial court granted summary judgment for St. Paul holding that aggravation of a pre-existing injury did notfall within the definition of “injury.”

Holding: The Court found that the definition of an injury does include aggravation of a prior injury andoccupational injuries. First, the trial court did have jurisdiction even though St. Paul did not raise the issue ofthe definition of an “injury” at the administrative level. St. Paul was not obligated to first present the topic tothe appeals panel. Second, the definition of “injury” may include aggravated injury. The Court looked tolegislative intent finding that “if something occurs during the course of employment that damages or harms thephysical structure of the employee’s body, then the employee has suffered an injury.” Further, the definitionof injury may include occupational injuries that arise out of repetitive activity. In summary, an injury includesaggravation of an injury and occupational injuries with the focus being on whether damage or harm to thephysical structure of the body has occurred.


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Second Injury Fund v. Avon, No. 11-96-00066-CV (Tex. App. -Eastland 1998).The Court made five findings: 1) error on admission of the treating doctor’s report is waived whenthe entire medical file is not objected to, 2) a subsequent injury occurring on the same day as theoriginal injury can be a “previous injury” entitled to compensation, 3) benefits should run from thedate the jury finds incapacity not the date of the injury, 4) lifetime income benefits may be awardedfrom the Second Injury Fund, and 5) awarding attorney’s fees in periodic payments is sufficient ifcompensation is being made in periodic payments.

Facts: Avon sustained an injury to his left knee and a subsequent injury to his right knee for which he broughtworker’s compensation claims against the city who subsequently settled and the Second Injury Fund of theState of Texas (the Fund). The trial court found in favor of Avon, and the Fund appeals.

Holding: The Court affirmed in part and reversed in part. First, the Fund argued that the treatingphysician’s letter which described Avon’s “total loss of use” to both legs should not be admitted; however,the Court overruled this point because the Fund failed object to Avon’s medical records being admitted. Theletter was part of the medical records; thus, the Fund waived any error on admission of the letter by not objectingto the medical records. Second, the Fund argued that liability should not have been granted because the juryfailed to make a finding of “total and permanent incapacity” and the findings showed a simultaneously ratherthan a “previous” loss of a specific member. The Court overruled this point because Avon’s loss of both legsfalls within Article 8306’s definition of total and permanent incapacity. Further, the jury’s findings of a previousinjury are sufficient even though the injury to both legs occurred on the same day. Third, the Fund argued thatthe trial court erred in awarding benefits from the date of the injury rather than the date of the total loss foundby the jury. This point was sustained because Avon’s incapacity did not follow at once after the affliction.Fourth, the Fund argued that Lifetime Income Benefits (LIBs) are not available from the Fund. The Courtdisagreed and found that the Fund is “intended to provide an employee with the maximum benefits that he orshe is entitled” which may include LIBs. Finally, the Court overruled Avon’s cross point asking for lump sumattorneys fees stating that “if compensation is being paid in periodic payments, any attorney’s fee allowed bythe Board or Court shall be paid in periodic payments.”

CITATION UPDATEThe case below has previously been summarized in FOLIO. However, at the time of printing, itwas not yet published in the Southwest 2d Reporter. It has now been released for publication. Wehave included the citation to the Southwest 2d Reporter below. This update will appear in eachedition of FOLIO.

Stewart v. Littlefield, 982 S.W.2d 133 (Tex. App. -Houston [1st Dist.] 1998).

Appeared in FOLIO - August 1998


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APPEALS PANEL DECISIONS

Texas Workers’ Compensation Commission Appeals Panel Decision No. 982074Doctor’s opinion suggested no more than a possibility as to causation and, therefore, does notconstitute medical evidence based upon reasonable medical probability.

Facts: Claimant given vaccination at work, immediately begins suffering swelling and ongoing migraineheadaches. Dr. C testified that the migraines resulted from the injury because claimant did not report previoushistory of migraines, and because headaches are a known side-effect of the vaccination. On cross-examination,Dr. C admitted that he had not reviewed any medical literature or epidemiological studies regarding this issue,and that the mechanism causing the migraine is complicated and unknown. The Hearing Officer ruled that themigraines were a result of a compensable injury. This was appealed by carrier on the grounds that the medicalevidence did not meet the standards of Havner and that there was insufficient evidence of causation.

Holding: Reversed, and rendered. The Panel held that Dr. C’s opinion suggested no more than a possibilityas to causation and, therefore, does not constitute medical evidence based upon reasonable medical probability.Based upon this ruling, the Panel does not address the Havner defense. In her concurrence, Judge Kelly notesthat this is one of the rare cases where Havner applies, and that Dr. C’s expert opinion is legally insufficient.

Texas Workers’ Compensation Commission Appeals Panel Decision No. 982400False information Claimant provided to his doctor was not shown to have impeded, delayed, oraggravated his medical treatment sufficient to break the chain of causation and establish non-entitlement to SIBs.

Facts: Claimant scheduled to have fourth spinal surgery on June 1, the last month of the filing period forthe 9th Quarter of sibs. To delay surgery, Claimant reported a fictitious MVA accident as well as fictitiousinjuries. Two weeks later, Claimant informed doctor and adjuster that injuries were fictitious and the surgerywas rescheduled for October 1. The Hearing Officer ruled that Claimant was entitled to the 9th Quarterbecause of a total inability to work and unemployment directly resulting from his impairment. Carrier appealedarguing that the false information Claimant provided to his doctor impeded, delayed, and aggravated his medicaltreatment and caused additional damage/harm sufficient to break the chain of causation.

Holding: Affirmed. No medical evidence was provided to show that had Claimant undergone the June1 surgery that his pain would have improved during the filing period allowing him to work. Similarly, there isno evidence showing that Claimant's lie caused his condition to worsen.

Texas Workers’ Compensation Commission Appeals Panel Decision No. 982649Claimant’s ambiguous testimony failed to establish that his unspecified work activities, for anunspecified duration, were traumatic enough to have caused an injury three months after thoseactivities ceased.

Facts: Claimant is a baggage handler. On March 19, 1998, he suffered a compensable knee injury. Whileof work for the knee injury, on June 11, 1998, he began experiencing neck pain while in bed. Claimant, as wellas his treating doctor, attributed the neck pain to sleep. After an MRI and a description of his work duties,referral doctor concluded that Claimant’s cervical herniation was caused by his employment, despite the factthat he had been off work for several months. Referral doctor provided a letter noting that in all medicalprobability Claimant’s condition was caused by his work. Referral doctor notes that Claimant had performedthat same job for 12 years, which contradicted Claimant’s testimony that he had performed the particular jobin question for two years.


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Claimant testified that, prior to June 11, 1998, he had never experienced neck pain, although this iscontradicted by his 1996 medical records. Hearing Officer ruled that repetitive movement at work caused acompensable injury, that the date of injury was June 24, 1998, and that Claimant gave timely notice to hisemployer.

Holding: Reversed and rendered. Claimant’s ambiguous testimony fails to establish that his unspecifiedwork activities, for an unspecified duration, were traumatic enough to cause an injury three months after thoseactivities ceased. Moreover, because of the delay in symptoms, medical proof of causation is required. Medicalintroduced by Claimant is insufficient because: (1) despite the Amedical probability wording, it only establishesa possibility that Claimant’s injury is work related; and (2) the error in the assumed fact of Claimant’s lengthof service invalidates the medical completely.

Texas Workers’ Compensation Commission Appeals Panel Decision No. 981947Medicines taken in accordance with a doctor’s prescription are excluded from the definition ofintoxication; for the Carrier to shift the burden of proof to the Claimant, it must present probativeevidence of the terms of the prescription

Facts: Claimant is a supply clerk. On January 22, 1998, Claimant was using the prescription pain killerfiorinal for a non-work related leg injury. That same day, she fell out of her chair causing an injury. Carrier raisedan intoxication defense and introduced many co-worker statements indicating that, on the date of injury,Claimant’s speech was slurred, her eyes were glazed, and that she was unable to walk without the aid of a chairwith rollers. The Hearing Officer ruled that Claimant was not intoxicated when she sustained a compensableinjury. Carrier appealed contending the Hearing Officer erred in failing to shift the burden of proof back to theClaimant once it has established she was taking drugs.

Holding: Affirmed. Medicines taken in accordance with a doctor’s prescription are excluded from thedefinition of intoxication. In such a case, in order for the Carrier to shift the burden of proof to the Claimant,it must present probative evidence of what the terms of the prescription were. The only such evidenceintroduced at the hearing was Claimant’s own testimony.

Texas Workers’ Compensation Commission Appeals Panel Decision No. 982572The Hearing Officer does not have the authority to determine whether an injury is resolved; this isan issue for medical dispute resolution.

Facts: The issue at CCH was whether Claimant continued to suffer the effects of his August 12, 1997,compensable injury. On September 19, 1997, Claimant requested a full work release from his treating doctor,Dr. E. Dr. E subsequently found Claimant at MMI on September 24, 1997, with a zero percent IR. Claimantsubsequently changed doctors, and first saw Dr. G on May 1, 1998, who diagnosed lumbar disc disease. Carrierdisputed treatment based upon the current treatment not being related to the compensable injury. The HearingOfficer ruled that Claimant does not continue to suffer the effects of the compensable injury.

Holding: Reversed and rendered. The Hearing Officer's determination exceeded his jurisdiction in thathe does not have the authority to determine whether an injury is resolved. This is truly an issue for medicaldispute resolution under the reasonable and neccessary standard.


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To help expedite your faxed information to the correct area within FO&L and get it to the responsible person at the earliest time, usethe following fax directory. Please remember the 4:00 p.m. receipt deadline for material required to be date stamped at theCommission. Material received after 4:00 does not permit time to deliver across town prior to the commission close.

Fax Number Attention To: Subject Matter:(512) 479-5320 Stacie Allen All materials not listed below

(512) 479-5319 Barbara Simon Elzey ONLY Spinal Surgery Info.

(512) 479-5320 Patsy Shelton Advisory Info., APA-Admin.ViolationsCompliance & PracticeExtra Hazardous

(512) 477-4862 Tillie Aguirre Billing InquiriesRequest for Treating Doctor (TWCC-53)

(512) 477-4862 Kathy McFerrin Status of BRC Requests

(512) 479-5320 Paralegals All CCH Related Info.

(512) 477-4862 Joyce Reagan Request for BRCs (TWCC-45)SIBs Applications (TWCC-52)Notice of MMI/IR Dispute (TWCC-32)Req. for Reduction due to Contribution (TWCC-33)

(512) 477-4987 Ann Weersing BRC & PHC HearingsRFEs, Set Notices, Hearings,Files, Set Notice Cancelations

(512) 477-4996 Phyllis Devine Insurance Coverage (TWCC-20)

(512) 477-4996 Margo Davis Notice of Disputed Claims (ALL TWCC-21s)Notice of ControversionRequest for Record & Photostat Checks

(512) 480-9633 Frank Clary/ Med Review Disputes/Initial SubmissionsAthena Clawson SOAH/Medical Review

(512) 472-9160 Paul Williams TWC Manual Orders & Request for Info.

Note: Time sensitive fax numbers are highlighted in bold face.

FO&L Fax Directory

Flahive, Ogden & LatsonP.O. Box 13367Austin, Texas 78711

FOLIO

March 1999 Volume 4, No. 3 ©1999 - Flahive, Ogden ...conditions as carpal tunnel syndrome, low back...

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Transcript of March 1999 Volume 4, No. 3 ©1999 - Flahive, Ogden ...conditions as carpal tunnel syndrome, low back...