The Texas Workers' Compensation Commission (the Commission) adopts new §124.1 and §124.2 and the simultaneous repeal of §§124.1, 124.2, 124.3, and 124.4 concerning carriers required notices and mode of payment. Section 124.1 and §124.2 are adopted with changes to the proposed text as published in the March 19, 1999, issue of the Texas Register (24 TexReg 1906).

As required by the Government Code, §2001.033(1), the Commission's reasoned justification for this rule is set out in this order which includes the preamble, which in turn includes the rule. The reasoned justification is contained in this preamble, and throughout this preamble, including how and why the Commission reached the conclusions it did, why the rule is appropriate, the factual, policy, and legal bases for the rule, a restatement of the factual basis for the rule, a summary of comments received from interested parties, names of those groups and associations who commented and whether they were for or against adoption of the rule, and the reasons why the Commission disagrees with some of the comments and proposals.

Changes made to the rule as proposed are in response to public comment received in writing and at a public hearing held on April 1, 1999, and are described in the summary of comments and responses section of this preamble. Other changes were made based upon further review by staff to simplify the rules, ensure consistency, or to correct typographical or grammatical errors. Specifically, subsection (b) of §124.1 was amended. Subsections (c) through (l) of §124.2 as proposed were deleted and the concepts in them combined and reordered in new subsections (c) through (g) to make them easier to follow and to reduce duplicate language. In addition, a new subsection (h) was added to reduce potential confusion regarding the requirements of filing a dispute of compensability or liability as provided by this rule and the requirements for filing disputes of disability or extent of injury. Another new subsection (m) was added to address how notices to claimants are to be sent and to implement legislation passed in the 76th Legislature requiring the Commission to reduce the system's reliance on paper filing by means such as the mail. This resulted in renumbering the remaining sections. In addition, proposed §124.2 (a), (p) (now (k)), and (q) (now (l)) were amended.

These new rules define what constitutes written notice of injury, the insurance carrier's responsibility once written notice of injury is received, the Commission's responsibility when notified of an injury by a source other than the insurance carrier, the insurance carrier's responsibility when notified of an injury by a party other than the employer and the reporting of claim administration information to the employee and/or Commission. The new rules are adopted to provide more direct guidance regarding an insurance carrier's responsibility to maintain claim administration information, and the requirements for reporting that information to the employee and the Commission including the use of electronic data interchange (EDI) for reporting to the Commission. The two new rules incorporate the provisions in the four rules repealed. Nothing is these rules should be seen to limit the Commission's authority to take enforcement actions regarding noncompliance with these rules, any other Commission rule or the Texas Workers' Compensation Act as provided in the statute including the issuance of administrative penalties or other sanctions.

Section 124.1.

New §124.1 focuses on written notice of injury and incorporates provisions contained in former §124.1. Written notice of injury is an important concept in the workers' compensation system because receipt of this notice triggers nearly all carrier duties regarding administration of the claim.

Subsection (a) defines written notice of injury. The definition in the new rule is slightly different than under previous §124.1. In the situation where a source other than the Commission or the Employer's First Report of Injury supplies the information, the new rule requires only the assertion that the injury was work related. This change was made because often, a carrier's first knowledge of an injury comes from a HCP in the form of a bill on a no lost time claim and previous language did not make it clear that a bill could be written notice of the injury.

Subsection (b) requires an insurance carrier to create a written record either on paper or in an electronic document of the earliest report of injury if the report is not received in writing. It also establishes the date of receipt of a written notice of injury as the date the insurance carrier obtained the information. This change was made because a carrier's statutory duty to pay benefits does not begin until the carrier has received written notice of the injury even though many employers report injuries by telephone.

Subsection (c) requires the Commission to notify the carrier of qualified injuries, deaths and occupational diseases reported to the Commission by a source other than the insurance carrier. This subsection is substantively the same as a provision in the previous rule, the intent of which is to ensure that the carrier has received notice of the injury.

Subsection (d) requires an insurance carrier to report to the employer all injuries, deaths and occupational diseases reported to the insurance carrier by a source other than the employer. The Commission has discovered that in many cases, the employer is unaware of the injury before the carrier initiates benefits despite the fact that the carrier is expected to review a claim to determine whether to accept the compensability of the injury within seven days of written notice of the injury. The requirement to contact the employer ensures that the carrier has more complete information to make its decision regarding compensability. In addition, the contact will ensure that the employer is aware that there may be reporting requirements concerning the injury.

Section 124.2.

New §124.2 focuses on carrier reporting to the employee and the Commission actions taken on claims, and key events occurring in claims. The new rule includes requirements contained in previous §§124.1 through 124.4 as well as other requirements.

Subsection (a) requires an insurance carrier to notify the claimant and the Commission of actions taken on or events occurring in a claim to ensure that both are aware of the status of the claim.

Subsection (b) requires the Commission to establish the form, format and manner of electronic submission of claim benefit information. It also requires insurance carriers to obtain a copy of the International Association of Industrial Accident Boards and Commissions Electronic Data Interchange (EDI) Implementation Guide . As part of the Commission's efforts to improve communication within the system, the Commission has implemented electronic data interchange as a means for carriers to electronically submit claim information to the Commission. As new situations arise that have not been seen before, the Commission refines its EDI support materials to better explain the requirements. This is done through documents such as the implementation guide and advisories.

Subsection (c) identifies information which the carrier must electronically report to the Commission. It also identifies the timeframes in which the reporting must be made. Some of the specific reportables, such as the Employer's First Report of Injury are mandated by statute or rule. Others are necessary to efficiently administer the system. For example, the requirement to provide information regarding death cases without legal beneficiaries helps the Commission ensure that the carrier timely pays the benefits to the Subsequent Injury Fund. In addition, given the large volume of mail sent to claimants that is returned due to bad addresses, requiring carriers to submit this information to the Commission helps improve communications.

Subsection (d) explains that carrier notification to the Commission and the claimant of denials of claims is governed by this rule (i.e. the requirement to send a report by EDI) and by other rules as well which lay out the timing of these denials and the consequences of delaying those denials.

Subsection (e) identifies events and actions which require the carrier to notify the Commission and the claimant of their occurrence. These events and actions are generally related to initiation, termination, and other changes in income benefits and most of their requirements are mandated by statute.

Subsection (f) specifies how notification to claimants required by subsections (d) and (e) is to be performed using plain language notices with language prescribed by the Commission and explains that the notice must also provide a full and complete statement of the carrier's reason(s) for the action. The use of plain language notifications is expected to lead to improved dispute resolution. Providing better explanations for actions may also reduce disputes because claimants will be more able to understand the actions and be less suspicious of those actions.

Subsection (g) provides that the notification to the Commission required by subsections (c), (d) and (e) is to be performed using electronic filing. The subsection also requires carriers to provide a copy of the plain language notification sent to the claimant denying a claim because the statute requires carriers to specify the grounds for a denial but the current EDI specifications do not provide a free text field in which the carrier can explain its actions.

Subsection (h) specifies that notification to the Commission and the claimant regarding a dispute of disability or extent of injury, or eligibility of a claimant to receive death benefits, shall be made through simple language notifications but that the timing and applicability of the filings are governed by other rules. The use of plain language notifications is again expected to lead to improved dispute resolution. Providing better explanations for actions may also reduce disputes because claimants will be more able to understand the actions.

Subsection (i) requires the Commission to send acknowledgments to trading partners identifying which records were accepted, accepted with errors in conditional data elements, or rejected. It also requires records accepted with errors to be corrected in accordance with §102.5 (referring to General Rules for Written Communication To and From the Commission).

Subsection (j) identifies information which is not required to be submitted to the Commission. This type of unnecessary, unsolicited information serves no purpose and is costly to the system in terms of staff time to process, storage, etc.

Subsection (k) provides that a written request for waiver from the requirement that the first report of injury be filed electronically are to be submitted to the Executive Director or his/her designee. Requests must be filed annually and must include a justification for the waiver, the carrier's volume of claims and total premium amounts, automation capabilities and a timeframe for implementation of electronic data interchange. Through House Bill 2511, the 76th Texas Legislature again indicated its expectation that the Commission improve communications within the system and reduce reliance on paper. However, in doing so, the Legislature did not remove the language in §409.005 which allows the Executive Director to waive the carrier's electronic reporting requirement regarding the Employer's First Report of Injury. This subsection provides detail regarding how a request for such a waiver must be filed.

Subsection (l) allows the hardcopy/paper submission of information which would ordinarily be required to be submitted electronically if such submission is directed by the Commission. Such direction could come through Commission advisory, the Texas Electronic Data Interchange Guide, or other Commission communication.

Subsection (m) is based upon provisions of House Bill 2511 passed by the 76th Texas Legislature which encourages the Commission to emphasize "instant communications" which should reduce costs and improve benefit delivery. The addition of this subsection recognizes the advances in communications technology and the necessity to integrate them into the Texas workers' compensation system.

Comments supporting and/or opposing the new rules as proposed were received from the following groups: American Insurance Association, and Texas Workers' Compensation Insurance Fund.

Nancy Siegel of the American Insurance Association generally opposed some of the proposed amendments. Nick Huestis of the American Insurance Association expressed some support for the proposed amendments but also express concern and opposition to some of the proposals. Jaylene Fayhee of the Texas Workers' Compensation Insurance Fund expressed some support but also raised some concerns regarding the proposed rules and made several specific suggestions.

Summaries of the comments and Commission responses follow.

Section 124.1(a).

Comment: A commentor objected to subsection (a)(3) contending that it would broaden the definition of notice of injury to include "any other communications regardless of source" and would be virtually impossible to track.

Response: The Commission disagrees. This provision of the new §124.1 is identical to the provision in the former rule and it is not the Commission's experience that carriers have had any particular difficulty complying with this requirement in the past. The language regarding "any other communication regardless of source" is not a broadening of the former requirement. The only change in this provision from the former rule is that one of the four elements required to constitute written notice of injury in the absence of an Employer's First Report of Injury has been changed. Specifically, instead of requiring "the facts surrounding compensability," the new requirement is for "information which asserts the injury is work related." The specific language of this proposal was developed with industry input through the Claims Service Task Force based upon reactions to earlier ideas which would have significantly broadened the provision. This change was made because often, a carrier's first knowledge of an injury comes from a HCP in the form of a bill on a no lost time claim and previous language did not make it clear that a bill could be written notice of the injury. This could interfere with benefit delivery because the carrier's duty to pay or dispute benefits does not begin until receipt of first written notice of an injury. If a medical bill did not provide the facts surrounding compensability, the carrier would not have a duty to pay the claim. This requirement broadens the definition so that when a carrier that receives information regarding a work-related injury, it has to react to that information and make its decision to either accept or deny the claim.

Section 124.1(b).

Comment: A commentor stated that carriers should not be required to create paper records of verbal injury reports. The commentor contended that "the report of injury can be documented in the carrier's claim database or diary as an alternative" and recommended replacing the phrase "create a written record of" with the word "document".

Response: The Commission agrees that this section could be clarified but disagrees with the specific recommendation. A computer record is a written record and the language "create a written record" is inclusive of making it in a computer record. The term "document" as the commentor uses it, does not specifically require a written record to be created it could be interpreted to allow a tape recording which is not the intent of this subsection. The intent of this section is to take a verbal notice and translate it into writing which then begins the carrier's obligations to pay or dispute the claim and creates a record which can easily verify the report. The words "if received via tele-claims reporting or electronic transmission" have been deleted. Section 124.1(b) has been changed to read:

(b) The carrier shall immediately create a written record on paper or in an electronic format of the earliest notice of injury as defined in subsection (a) of this section that is not received in writing. The date of receipt of a written notice of injury shall be deemed to be the earliest date the carrier receives the information identified in subsections (a)(1), (2), or (3) of this section. Upon request of the Commission, a carrier shall provide an affidavit indicating the receipt or non-receipt of a notice of injury received and the receipt date.

Section124.2(a).

Comment: A commentor objected to the requirement to notify the Commission of actions or events in a claim contending that "it represents an attempt by the Commission to micro-manage the claims process and would present a significant burden on the carrier."

Response: The Commission disagrees. The required reporting in the new §124.2 is more or less similar to the requirements under the former rules. Most of the information required is mandated under Chapter 409 of the Texas Labor Code or is currently being provided to the Commission by EDI. The new rule centralizes and clarifies existing policies and is based upon numerous provisions of the statute including Texas Labor Code, §406.010 which requires the Commission to lay out claims service requirements through rules as this rule does.

Section 124.2(b).

Comment: A commentor encouraged "the Commission to provide a reasonable period of time between announcing and requiring changes in the form, format and manner of any required electronic submission."

Response: The Commission agrees. As in the past, the Commission will continue to work with the EDI trading partners regarding changes in the implementation and application of EDI to allow sufficient time for any required changes.

Comment: A commentor indicated support for the use of plain language letters instead of forms proposed in the rule.

Response: The Commission agrees. This change was made in large part based upon the requests of carriers and claimants.

Section 124.2(c).

Comment: One commentor offered the following: "Currently, the Commission requires an original (MTC = 00) electronic First Report of Injury (FROI) to be filed when one of three qualifying events occur:

1. greater than one day of lost time

2. occupational disease as defined by the TWCC (nature of injury code 60 - 80)

3. work related fatality

There is no mention of these qualifying events in proposed §124.2(c)(1)-(4). Instead, the proposed language requires an electronic notification for any type of claim. This will result in carriers being required to report under two sets of rules.

Proposed §124.2(c)(1)-(4) is also in direct conflict with §124.2(b). The Texas Electronic Data Interchange Implementation Guide references the three triggers listed above in Advisory 95-06. The EDI edits themselves do not allow for a claim to be accepted without a Date Lost Time Began date being present."

The commentor recommended resolving "the differences between the Texas Electronic Data Interchange Implementation Guide and the proposed reporting requirements before adopting proposed §124.2(c)(1)-(4). If and when the new reporting requirements are adopted, the effective date of the change should consider the timeframe EDI trading partners will need to establish two sets of reporting requirements."

Response: The Commission agrees that the filing requirements relative to receipt of the Employer's First Report of Injury could be clearer because many employers make a First Report of Injury to their carrier in the absence of the duty to file the form (i.e. absence from work). Logically, the requirements of §124.2 (c)(2)-(3) can not be complied with prior the carrier successfully transmitting an electronically submitted record which is to be corrected. Similarly, the requirement of (c)(4) can not be complied with prior to the receipt of a first report of injury, either electronic or paper. This is part of the reason that §124.1(d) requires the carrier to contact the employer if it receives notice of an injury from a source other than the employer. The expectation is that the carrier will be able to obtain the first report of injury in that manner which would then allow the transmission of the notice. However, §124.2(b) requires electronic transmissions required by this rule to be transmitted in form, format and manner prescribed by the Commission through such publications as the Texas Electronic Data Interchange Implementation Guide. Therefore if a transmission can not be accomplished due to the failure of others to comply with the Commission's requirements (e.g. notifying the Commission of a compensable death with no beneficiaries when the carrier has not yet received the Employer's First Report of Injury) then the carrier is not in noncompliance. It was never the intent of the rule to create reporting requirements which were not technologically possible through EDI and the rule needs to be read as a whole with that in mind.

To clarify the requirements, the language of §124.2 has been revised to simplify the construction of the rule so that the information/event, time frame for transmission, and means of transmission are tied closer together making the rule easier to understand. This new language also clarifies the requirements for sending information from the Employers' First Report of Injury to the Commission. In addition, because it §124.2(a) could be construed to limit carrier notification requirements to §124.2 only, subsection (a) was changed to clarify the intent by changing the word "rule" to "title."

Proposed subsections (c) through (l) were simplified by combining them together and revising some of the language. Proposed subsections (c) through (l) as proposed were deleted and replaced with new subsections (c) to (g) and the remaining subsections were renumbered. Subsection (g) provides specific instruction on the types of notice to file when a carrier is disputing disability, extent of injury, or eligibility of a claimant to receive death benefits. Proposed subsection (m) was deleted because its requirements were duplicative of §130.106. Proposed subsection (n) was renumbered as subsection (i) and revised to make it clear that this subsection was addressing conditional elements which have errors. In addition, minor changes were made to proposed subsection (o) (now subsection (j)) to clarify the prohibitions.

As noted, a new subsection (h) was added to address the manner which disputes of disability, extent of injury or eligibility of a claimant to receive death benefits needed to be filed with the claimant and the Commission and to differentiate them from disputes of compensability or liability for the claim. Also added was a new subsection (m) which requires notices filed with the claimant and the claimant's representative to be filed by facsimile or electronic transmission unless the recipient is unable to receive those types of transmissions. This last subsection was added because the proposed rule did not address how the carrier was to transmit the notices required by the rule to the claimant. The emphasis on facsimile and electronic transmission was in reaction to House Bill 2511 of the 76th Legislature which requires the Commission to reduce the system's reliance on paper filing by means such as the mail. This also has the positive effect of speeding up communication by eliminating the 3-5 days that traditional mail takes. The requirements of this new subsection are consistent with the requirements of other notifications and merely state that the carrier must use plain language notices as prescribed by the Commission.

The public benefit anticipated as a result of adoption of the new rules will include an increased ability of the parties to clearly understand the requirements regarding submission of claim administration data to the Commission; and will provide plain language written communications between injured employees/legal beneficiaries, insurance carriers, and the Commission which will be easier to understand for all participants in the system.

Insurance carriers should benefit from the new rules by being able to reduce the number of hardcopy (paper) forms that must be created and handled, and by reducing the amount of time for submission of information to the Commission. Additionally, the edits required for EDI will require a higher level of data quality than that previously submitted. Carriers should benefit from the use of plain language notices rather than Commission form TWCC-21. The notices will enable the injured employee to better understand the actions taken and the reason(s) the insurance carrier took the action. This better understanding by the injured employee may reduce verbal contacts to the insurance carrier requesting clarification and may also reduce the number of disputes raised due to misunderstanding. Initially, insurance carriers will incur the expenses associated with the development and programming for the electronic reporting standards. However, these standards will also be available for use in other jurisdictions that are moving toward electronic data interchange and meet legislative requirements. There will also be costs associated with the development and implementation of the plain language notifications. However, these initial costs will be offset by subsequent savings realized from the reduction of paper and mail handling processes, postage, and added consistency of data reporting requirements between jurisdictions.

Injured employees/legal beneficiaries should benefit from the rules due to the implementation of the plain language notices and replacement for the TWCC-21 form. The notices will provide information in a format that should be easier to understand and will provide more specific information regarding the actions taken on a claim by an insurance carrier and the reason for the action. The information will include benefit payment information, disputed claim information and general information regarding the claim. In addition, the emphasis on "instant communication" rather than mail should ensure that, as more claimants have a means of receiving facsimile or electronic transmissions, communication within the system will speed up. There are no anticipated costs to the employee/legal beneficiaries.

Covered employers should benefit from increased communication with their insurance carrier regarding workers' compensation claims reported by the employer and by parties other than the employer.

In addition, the Commission should see benefits from the addition of these two new rules as they should result in: improved communications with the Commission, more accurate data for system monitoring and analysis, and improved dispute resolution at lower levels. It should also be easier to hold system participants accountable for their actions and inactions.

To the extent that there is any impact to small businesses it will not differ from the impact on large businesses.