Calif. Gov. Takes Action on WC Bills

California Gov. Jerry Brown signaled support Friday for reducing the cost to state businesses of the state’s workers’ compensation program by signing two bills approved by the industry while vetoing four other bills passed by the legislature that the industry opposed.

One bill Brown signed is AB 378, which brings compound drugs under the pharmacy fee schedule. The bill passed the legislature Sept. 9.

These drugs are mostly dispensed by the physicians who provide services to injured workers and were previously exempt from the state’s pharmacy fee schedule, according to Mark Sektnan, president of the Association of California Insurance Companies (ACIC).

AB 378 was supported by a broad coalition, including insurers, employers and labor unions representing injured workers, according to Sektnan. 

“This new law will take away financial incentives for unnecessary dispensing of these medications that are created for the sole purpose of avoiding the pharmacy fee schedule,” Sektnan says. “Injured workers must get the medicines they need to get better and get back to work. Medical providers should not have incentives to prescribe costly, yet questionable drugs.”

The new law was prompted by studies conducted by the California Workers' Compensation Institute in 2010 and a report to the Commission on Health and Safety and Workers' Compensation by the RAND Institute that pointed out the costly abuses involving physician-dispensed compound drugs. 

Sektnan says compound medications are often paired with topical and transdermal creams that have not been approved by the FDA.

He says that since compound medications are a combination of other medications, these medications present unique billing issues and many insurers have seen instances where the bill for a compound drugs is several times more expensive than the comparable FDA-approved, commercially available oral dosage.  Some of these compound prescriptions are not vetted and could pose safety risks to injured workers, ACIC officials note.

Brown also signed SB 684, which protects California employers from being dragged out of state by workers’ comp insurers to resolve disputes. The bill passed the legislature Sept. 1.

SB 684 provides that workers’ comp insurers must present a written disclosure to California employers that the insurer is seeking to include in the workers’ comp insurance contract a requirement that disputes be arbitrated or resolved in a state other than California under that other state’s laws.

The bill also provides that unless the California employer agrees explicitly otherwise, any disputes with the insurer will be resolved in California under California law.

The industry initially opposed this bill because it would have mandated that California law be used in arbitrating a payment dispute between an insurer and an employer.

But the industry found this bill acceptable after it was amended to allow both parties in a dispute to mutually establish the guidelines, according to Nicole Mahrt Ganley, an ACIC spokesperson.

At the same time, Brown vetoed four other bills: two dealing with temporary disability benefits, one involving utilization reviews, and a fourth which would rule out basing the handling of workers’ comp injury determinations on such issues as race, marital status or genetic characteristics.

On the latter bill, Brown says he vetoed it because consideration of these factors in making determinations is already outlawed by existing laws and court decisions, and enacting the new law would generate costly new litigation “over questions of whether it is intended to change existing interpretations.”

Sektnan lauds the governor’s decisions.

“Gov. Brown vetoed four measures that would have raised workers’ compensation system costs or fostered litigation,” he says.

Sektnan adds: “The governor’s veto messages state he is willing to make changes to the system but he wants changes to be made in a balanced way where cost increases are offset by cost savings.  Governor Brown wisely recognized in his veto message that costs in the system must remain sustainable.”

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