From the August 20, 2012 issue of National Underwriter Property & Casualty • Subscribe!

Workers’ Comp State Legislation Battles to Watch

The lazy, hazy days of summer are about to give way to a frenetic presidential campaign season for the most powerful political position in the world. Lost in all the hype surrounding this national political drama are hundreds of barely watched and little noticed campaigns for legislative seats in statehouses across the U.S.

These campaigns will be waged against a backdrop of a sluggish economy. The latest figures from the U.S. Bureau of Labor Statistics show national unemployment flatlining at around 8 percent. Economic growth, indicated by the Gross Domestic Product and reported by the Bureau of Economic Analysis, is hovering around 2 percent.

The added uncertainty of the global economy, tepid returns in the investment markets and a hardening Workers’ Compensation insurance market are causing business leaders and citizens to look for legislative candidates who have the potential to re-energize their local economies by attracting jobs and lowering the cost of doing business. The men and women battling it out on doorsteps, at local cafés and town meetings will have a lot to say about how improvements should be made in their state’s business climate. These changes include reforms to Workers’ Comp laws that deal with how medical treatment and benefits are delivered to injured workers and the costs that are ultimately passed on to local businesses.

STATE OF REFORM

There has been significant reform activity in a number of legislative chambers, and a handful of states have put forth some major reform efforts that impact Workers’ Comp payers as well as injured workers. No single area of the system is immune from scrutiny: State legislators are taking a hard look at everything from disability benefits to the cost and delivery of pharmacy and ancillary services.

Some issues have led to harsh divisions and even harsher words, and for some higher-profile state issues, the debates have become so fierce they have made the national airwaves. Here are some highlights from state legislative activities and their expected impact on Workers’ Comp:

In New York, Assembly Member Arvella Simotas, D-Astoria, pushed A. 5183, a bill that would have rolled back one of the hallmark provisions of the Spitzer reforms of 2007 by undoing the mandatory participation by injured workers in a pharmacy network if one had been established by their employer. Supporters of the pharmacy-choice bill included retail pharmacies. Opponents included pharmacy-benefit managers and insurance carriers.

Both sides traded volleys during a high-profile media campaign to sway the vote. Proponents touted patient safety and convenience, while opponents pointed out that pharmacy was the one area in which costs have actually been contained since the reform measures were adopted. Lawmakers, sobered by the announcement that New York employers had seen their Workers’ Comp premiums rise by roughly 30 percent since the 2007 reforms, decided to keep the mandatory networks in place to avoid any inadvertent culpability for future rate increases.

The New York legislature also recently took a big step in combating opioid abuse by passing the Internet System for Tracking Over-Prescribing Act (I-STOP), which directs the State Department of Health to create a real-time prescription-drug monitoring system. I-STOP also includes an education component designed to help physicians, pharmacists and patients understand risks and potential alternatives to opioid use.

Legislators believe that I-STOP will dramatically reduce fraudulent prescriptions and significantly limit doctor shopping to decrease opportunities for fraud, misuse and abuse. While the manner in which the law is actually implemented will determine its ultimate success, the legislation is already being heralded by industry experts as the new standard for prescription-drug monitoring programs.

The California Department of Industrial Relations (DIR), the Division of Workers’ Compensation (DWC) and the state legislature set the wheels in motion for a major reform effort in the latter part of this year and into the 2013 session. DIR Director Christine Baker and DWC Administrative Director Rosa Moran hosted listening sessions throughout the state in which they sought input from various stakeholders on problems in the Workers’ Comp system along with ideas for potential solutions. Hundreds of written comments were also submitted. Gov. Jerry Brown has publicly stated that he does not want piecemeal reform; the information gathered from the listening tour should reveal a road map for both the DWC and legislators to follow as they create the reform package.

Managing reimbursement rates of repackaged drugs has been a hot debate in Florida, as it has been identified as a key cost-driver in the state’s Workers’ Comp expenditures. Florida HB 668 (to regulate pricing for repackaged drugs), sponsored by Sen. Alan Hays, R-Umatilla, generated one of the more acrimonious debates this legislative season. The House version, HB 511, sponsored by Rep. Matt Hudson, R-Naples, sailed through the House committees. In contrast, the Senate version faced multiple unfriendly amendments.

Both sides claimed influence was “purchased” by the other side and subsequently presented data the other side immediately refuted. Other important bills became political casualties in retribution for a particular stand on the bill. The senators, who were besieged by wildly conflicting data and caught in the middle of a firestorm of words, did the only safe thing—sticking with the status quo.

Maryland had its own mini-drama surrounding its efforts to limit reimbursement on physician-dispensed drugs. The state Workers’ Compensation Commission held a public hearing, accepted public comments and drafted a rule that would have put reimbursement for physician-dispensed medications on par with the reimbursement received by pharmacies. Prior to officially adopting the rule, the commission was summoned to a state legislative committee that ultimately sent the message that the rule change was not well-received and would not receive the requisite legislative support for passage. Some of the same players that offered objections to the Florida repackaged drug legislation resurfaced as debate over the proposed Maryland rule played out.

Oklahoma made news as a bill moved through its legislative process that would allow employers that met certain criteria the ability to opt out of the Workers’ Comp system and become “nonsubscribers.” HB 2155, sponsored by Speaker Kris Steele, R-Shawnee, passed the House but was amended in the Senate committee before passing out of the Senate. The amendment would have required benefits provided by employers choosing to be nonsubscribers to the system to meet or exceed benefits offered by payers in the system. The House failed to concur with the Senate amendments on a closely divided vote, thus killing the bill.

Louisiana attempted to advance a number of major initiatives to reform its Workers’ Comp system. Signed into law by Gov. Bobby Jindal in June, HB 367 enacted language refining the medical-dispute process and the determination of medical necessity. It also created a definition for “utilization review company.” Additionally, Rep. Tony Ligi, R-Jefferson Parish, sponsored two major pieces of legislation that were ultimately held for further study. They are HB 885, which seeks to outline clear guidelines for reimbursement of repackaged and compound medications; and HB 959, which would allow employers to establish medical-provider networks.

REFORM EFFORTS CONTINUE

Here’s a forecast of what to expect on state legislative agendas as we move into fall sessions and into 2013:

Major reform efforts will occur in California as the information garnered from the listening tours is distilled into concrete proposals. New York will be advancing its own set of reforms to shore up some of the erosion in savings that has occurred since its 2007 system overhaul. Louisiana will revisit the Ligi bills, and Oklahoma will make another run at an opt-out bill. Tennessee already has some working groups pulled together to scrutinize its system, and those ideas will be shared and likely explored when the legislature reconvenes.

We expect other states to explore reform measures as they battle rising Workers’ Comp expenses and challenging public issues contributing to these costs such as physician dispensing, opioid abuse, compounded medications and repackaged drugs.

For example, reducing opioid misuse and abuse has quickly become one of the hottest topics in the health-care world and in Workers’ Comp. It will be interesting to see how New York will define and implement its I-STOP program and how other states begin to follow its lead and take steps to curb abuse.

States also will likely continue to observe the outcome of the Texas formulary law, set to become fully active for legacy claims on Sept. 1, 2013, which created a closed formulary that is based on Official Disability Guidelines. Initial results of the law have shown a significant decrease in opioid use in new Texas Workers’ Comp claims. Based on these initial outcomes, it is likely that state legislatures will monitor Texas’ progress closely to determine if they would like to pursue similar legislation.

We can also expect to see continued debate surrounding physician dispensing in Florida, Maryland and myriad other statehouses, bringing with it much controversy and media attention for both sides.

On the federal front, it will be interesting to see the result of the November elections. Whoever wins will ultimately drive change in policy related to Workers’ Comp. No matter which candidate you support, the federal government is expected to take a closer look at mitigating the risks associated with narcotic use through education initiatives and the U.S. Food and Drug Administration’s Risk Evaluation and Mitigation Strategy.

Budgetary pressures will continue to keep attention focused on the cost-drivers in the federal Workers’ Comp system. While watching the campaigns play out is a political junkie’s dream, outcomes of who is elected at the state and federal levels will greatly influence Workers’ Comp policy.

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