Author: WorkCompAcademy

If Congress does not reauthorize the Terrorism Risk Insurance Act by the end of 2014, it could significantly affect the cost and availability of workers’ compensation coverage, according to new policy brief by RAND researchers. The report examines how insurers might respond if TRIA expires, especially in the workers’ compensation markets because states “rigidly define the terms of the coverage.” For example, insurers cannot exclude terrorism from such policies, impose policy limits or exclude losses from nuclear, biological, chemical or radiological attacks as a way to control their exposure.

Congress passed TRIA the year after the Sept. 11, 2011 terrorist attacks, which resulted in $40 billion of insured losses – considered “the most expensive man made catastrophe in insurance history,” the brief said. TRIA provides a high-level federal backstop in case of large catastrophic losses greater than $100 million. This helps mitigate the impact of terrorism on the insurance markets by spreading the losses across all property and casualty policyholders.

RAND researchers said if the TRIA expires and there is not a sufficient private reinsurance capacity covering terrorism losses then insurers could decline to provide workers’ compensation coverage to businesses considered high risk. Compared with other insurance lines covered by the Terrorism Risk Insurance Act (TRIA), workers’ compensation offers insurers less flexibility to control terrorism exposure through modifications in coverage: WC policies cannot exclude terrorism, impose policy limits, or exclude losses from nuclear, biological, chemical, or radiological (NBCR) attacks.

Terrorism does present the potential for extremely large WC losses. Attack simulations performed by Risk Management Solutions (RMS) for previous RAND work suggest that losses in WC could be more than $10 billion from a large conventional attack (10-ton truck bomb) and more than $300 billion from a nuclear attack. In comparison, the 9/11 attacks caused approximately $2.6 billion (in 2013 dollars) of WC losses. What is more, the probabilities of these catastrophic events are highly uncertain. As discussed in a previous RAND policy brief on TRIA, terrorism risk models are limited in their ability to predict the frequency of events.

As a result, some employers might have to get coverage in residual markets where higher premiums are charged. The higher cost of coverage could reduce incomes and economic growth although the brief said this effect would likely be small. And if TRIA expires and there is another terrorist attack, then businesses and taxpayers would likely finance workers’ compensation losses within the state where the attack occurred, adding to the challenge of rebuilding. “It is important that policy makers be aware of this plausible scenario when debating how to proceed with TRIA,” the brief said.

California’s State Average Weekly Wage (SAWW) climbed just under 2.666% from $1,067.25 to $1095.70 in the 12 months ending March 31, 2014, which the California Workers’ Compensation Institute (CWCI) notes will push the maximum temporary total disability (TTD) rate for 2015 job injuries to more than $1,100 a week and boost other workers’ comp benefits that are tied to changes in the SAWW as well.

California’s current maximum TTD rate is $1,074.64 per week for 2014 job injuries, but under state law the increase in the SAWW will boost the weekly maximum to $1,103.29 for claims with injury dates on or after January 1, 2015. The minimum weekly TTD rate is also tied to increases in the SAWW, so CWCI calculates that the minimum will rise from the current $161.19 to $165.49 for claims with 2015 injury dates. The Institute has confirmed both the minimum and maximum TTD rates for 2015 injury claims with the state Division of Workers’ Compensation.

Other benefits that will be bumped up by the SAWW increase include TTD paid 2 years or more after injury, life pension and Permanent Total Disability payments for injuries on or after January 1, 2003, and death claim installment payments. Underpayment of benefits results in penalties, so CWCI encourages claims administrators to review changes in benefit rates with legal counsel to assure that adjustments are appropriate and accurate. A CWCI Bulletin with more details is available to Institute members and subscribers who log in at www.cwci.org.

The Division of Workers’ Compensation (DWC) has issued a notice of public hearing for proposed Workers’ Compensation Information system (WCIS) Electronic Data Interchange (EDI) reporting regulations. The public hearing has been scheduled for 10 a.m., Monday, July 14, 2014, in the auditorium of the Elihu Harris State Office Building, 1515 Clay Street, Oakland, CA 94612. Members of the public may also submit written comments on the regulations until 5 p.m. that day. Labor Code section 138.6 requires the Administrative Director of the DWC to develop a cost-efficient WCIS to accomplish four objectives:

1. Assist the Department of Industrial Relations to manage the workers’ compensation system in an efficient and effective manner.
2. Facilitate the evaluation of the efficiency and effectiveness of the benefit delivery system.
3. Assist in measuring how adequately the system indemnifies injured workers and their dependents.
4. Provide statistical data for research into specific aspects of the workers’ compensation system.

The statute requires that the data collected electronically by the WCIS be compatible with the EDI system of the International Association of Industrial Accident Boards and Commissions (IAIABC). The statute further directs the Administrative Director to adopt regulations specifying the data elements to be collected by EDI.

The initial regulations implementing Labor Code section 138.6 (California Code of Regulations, title 8, sections 9700 – 9704) became operative November 5, 1999. The regulations were amended in April 2006, primarily to require the electronic reporting of medical bill payment data. In 2010, the regulations were amended again to refine WCIS reporting by eliminating unnecessary data elements, adding relevant data elements, correcting errors in the text of the regulation, adding lien payment data elements for medical bill payment reporting, and updating the two California-specific implementation guides. The California EDI Implementation Guide for First and Subsequent Reports of Injury and the California EDI Implementation Guide for Medical Bill Payment Records, in conjunction with the more comprehensive guides issued by the IAIABC, explain how the data transmission is accomplished, explain how to edit data transactions, provide the required codes for transmitting data, and set forth the system specifications. Currently, workers’ compensation claims administrators adjusting approximately 95 percent of all workers’ compensation claims in the State are electronically reporting claim data information to WCIS.

The IABIABC is again updating its Medical Bill Data Reporting guidelines, moving from version 1.1 to Release 2.0. Correspondingly, the California EDI Implementation Guide for Medical Bill Payment Records is being updated to be consistent with IAIABIC’s Medical Bill Data Reporting Implementation Guide, Release 2.0. It is therefore necessary to also revise sections 9701 and 9702 of Title 8 of the California Code of Regulations, concerning transmittal of EDI to WCIS so that these regulations will not be inconsistent with the revised California EDI Implementation Guide for Medical Bill Payment Records and the IAIABC’s Medical Bill Data Reporting guidelines, Release 2.0.

These proposed regulations implement, interpret, and make specific Labor Code section 138.6, which mandates the development of the WCIS, requires data to be collected electronically to be compatible with the IAIABC EDI system, and requires data elements to be collected through EDI to be set forth in regulations. Changes in certain regulatory definitions and in the data elements to be reported have been proposed to bring WCIS into compliance with the new IAIABC requirements. The notice and text of the regulations can be found on the proposed regulations page.

Shocked by the rapid adoption of a new $84,000 hepatitis C treatment, U.S. health insurers are trying to make sure they aren’t blindsided by other drugs being developed and are looking for ways to limit their use from the day they are launched. According to the article in Reuters Health 30,000 people have received hepatitis drug Sovaldi so far, and that sales hit a record-breaking $2.3 billion within a few months. The treatment, typically 84 pills taken over 12 weeks, completely cures the disease in more than 90 percent of patients. As many as 3.2 million Americans are infected by hepatitis C, and the cost of giving most of them Sovaldi would surpass $200 billion. Some insurers have already put conditions on who can get the drug, and states including California and Texas have slowed or put treatment on hold while they study what to do.

Insurers warned that these unforeseen costs will cut 2014 earnings and require rate hikes. Now, at industry conferences, in conversations with investors, and in private, they are pushing Gilead’s rivals, a group that includes AbbVie Inc, Merck and Co and Bristol-Myers Squibb Co, to discount their own new hepatitis C treatments when they come to market starting this fall. Such a high-profile campaign by insurers before drugs are even approved is new.

They are also signaling they will restrict who can get coverage for new cholesterol drugs being developed by Amgen Inc, Pfizer Inc and a partnership of Regeneron Pharmaceuticals Inc and Sanofi SA. By law, insurers cannot deny access to new drugs if they represent a real improvement for patients, leaving drug companies with the upper hand in most price discussions. When comparable competitors, or a generic version is on the market about a decade later, insurers have room to steer patients away from the new drugs, and pharmaceutical companies cut prices steeply and give big discounts. But insurers have not faced such a highly effective drug aimed at a widespread disease that is so expensive and so quickly adopted. The previous record for a drug reaching blockbuster status was set in 2011, when hepatitis C therapy Incivek from Vertex Pharmaceuticals raked in $1.56 billion for the entire year. Sovaldi has sold more in a quarter of the time. As a result, insurers are taking a harder line on which patients should get Sovaldi, based on the drug’s clinical data.

Sovaldi is “game-changing” for insurers’ thinking, said John Whang, co-president of Reimbursement Intelligence, a consulting firm that helps pharmaceutical companies set prices. The only way for them to respond is to control the volume of treatment used, he said.

In a sign of how serious the industry has become, the largest insurer lobby group last week took Gilead to task at a public conference. “The company in this case is asking for a blank check and you can’t give anyone anymore a blank check because it will blow up family budgets, state Medicaid budgets, employer costs and wreak havoc on the federal debt,” said Karen Ignagni, president of America’s Health Insurance Plans.

Gilead argues that Sovaldi’s price is worth it, since it will replace even costlier spending on hospital visits and treatments for cirrhosis or liver failure. It has not budged on price for the hepatitis C drug, although Gregg Alton, Gilead’s executive vice president for corporate and medical affairs, acknowledged that insurers are going to start negotiating.

U.S. drug spending reached a record $329 billion in 2013, driven by a double-digit increase in prices for new cancer, HIV and hepatitis C therapies. Express Scripts, the nation’s largest pharmacy benefit manager, expects spending on such specialty drugs to rise an additional 63 percent from 2014 to 2016, driven by an 1,800 percent increase in hepatitis C drug costs.More scrutiny of new pricing is likely ahead as the country comes to terms with how it should pay for expensive drugs, according to John Castellani, Chief Executive Officer of leading drug industry lobby group Pharmaceutical Research and Manufacturers of America or PhRMA.

The next big price battle centers on a new class of cholesterol drugs known as PCSK9 inhibitors, which help the liver to clear “bad” LDL cholesterol from the blood. Large-scale studies show the new drugs can help patients who cannot tolerate, or get enough benefit from, the most widely-used cholesterol drugs, statins. The PCSK9 therapies are expected to cost thousands of dollars a year, far above the price of statins sold as generics. Drugmakers are expected to push for the new medicines to be used by 7 million to 20 million people, or up to 30 percent of the 71 million Americans with high cholesterol. Insurers already are questioning whether the estimates of use are legitimate. “There is really no need to take these new medications and spread them out across a larger community of people who will respond to existing treatments, many of which are generic,” Aetna Inc’s National Medical Director for Pharmacy Policy Ed Pezalla said in an interview.

A surge in prescription drug abuse among older Americans has been accompanied by a big increase in urine and blood tests nationwide. Part of an effort to detect that abuse, the tests generate millions of dollars for providers. Medicare, the government insurance system for the disabled and people 65 years and older, is footing the bill. One illustrative example, a review of Medicare data released last month by Reuters Health found three Connecticut doctors billed Medicare for nearly 24,000 drug tests in 2012 – on just 145 patients. Despite the extraordinary number, Medicare administrators paid the doctors a total of $1.4 million. Each of the doctors requested only the most expensive and comprehensive drug test, for as much as $94, rather than the simpler $19 one. This was done to improve the accuracy of the results, one said.

“Those numbers are ridiculously high,” said Dr Stuart Gitlow, acting president of the American Society of Addiction Medicine. “There is no medical indication I can think of that would require such frequency of testing. I can’t come up with a scenario at all.”

Medicare paid medical providers $457 million in 2012 for 16 million tests to detect everything from prescription narcotics to cocaine and heroin, according to the Reuters analysis. “In some parts of the country every doctor and his cousin is hanging out a shingle to do (addiction) treatment. There’s a tailor-made opportunity for ordering a profusion of tests instead of one,” said Bill Mahon, former executive director of the National Health Care Anti-Fraud Association. “It’s like turning on a spigot of money,” he said. Urine and blood tests are potential areas of fraud and abuse because guidelines for drug testing are vague, leaving the frequency of testing to the discretion of the provider.

Yet, there is often a legitimate need for such drug tests, to determine whether an addict has relapsed or to ensure that patients prescribed painkillers are taking them rather than selling them. In 2011, the average number of older Americans misusing or dependent on prescription pain relievers grew to about 336,000, up from 132,000 a decade earlier, according to the Substance Abuse and Mental Health Services Administration.