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Tag: 2016 News

San Gabriel Valley Physician Pleads Guilty to Illegal Distribution of OxyContin

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A San Gabriel Valley doctor has agreed to plead guilty to a federal drug trafficking charge for illegally distributing the powerful painkiller best known by the brand name OxyContin.

Dr. Daniel Cham, 48, of Covina, has agreed to plead guilty to one count of distribution of oxycodone and one count of money laundering.

In the plea agreement, Cham admits to unlawfully prescribing oxycodone to an undercover agent posing as a patient in March 2014 in exchange for $300 in money orders, which Cham then deposited into a bank account held in the name of another business. Cham made the deposit “knowing that the transaction was designed to conceal and disguise the nature and source of the money orders,” according to the plea agreement.

Cham was initially charged in this case in October 2014 when a federal grand jury returned an indictment alleging narcotics trafficking, money laundering, fraud and making false statement to authorities. The indictment focused on prescriptions Cham wrote at various locations, including his medical offices in La Puente and Artesia.

As part of the investigation investigators in May 2014 executed federal search warrants at 13 locations, including Cham’s residence and medical offices. According to the affidavit in support of the search warrants, the doctor often saw patients between 8 p.m. and 2 a.m. on Fridays, Saturdays and Sundays, and he post-dated prescriptions to make them appear to have been written on weekdays. Over the course of a year that ended in March 2014, Cham issued more than 5,500 prescriptions for controlled substances – primarily for oxycodone, hydrocodone, alprazolam and carisoprodol – and he issued more than 42,000 such prescriptions since July 2010, according to the affidavit.

The affidavit also discussed how an undercover officer made three visits to Cham’s La Puente office in 2014, and how Cham wrote prescriptions for controlled substances in exchange for $200 or $300 in cash or money orders. As discussed in the affidavit, Cham issued a prescription for oxycodone even though the undercover operative said he “had been high and drunk while receiving controlled substance prescriptions” previously from Cham. On another occasion, Cham prescribed oxycodone even though the undercover law enforcement officer presented, in lieu of photo identification, a written notice that his license had been suspended for driving under the influence.

The drug trafficking and money laundering charges that Cham has agreed to plead guilty to each count carry a statutory maximum penalty of 20 years in federal prison. In his plea agreement, Cham also agrees to forfeit to the government more than $60,000 in cash that he admits are “proceeds of [his] illegal activity.”

The investigation into Cham was conducted by the Drug Enforcement Administration, IRS Criminal Investigation, the Los Angeles County Sheriff’s Department’s Health Authority Law Enforcement Task Force, the Federal Bureau of Investigation, the California Medical Board, and the Los Angeles Police Department.

The California Medical Board shows three disciplinary actions taken against Cham starting in 2010. His license status is shown as “Delinquent – License renewal fee has not been paid. No practice is permitted.”

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DWC Finally Updates 15 Year Old “Physicians Guide” for PTPs and QMEs

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The Division of Workers’ Compensation finally announce the release of the 137 Page fourth edition of the Physician’s Guide to Medical Practice in the California Workers’ Compensation System. This comprehensive guide helps physicians and other health care providers dispense care to injured workers while complying with the statutes and regulations that are applicable to medical providers.

This edition of the Physician’s Guide to Medical Practice in the California Workers’ Compensation System has been developed by the Division of Workers’ Compensation to continue the mission set forth in the first three editions of the Physician’s Guide, namely, to assist physicians in understanding the many complexities in the California workers’ compensation system in order to provide optimal care to ill and injured workers.

“The physician’s guide was last revised in 2001, and much has happened in the last 15 years,” said DWC Acting Administrative Director George Parisotto. “The guide provides up-to-date information that will help practitioners apply the reforms set forth in SB 863.”

“Physician understanding of the workers’ compensation system is critical to helping deliver appropriate care to injured workers,” said DWC Acting Executive Medical Director Dr. Raymond Meister.

The manual contains 16 chapters, revising material from the third edition and providing new chapters on the following subjects:

1) Parties to the System
2) Benefits and Payments to Employees
3) Reports and Timelines in the System
4) Evidence-Based Medicine and the MTUS
5) Utilization Review and IMR
6) Physician Payment and the OMFS

The Physician’s Guide is intended as an educational and reference tool to supplement the reader’s professional experience. While intended primarily for treating providers, others in the workers’ compensation community may also find the information helpful, particularly Qualified Medical Evaluators (QMEs) and those preparing for the QME certification exam which is set for April 16th.

Claims administrators who encounter physicians who are having difficulty navigating and complying with the workers’ compensation system may find it expeditious to send a PDF copy of this Guide to the physician, pointing out the chapter that is most applicable for the physician to read in order to learn about how the system works. Physicians would be well served to look over this Guide in its entirety and have it handy as a reference source when questions arise.

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DWC Posts Adjustments to the DMEPOS Section of the OMFS

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The Division of Workers’ Compensation has posted an order adjusting the Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) section of the Official Medical Fee Schedule to conform to the second quarter 2016 changes in the Medicare payment system as required by Labor Code section 5307.1.

The update includes all changes identified in Center for Medicare and Medicaid Services Change Request (CR) number 9554. The April 2016 DMEPOS Rural ZIP code file containing Quarter 2, 2016 rural ZIP Code changes, will replace the January 2016 DMEPOS Rural ZIP code file, for services rendered on or after April 1, 2016. There are no other changes to the DMEPOS fee schedule for the second quarter of 2016.

The order adopting the adjustment can be found on the DWC website. The fee schedule classifies most DMEPOS into one of the six categories:

1) Inexpensive or other routinely purchased DME (IRP)
2) Items requiring frequent and substantial servicing
3) Customized items
4) Other prosthetic and orthotic devices
5) Capped rental items
6) Oxygen and oxygen equipment

The DMEPOS Competitive Bidding Program (CBP) implemented by CMS was mandated by Congress through the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). The statute requires that Medicare replace the older fee schedule payment methodology for DMEPOS items with a competitive bid process. The intent was to improve the effectiveness of the Medicare methodology for setting DMEPOS payment amounts.CMS is required by law to recompete contracts under the DMEPOS Competitive Bidding Program at least once every three years. The Round 2 and national mail-order program contract periods expire on June 30, 2016. Round 2 Recompete and the national mail-order recompete contracts are scheduled to become effective on July 1, 2016, and will expire on December 31, 2018.

But some are very critical of this CMS Compteitive Bid Program. A recent article in Forbes characterizes the CMS competitive bidding process as a “fiasco.” It reasons “The CMS award model allows it to re-set pricing based on a formula that is tied to the standard deviations observed across the most competitive bids. In other words, the bidders are not bound by their own bids.  The CMS award calculus is based on a “musical chairs” philosophy. Low bidders don’t win based on price or by providing evidence that supports their price, they win based on where their price happens to fall “relative to peers” when the auction ends. A supplier could bid $30 for a product or service and “win” at a price set by the CMS at $42.”

This outcome is the result of the language of the CBP which states “Contracts are awarded to the Medicare suppliers who offer the best price and meet applicable quality and financial standards. Contracted suppliers will be paid the bid price amount. The bid price amount is derived from the median of all winning bids for an item.”

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“Biosimilar” Drugs May Save $110 Billion in Drug Costs

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A biosimilar drug (also known as follow-on biologic or subsequent entry biologic) is a biologic medical product which is almost an identical copy of an original product that is manufactured by a different company. Biosimilars are officially approved versions of original “innovator” products, and can be manufactured when the original product’s patent expires. Reference to the innovator product is an integral component of the approval.

And lower-cost copies of these complex biotech drugs could save the United States and Europe’s five top markets as much as 98 billion euros ($110 bln) by 2020, a new analysis showed on Tuesday as reported in an article by Reuters Health. Realizing those savings, however, depends on effective doctor education and healthcare providers adopting smart market access strategies, the report by IMS Institute for Healthcare Informatics said.

The potential for copycats to take business from original biotech brands is increasingly grabbing the attention of investors, with many worried about the impact on profits at companies like Roche and AbbVie. It also presents an opportunity for an emerging group of biosimilar specialists, such as South Korea’s Celltrion and large generic drugmakers with biotech know-how, like Novartis’ unit Sandoz.

A saving of 98 billion euros is based on eight major branded biotech drugs, including AbbVie’s Humira and Roche’s Herceptin, that are set to lose patent protection over the next five years. It also assumes an average biosimilar price discount of 40 percent, and savings would fall to 74 billion euros at a 30 percent discount and 49 billion at 20 percent. The IMS forecast covers Germany, France, Italy, Britain, Spain and the United States.

The European regulatory authorities led with a specially adapted approval procedure to authorize subsequent versions of previously approved biologics, termed “similar biological medicinal products”, or biosimilars. This procedure is based on a thorough demonstration of “comparability” of the “similar” product to an existing approved product. In the United States, the Food and Drug Administration (FDA) held that new legislation was required to enable them to approve biosimilars to those biologics originally approved through the PHS Act pathway. The FDA gained the authority to approve biosimilars (including interchangeables that are substitutable with their reference product) as part of the Patient Protection and Affordable Care Act signed by President Obama on March 23, 2010; on March 6, 2015, Zarxio obtained the first approval of FDA.

Interest in biosimilars has grown significantly in the past two years thanks to the arrival of copies of sophisticated antibody drugs that are among the world’s biggest-selling prescription medicines. Europe has lengthy experience with biosimilars, having approved the first such products 10 years ago, but uptake still varies widely from country to country, depending on local market conditions.

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White House Opens Purse Strings to Fight Pain Pill Addiction

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With a nod to his own drug use as a young man, President Barack Obama on Tuesday called for more funding and a new approach to help people addicted to heroin and prescription drugs, seeking to shine a public spotlight on an increasingly deadly killer.

Reuters Health reports that during an appearance at a drug abuse summit in Atlanta, Obama said opioid overdoses killed more people in the United States than traffic accidents did. “It’s costing lives and it’s devastating communities,” Obama said while participating in a panel with addicts in recovery and medical professionals. He said efforts to fight the epidemic were grossly underfunded.

Obama, who earlier this year asked the U.S. Congress for $1.1 billion in new funding over two years to expand treatment for the epidemic, has faced criticism for not doing more to fight the problem sooner. Opioid addiction has become an issue in the 2016 presidential campaign.

Obama wrote about using marijuana and cocaine in his book “Dreams from my Father.” He said on Tuesday he was lucky addiction had not overcome him earlier in life beyond his use of cigarettes, and he pressed for the issue to be framed as a medical problem rather than a legal one. “For too long we have viewed the problem of drug abuse generally in our society through the lens of the criminal justice system,” he said.

In 2014, a record number of Americans died from drug overdoses, with the highest rates seen in West Virginia, New Mexico, New Hampshire, Kentucky and Ohio.

Obama said he needs Congress to open the purse strings to help expand treatment, particularly in rural areas, and applauded bipartisan legislation designed to combat the problem. Meanwhile his administration announced $11 million in grants for up to 11 states to help expand medication-assisted treatment, and another $11 million for states to buy and distribute naloxone, an overdose drug.

The Health and Human Services Department is also proposing a new rule for buprenorphine, a medication used to help addicted people reduce or quit their use of heroin or painkillers. The rule would allow physicians who are qualified to prescribe the medication to double their patient limit to 200. The White House said that measure would expand treatment for tens of thousands of people.

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2nd DCA Rejects Another Constitutional Challenge to Lien Filing Fee

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Physician Robin Chorn, M.D. and workers’ compensation applicants Robert Kalestian, Tanya Vounov, and Latasha Buie petitioned the Court of Appeal for a writ of mandate asking it to enjoin the Workers’ Compensation Appeals Board from enforcing two recently enacted provisions of the Labor Code pertaining to the lien filing fees, sections 4903.05 and 4903.8.

Petitioners contend that section 4903.05, which imposes a filing fee of $150 on certain medical liens filed in workers’ compensation cases, deprives them of their state constitutional rights to due process (Cal. Const., art. I, § 7), equal protection (Cal. Const., art. I, § 9), and petition for redress of grievances (Cal. Const., art. I, § 3). Petitioners claim that section 4903.8, which restricts payment of lien awards to individuals other than those who incurred the expenses, substantially impairs their constitutional right to contract. (Cal. Const., art. I, § 9.) Finally, they argue that both statutes contravene the constitutional mandate that workers’ compensation laws “accomplish substantial justice in all cases expeditiously, inexpensively, and without any encumbrance of any character.” (Cal. Const., art. XIV, § 4.)

The Court of Appeal rejected the request in the published case of Chorn v WCAB and Kamala Harris and ruled that the challenged provisions of sections 4903.05 and 4903.8 do not violate any of the constitutional provisions identified in the petition.

Article XIV, “section 4 of the state Constitution ‘affirms the legislative prerogative in the workers’ compensation realm in broad and sweeping language’ . . . . [Citation.]” (Stevens, supra, 241 Cal.App.4th at p. 1094.) “[T]he notion that . . . Section 4 itself imposes separate restraints on the plenary powers it confers on the Legislature has been decidedly rejected.” (Ibid.) Likewise, the Legislature’s broad power to regulate and enact limitations upon workers’ compensation matters “has been repeatedly affirmed.” (Ibid. [collecting cases].) Thus, “nearly any  exercise of the Legislature’s plenary powers over workers’ compensation is permissible so long as the Legislature finds its action to be ‘necessary to the effectiveness of the system of workers’ compensation.’ (Greener v. Workers’ Comp. Appeals Bd., supra, 6 Cal.4th at p. 1038, fn. 8.)” (Stevens, supra, 241 Cal.App.4th at p. 1095.) “The California Constitution does not make a workers’ right to benefits absolute” (Rio Linda Union School District v. Workers’ Compensation Appeals Board (2005) 131 Cal.App.4th 517, 532), nor does it make lien claimants’ rights to reimbursement absolute, as their rights arise out of and are derivative of the underlying workers’ compensation claim (see Perrillo v. Picco & Presley (2007) 157 Cal.App.4th 914, 929).

Here, the Senate Rules Committee’s analysis of SB 863 states that the lien system was “out of control” and could be reined in by “re-enact[ing] a filing fee, so that potential filers of frivolous liens have a disincentive to file.” “[F]ar from conflicting with Section 4’s mandate to provide substantial justice,” the lien reforms implemented in sections 4903.05 and 4903.8 advance this goal by taking aim at problem liens that impede the functioning of the workers’ compensation system. (Stevens, supra, 241 Cal.App.4th at p. 1096.) “It is not our place under the state Constitution to ‘second-guess the wisdom of the Legislature’ in making these determinations. (Facundo-Guerrero v. Workers’ Comp. Appeals Bd., supra, 163 Cal.App.4th at p. 651 [ ].)” (Stevens, supra, 241 Cal.App.4th at p. 1096.)

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Feds Struggle to Stop Comp Opt-Out Trend

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U.S. Department of Labor Secretary Thomas Perez says his agency will use its “bully pulpit” to strike at what he calls “a disturbing trend” that leaves workers without medical care and wage replacement payments when they are injured on the job. In an interview with NPR, Perez also confirms a Labor Department investigation of an opt-out alternative to state-regulated workers’ compensation that has saved employers millions of dollars but that he says is “undermining that basic bargain” for American workers.

According to the story in NPR, Perez says the probe focuses on a practice by thousands of employers in Texas and Oklahoma to opt out of conventional state workers’ compensation in favor of benefits plans that provide lower and fewer payments, make it more difficult to qualify for benefits, control access to doctors and limit independent appeals of benefits decisions. “What opt-out programs really are all about is enabling employers to reduce benefits,” Perez says. Opt-out programs “create really a pathway to poverty for people who get injured on the job.”

Perez wouldn’t provide any details. But last month, his agency sent a letter to Sen. Sherrod Brown, D-Ohio, disclosing “contact with the company cited in the ProPublica/National Public Radio report that is offering services to employers in Texas and Oklahoma” who opt out of workers’ comp.

That description fits PartnerSource, a Dallas company that wrote and supports almost all opt-out plans in Oklahoma and about half the plans in Texas. An agency official, who declined to be named because he is not authorized to speak publicly, confirmed that PartnerSource plans are the focus of the investigation.

PartnerSource President Bill Minick has not responded to NPR’s requests for comment about the probe.

For decades, Texas employers have been able to forgo workers’ comp and its state-mandated benefits and regulations. Oklahoma employers began opting out in 2014. Minick has said he is trying to export the concept to a dozen states in the next decade. The two states combined have 1.5 million workers covered by these alternative plans instead of state-regulated workers’ comp.

“If you work in a full-time job, you ought to be able to put food on the table,” Perez says. “If you get hurt on that job, you still should be able to put food on the table, and these laws are really undermining that basic bargain.”

Perez cautions that the Labor Department has limited authority to respond because workers’ comp is a state-run program. The agency can’t force employers to match state workers’ comp benefits when they opt out of state systems, he says. But in both Oklahoma and Texas, and in other states that have considered opt-out laws, Minick and employers say that opt-out plans are governed by the federal Employee Retirement Income Security Act, or ERISA.

ERISA is regulated by the Labor Department, and the agency’s investigation focuses on whether employers are violating ERISA with plans that restrict access to benefits. Perez cited plans that require mandatory arbitration for benefits disputes as an example. “Mandatory arbitration clauses I think more often than not work to the detriment of working people,” Perez says.

He also cited plans that force workers to report injuries before the end of their shifts or within 24 hours, which “ends up being used by companies to deny all benefits,” Perez says.

Last month, the agency sued U.S. Steel for suspending workers (in a non-opt-out state) who failed to report injuries immediately. The lawsuit argues that some injuries, like those involving muscles and soft tissue, are not immediately apparent or serious. Perez says the Labor Department has the authority to make sure that employers who opt out of workers’ comp “have important procedural safeguards” required by ERISA. If violations are found, he says, the agency could demand procedural corrections, but employers would still be able to provide fewer benefits.

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Comp Medical Transportation – There’s an App For That!

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It may be that Uber type competition is about to challenge the medical transportation industry in California, hopefully bringing lower prices and better service.

EMS Find, Inc. announced the launch of its updated website. The on-demand medical transportation mobile application developed by the Company is now available for download in Google Play Store and the updated version of it is now offered in Apple App Store.

Within one month the Company plans to release the desktop version of its software for scheduling and tracking of medical transport. Availability of iOS, Android and Desktop versions will facilitate the seamless integration between medical transporters and health care providers.

The Company says it is engaging in several strategic partnerships with the leading industry peers with focus to provide the ultimate solution to manage medical transportation fleet scheduling tasks as well as integration with the Uber Platform to allow any Uber Driver to assist in transportation to medical appointments of the patients who are not requiring ambulances or other specialized medical equipment.

The Company is also working on expanding its B2B solution by implementing the claim billing functionality along with an automatic verification of patient’s eligibility to receive medical insurance compensation for transportation. EMS Find’s solution offers many important features such as verification of validity of drivers’ certifications to deliver the trip.

EMS Find App is designed to dramatically reduce the paper load and the time, currently burdening the social workers, case managers and other health care professionals in charge of scheduling, fraud reduction and elimination of the unpaid and empty trips by the ambulance companies.

The Company says it has been making progress with practical implementation of its business plans along with continuing its software development, . The recently announced pilot testing of its mobile app in California is expected to involve about 50 ambulances and other special medical vehicles interacting with several skilled care facilities in and around Los Angeles County with the goal of launching and growing commercial service in the greater Los Angeles and surrounding counties in 2-3 months.

The revenue model under development there will include per booked trip fees as well as principal transportation brokerage fees.

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DEA Drug Take-Back Program Nets 74,000 Pounds of Opioids

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Chuck Rosenberg, acting head of the Drug Enforcement Administration, told Congress earlier this week that four out of five heroin users started on pills, and many people who use or abuse opioid pain pills get them from a friend or relative’s medicine cabinet, . “And that’s why we have re-instituted our national take-back program.”

Rosenberg noted that the most recent take-back day, in September 2015, was a big success, as measured in pounds: “I’ll break it down a little bit, if I may. But in September of last year, we took in 749,000 pounds of unwanted and expired drugs. By some estimates, only 10 percent or so are opioids, but even if that’s true, even if it’s quote-unquote ‘only 10 percent,’ that’s still about 74,000 pounds of opioids.

“So we think we’re making a difference. We’re going to continue these programs. Our next take-back will be April 30th of this year, so not that far away, about five weeks. And if it’s like our last take-back program, it will be in 5,000 communities around the country.” The other take-back day this year “will likely be in October,” he said, “and I’m hoping we build on the success.”

Rosenberg said the United States has five percent of the world’s population, but consumes 99 percent of the world’s hydrocodone. “And so I guess we shouldn’t be surprised that the connection between pills and heroin is as strong as it is.”

He said the DEA is approaching the opioid problem with a “360-degree” strategy, including keeping pain pills in the legitimate stream of commerce, attacking the supply side, and trying to reduce demand through education and treatment and prevention. “If we don’t start knocking down the demand side, we can’t possibly win against the supply side,” Rosenberg said. The 360 program is now being tested in four cities — Pittsburgh, St. Louis, West Memphis (Ark.) and Milwaukee.

“We looked at cities generally that had an uptick in crime, cities…that were large cities but not enormous cities and cities where we thought we could make an immediate difference. We’re looking now at another round of cities, and we’re trying to approach this sort of driven as much by statistics as we possibly can. Where do they need us, where has a problem gotten worse and where can we make a difference.

The FDA supports the responsible disposal of medicines from the home. Almost all medicines can be safely disposed of by using medicine take-back programs or using U.S. Drug Enforcement Agency (DEA)-authorized collectors. DEA-authorized collectors safely and securely collect and dispose of pharmaceutical controlled substances and other prescription drugs. Authorized collection sites may be retail pharmacies, hospital or clinic pharmacies, and law enforcement locations. Some pharmacies may also offer mail-back envelopes to assist consumers in safely disposing of their unused medicines through the U.S. Mail.

Consumers can visit the DEA’s website for more information about drug disposal and to locate an authorized collector in their area. Consumers may also call the DEA Office of Diversion Control’s Registration Call Center at 1-800-882-9539 to find an authorized collector in their community. Local law enforcement agencies may also sponsor medicine take-back programs in your community. Contact your city or county government for more information on local drug take-back programs.

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Senate Subcommittee Report Says 12 Obamacare CO-OPS Are Now Insolvent

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The Patient Protection and Affordable Care Act (ACA) created the Consumer Operated and Oriented Plan Program – known as the CO-OP Program. Under the CO-OP Program, the Department of Health and Human Services (HHS) distributed loans to consumer-governed, nonprofit health insurance issuers. A new Majority Staff Report of the U.S. Senate Permanent Subcommittee on Investigations says that HHS ultimately received $2.4 billion of taxpayer money to fund 23 CO-OPs that participated in the program. Twelve of those 23 CO-OPs have now failed, leaving 740,000 people in 14 states searching for new coverage and leaving the taxpayer little hope of recovering the $1.2 billion in loans HHS disbursed to those failed insurance businesses.

Congress initially allocated $6 billion for the Obamacare CO-OP program, with the goal of establishing CO-OPs in all 50 states as well as the District of Columbia. Subsequent legislation slashed some of this funding. The CO-OPs ultimately suffered $376 million in losses in 2014 and more than $1 billion in losses in 2015. By the end of 2014, the 12 collapsed insurance nonprofits had already exceeded their projected worst-case-scenarios by more than $263 million, four times more than what they initially projected.

None of the failed CO-OPs have repaid a single dollar, principal or interest, of the $1.2 billion in federal solvency and start-up loans they received. In addition, there remains substantial liability for unpaid claims including fully processed 2015 claims as well as incurred but unprocessed 2015 claims. The CO-OPs report that they continue to receive some 2015 medical claims through the first quarter of 2016, and many received claims are still being processed to determine coverage.

Based on the most recent balance sheets provided to the Subcommittee, the failed CO-OPs currently owe an estimated $742 million to doctors and hospitals for plan year 2015, including incurred claims. An insolvent health insurer’s debt to providers takes priority over other liabilities, so those claims are likely to be the first to be paid out of remaining assets. But if a CO-OP’s medical claims alone exceed assets, payment to providers can be in doubt. Based on their submissions, at least six CO-OPs currently owe more in medical claims alone than they hold in assets. Three of those CO-OPs – the Colorado CO-OP, the South Carolina CO-OP, and CoOportunity – have access to guaranty associations capable of paying some or all unpaid medical claims.

Guaranty associations serve as a mechanism to pay covered claims occurring as a result of an insurer’s insolvency. Associations were created to alleviate these problems and ensure the stability of the insurance market. The Colorado CO-OP projects that substantially all of its $96.6 million in unpaid medical claims will be paid by the state’s guaranty fund. Similarly, the South Carolina CO-OP estimates that all of its $48 million in unpaid claims will be paid by the state’s guaranty fund. The first CO-OP to close, CoOportunity, reports that $114.1 million of its unpaid medical claims have now been paid by the Iowa and Nebraska guaranty associations.

The other three CO-OPs with serious shortfalls, however, will not be bailed out by guaranty funds. The New York CO-OP reports that it had $379.5 million in unpaid medical claims and $157.54 million in assets as of December 31, 2015 – a $222 million shortfall, excluding any other liabilities. No portion of that shortfall will be covered by New York’s guaranty fund. Most of the New York CO-OP’s unpaid claims are owed to doctors and hospitals, and a non-negligible share – $373,000 as of January 31, 2016 – is owed directly to patients.

Similarly, the Louisiana CO-OP reports $34.4 million in assets and $43.3 million in unpaid medical claims as of January 31, 2016, and none of that $9 million shortfall will be covered by a guaranty fund. The same is true of the $7 million shortfall on the Kentucky CO-OP’s January 2016 balance sheet, which shows $77.5 million in unpaid claims and only $70.5 million in assets.

It is likely that some of the cost of these losses will translate to cost drivers in workers’ compensation claims.  Certainly, the guarantee funds will distribute the cost by way of assessments to other insurers who will in turn pass the costs to policyholders everywhere.  Medical providers who are not paid in one system, will demand higher fees to compensate them in another system.  The epic failure of the CO-OP Program is not good news for anyone.

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