Cannabis Reimbursement Trend Grows
An insurer reimbursed workers’ compensation claimant Peter Mould for $4,600 of the $10,000 he has spent buying cannabis since obtaining a state medical marijuana program registration card nearly two years ago.
Mould said he expects reimbursement from American International Group for the remainder of $10,000, and payments for any future purchases of cannabis buds bought at a dispensary licensed under Connecticut’s 4-year-old medical marijuana program.
The Connecticut claimant’s case shares similarities with others across a few jurisdictions where insurers have reimbursed workers’ comp claimants for their purchases under state medical marijuana laws.
Those similarities include injured workers reportedly obtaining relief from chronic pain — a condition that torments sufferers and claims payers alike, often because it leads to the prescribing of dangerous opioid narcotics and the costly complications they cause.
Mould, 43, believes he is saving the worker’s comp insurer thousands of dollars for the costs normally driven by opioids that doctors prescribed for him following a 2011 workplace injury. The injury led to two cervical spine surgeries and “countless hours of physical therapy” that didn’t eliminate his pain and back spasms, Mould said.
“The medical cannabis absolutely helps,” said Mould who injured his neck by pulling up glued-down carpet while employed at a restoration company. “I don’t take narcotics anymore because of medical cannabis.”
“Reimbursement, as opposed to direct pay, is a significant legal distinction that I think somewhat insulates the carrier or self-insured employer,” — Paul H. Sighinolfi, executive director and chair, Maine Workers’ Compensation Board
Cases of workers’ comp insurers paying for marijuana across the country likely remain few and isolated to states like Connecticut, Maine, Minnesota, and New Mexico.
But Mould’s attorney, George H. Romania of the Law Office of George H. Romania LLC in Hamden, Conn., expects many more such claims. Growing recognition of the harms caused by treating pain sufferers with opioids will drive more claimants to seek cannabis, he said.
Some state medical marijuana laws protect insurers from having to pay for the drug. But where the laws allow, claimants have found judges or hearing administrators supporting their requests for reimbursements.
In Maine, for example, administrative law judges have heard five cases with workers’ comp claimants requesting payment for cannabis purchased under the state’s medical marijuana program, said Paul H. Sighinolfi, executive director and chair of Maine’s Workers’ Compensation Board.
Three of those cases resulted in the judges ordering insurers to reimburse claimants for their purchases. All three cases involved patients suffering “intractable pain,” Sighinolfi said. Two of those decisions are under appeal.
The first case heard by Maine judges involved a worker who strained his back in 1989 while lifting an industrial garage door. His employer paid for treatment at several prominent hospitals. The pain persisted and he was diagnosed as suffering from complex regional pain syndrome.
He eventually consumed between 120-140 milligrams of OxyContin daily. He also received Dilaudid, another opioid, for breakthrough pain and periodically received for morphine injections.
In a “last-ditch effort,” his physician agreed he should see a doctor known to certify patients to Maine’s medical marijuana program.
By the time of his hearing to consider whether he should be reimbursed for purchasing cannabis, he was not consuming any narcotics, said Sighinolfi, who interviewed the injured worker’s physician. Instead, the claimant found relief by vaping cannabis three or four times a day.
The cannabis strain he vapes has been bred to so that it does not contain the ingredient that typically produces a marijuana high when consumed.
“This is a very believable guy,” Sighinolfi said of the claimant.
As first occurred in New Mexico two years ago, when claims payers in other states have been ordered to fund cannabis, it hinges on reimbursing claimants for their medical marijuana purchases. Judges evidently believe that requiring reimbursement insulates claims payers from federal law prohibiting the purchase of marijuana.
“Reimbursement, as opposed to direct pay, is a significant legal distinction that I think somewhat insulates the carrier or self-insured employer,” Sighinolfi said.
But Trey Gillespie, assistant vice president, workers’ compensation, for the Property Casualty Insurers Association of America (PCI), disagrees. He argues that the reimbursement arrangements still force underwriters to violate federal law regulating financial services companies.
A few PCI members have voiced willingness to consider voluntarily reimbursing for medical marijuana, should studies show it indeed addresses chronic pain and can help eliminate opioid consumption.
But the federal classification of marijuana as a Schedule 1 drug currently hampers such research. The U.S. Drug Enforcement Administration is now considering changing that status and is expected to announce soon whether it will do so.
“What is needed are high-quality studies on the effectiveness of marijuana in the treatment of the diseases for which it is authorized in various states, whether we are talking about glaucoma, or chronic pain,” Gillespie said.
Risk Complexity Breeds Stress
Risk managers are straining under a workload beset by increasingly complex exposures and limited resources to ensure they are adequately addressing them.
“There is this absolute grind of increasing complexity,” the treasurer overseeing risk management at a nationwide retailer agreed when I mentioned the growing stress placed on risk managers.
He can no longer afford the time to take calls from service providers vying for his business, he added. In years past, added the retailer’s risk management director, meeting with new providers gave him the opportunity to learn about risk-management trends and service options.
It’s easy to understand why risk managers have had to make such adjustments.
Current corporate profitability levels are placing risk management department expenses under pressure.
The complexity of traditional risks, like workers’ compensation, has grown substantially, demanding more time to manage. No longer does mitigating that risk just require reducing accident frequency and establishing a relatively straightforward return-to-work program for injuries that do occur.
There are now more regulatory considerations, like how the RTW efforts mesh with Americans with Disabilities Act mandates, for example.
Additionally, workers’ health conditions coupled with the rising cost of emerging drugs and medical treatments require more specialized expertise and services to manage their appropriate use. The rise of predictive analytics, case management and drug-utilization monitoring come to mind.
So while the workers’ comp manager and risk manager have more service providers touching their workers’ comp claims, they have less time to converse with competing service vendors to help ensure they are tapping the best options.
Then there are the new, emerging risks.
Corporate boards have taken a direct interest in their companies’ preparations for cyber exposures. So the risk manager must respond, taking his attention away from those growing workers’ comp challenges to devote additional resources to evaluate cyber risk preparations.
Yet according to Aon’s “Global Risk Management Survey 2015,” risk management department staffing levels have held constant since 2009. That is the year the “Great Recession” ended.
Current corporate profitability levels are placing risk management department expenses under pressure. So it’s growing common for companies to cut risk management program expenses — that might produce short-term savings, but result in additional long-term costs, several sources told me.
Risk managers who know better can’t feel good about making such decisions.
“I am seeing stress,” said Mark Noonan, managing principal, casualty at broker Integro USA Inc.
“You have to cut here to cover there. It’s the stress of, ‘Did I do enough with what I have? Am I making the best financial decisions that result in the coverage I need to let my company continue to grow and prosper?’ And that is very stressful.”
It would be less stressful if risk managers and workers’ comp managers were the kind of people who didn’t make their work responsibilities a high priority.
But the risk managers I have met over the years are smart, hard-working individuals interested in being the best at what they do. They care about their responsibilities and want to contribute to their organizations’ success.
But facing more regulations,more risks and an “absolute grind of increasing complexity,” they could use more support. &
New Wage and OT Laws May Increase WC Premiums
The U.S. Labor Department’s new rule expected to make 4.2 million more workers eligible for overtime pay could increase the premiums some employers’ pay for workers’ compensation insurance.
Many factors remain in play, however, including whether employers shift their hiring practices or adjust their pay structures and how underwriters react, making it difficult to say for now precisely how the rule finalized on May 18, 2016 will impact workers’ compensation premiums.
But there is a potential for some premium increases, especially for small employers, due to the rule’s impact on payroll amounts policyholders typically report to their workers’ comp insurers, brokers said.
Meanwhile, state and federal efforts to increase the minimum wage would have a more certain effect, increasing employer insurance expense, and self-insured company costs.
That would occur as minimum wage hikes directly increase the risk exposure. The greater exposure would follow from claims payers having to provide more indemnity benefits to match workers’ new earning capacity.
“It’s a genuine change in exposure because the injured worker now will have a higher benefit threshold in many cases when they are injured,” said Pamela F. Ferrandino, EVP and senior principal national casualty at Willis Towers Watson.
Sharon Brainard, executive managing director and national casualty practice leader leader at brokerage Beecher Carlson agreed.
“That obviously is going to have a direct impact,” Brainard said “It is going to increase the premiums and ultimate claims costs.”
Increases in overtime pay and minimum wages would both cause an employer’s gross payroll to expand. Underwriters typically calculate workers’ comp premium amounts applying a formula that includes an insured’s business type or employee classification, an experience modification, and the employer’s gross payroll.
The greater the payroll, the greater the premium paid. In most states, though, any overtime related premium increase is calculated by including only the regular hourly wage paid for overtime hours worked, not the additional amount a worker earns for each hour of labor conducted during overtime hours.
For example, for a worker regularly earning $10 per hour and time and a half, or $15 for overtime hours, underwriters apply only the $10 per hour, even for overtime hours worked, when factoring employer payroll impact on premiums charged.
The Labor Department’s new rule takes effect December 1, 2016. It increases the threshold at which employees are exempt from overtime pay from $23,660 to $47,470. Qualifying employees will be eligible for time-and-a-half pay for each hour worked beyond 40 hours per week.
While the amount of payroll employers report to their workers’ comp underwriters may increase due to more overtime pay, the actual risk exposure is not really growing if employees were already working overtime hours beyond 40 a week before the new rule goes into effect, but they were receiving a salary and not compensated for the overtime.
How insurers will react to that remains to be seen, especially regarding larger employers that maintain large deductibles and enjoy negotiating clout when purchasing insurance, sources said.
Brokers will want to help clients capture payroll information to gauge whether their payroll expands due to more overtime pay, but the exposure does not correspondingly grow because employees are really working no more hours than they did before the rule takes effect, Ferrandino said.
“That is the thing as brokers that we are focusing on,” Ferrandino said. “Identifying the impact for the organization and communicating that to the carriers so there is not an inflated premium resulting from no change in exposure.”
In contrast, smaller employers purchasing first-dollar coverage because they need greater expense predictability or have less negotiating clout are more likely to feel the impact, said Mark Noonan, managing principal at Integro.
“Where there is first dollar coverage in a guaranteed cost program every change in payroll impacts the ultimate cost,” Noonan said. It could be very impactful to a small employer who then suddenly finds out that there are going to be payroll changes and their fixed costs are going up by a percentage they were not contemplating.”
Depending on when employers renew their coverage, any premium increase could come during end-of-policy period audits. But employers may also react to the new rule by increasing employee wages so they do not qualify for the new overtime threshold. Or, they may mandate that employees not work overtime, or they could hire additional workers rather than pay overtime.
The new rule is intended to stimulate such actions, which would also impact an employer’s premium calculations.