When Comp and Non-Comp Drugs Collide
Did pharmaceutical drugs prescribed to treat a work-related fall contribute to an employee’s death?
Or did other drugs prescribed by a personal physician treating a non-industrial illness cause his fatality?
If the pharmaceuticals prescribed to treat his workplace injury merely contributed to the worker’s demise, in combination with the other prescribed drugs, is that enough to trigger worker’s compensation death benefits for the employee’s surviving family members?
Those questions underlie a legal battle over whether an employer and its worker’s compensation insurer must indemnify the deceased worker’s family. California’s Supreme Court will hear arguments in that legal battle next month in the case of South Coast Framing v. Workers’ Compensation Appeals Board.
While it is a California specific case, it epitomizes a concern shared by workers’ compensation claims payers across the country. They worry about courts forcing them to shoulder liability for adverse outcomes when a workers’ comp claimant consumes a dangerous combination of prescription drugs.
Courts in several states have already ruled that workers’ comp payers are responsible for providing surviving family members with death benefits when workers die due to overdosing on pain medications and other drugs prescribed to treat work-related injuries, said Mark Pew, senior VP at PRIUM.
Courts have reached such conclusions in overdose death cases, even when drug misuse or abuse occur beyond an employer’s control, Pew added.
A Washington state appeals court, for example, ruled in 2012 that a claimant’s widow was entitled to survivor benefits after her husband died after ingesting several prescribed pain medications in combination with alcohol.
Tennessee’s Supreme Court ruled, somewhat similarly, in 2011 that a workers’ widow was entitled to survivor benefits when her husband died after accidentally overdosing on oxycodone prescribed for work-related injuries.
In both cases, the workers’ comp payers argued that claimant behavior — consuming alcohol in one instance and ignoring a doctor’s instructions for consuming the medication in the other case — amounted to an independent, intervening factor that broke the causal connection between the workers’ deaths and their workplace injury.
Workers’ comp payers are extremely concerned about poly-substance abuse cases where worker’s comp claimants have been prescribed multiple medications that can lead to harmful outcomes such as addiction and death.
In California, courts have also held employers responsible for adverse results from medical care, including pharmaceutical prescriptions, given to treat workplace injuries, said Robert G. Rassp, a California worker’s comp claimant attorney at the Law Offices of Robert G. Rassp.
In one case, California’s high court ordered the defendant to provide treatment for a worker grown dependent on opioids prescribed for a work injury even though the claimant had a history of illegal drug use and dependence pre-existing the workplace accident that led to the opioid addiction, Rassp said.
Workers’ comp payers are extremely concerned about poly-substance abuse cases where worker’s comp claimants have been prescribed multiple medications that can lead to harmful outcomes such as addiction and death, Rassp and others said.
But the case that will go before California’s Supreme Court on March 3rd is different, said Michael McClain, general counsel for the California Workers’ Compensation Institute. CWCI members include worker’s comp insurers and self-insured employers. The organization filed an amicus brief supporting the employer and insurer going before the Supreme Court.
While the worker’s death resulted from ingesting pharmaceutical drugs, California’s Supreme Court will review the burden of proof and causation standard required to determine whether the employer and insurer in the case must provide benefits to the worker’s survivors, McClain elaborated.
The case addresses worker’s comp death benefits sought by Brandon White’s surviving spouse and three children. They allege White’s death resulted from a work injury and “industrially prescribed medications,” court records state.
White died in 2009 after consuming amitriptyline, gabapentin and hydrocodone, prescribed by a worker’s compensation doctor treating back, head, neck and chest injuries caused when he fell from a roof while working for South Coast Framing Inc., the court records show.
But the exact role the drugs played in his death was complicated by his consumption of Xanax and Ambien, prescribed by a personal physician for anxiety and sleeping difficulties.
A worker’s comp judge found that White’s death resulted from medications consumed as a result of his industrial injury. South Coast Framing and its insurer, Redwood Fire and Casualty Co., administered by Bershire Hathaway Homestate Cos., filed for reconsideration.
But California’s Worker’s Compensation Appeals Board agreed with the judge’s finding and denied reconsideration.
Upon further appeal, however, a California appeals court reversed and denied the claim, essentially finding insufficient evidence that the prescriptions White consumed for his industrial accident caused his death. White’s wife then appealed to California’s Supreme Court.
In an amicus brief filed to the Supreme Court in support of White’s family, the California Applicant’s Attorneys Assn. argues that the appeals court erred in denying death benefits because it did so by introducing a new, more rigorous standard.
The appeals court erred, the attorneys argue, when it found that one of the drugs prescribed to treat White’s work injury was not a “material factor contributing” to his death.
They argue that the appeals court ignored standing law and should have made its final determination based on whether the drug was a “proximate” or “contributory” cause of death, not a “material” or “substantial” cause.
Now, records show that California’s high court is set to answer the question of whether a workers’ comp death benefits claim has “a separate and distinct causation standard and burden of proof requiring that an industrial injury constitute a ‘material factor’ contributing to the employee’s death, or does the standard require only that the industrial injury be a ‘contributing cause’?”
The CWCI in its amicus brief, however, asks the Supreme Court to reject an “effort to shift the burden of the decedent’s non-industrial pharmaceutical abuse onto the workers’ compensation system.”
CWCI further argues that Court of Appeal decision denying compensation should be upheld “as a proper application of the burden of proof’ and substantial evidence standard.”
Thought Leaders on the Present and Future of Workers’ Comp
Medical advancements and their associated costs, treatment guidelines, and the Affordable Care Act are among the issues weighing on the minds of workers’ comp practitioners this year. WorkersComp Forum spoke with several industry experts who shared their insights about the upcoming challenges and trends facing the system.
Innovation and Technology
“It’s becoming extremely clear that technology is progressing much faster than ever before,” said Jeffrey Austin White. “The rate of technological advancement has now been demonstrated to be exponential.”
White, the newly named director of Innovation at Accident Fund Holdings, Inc., is tasked with identifying opportunities for the insurance carrier to generate revenue and improve operations “while leveraging solutions backed by research, collaboration and state-of-the-art technology,” according to a statement on the company’s website. The staggering pace of technological advancements is being seen in the workers’ comp space with such things as 3-D printing.
“Most people last year said it was a hobby,” White said. “Today, at the recent Computer Electronics Show in Las Vegas people came to market with printers using both metal and plastic — vendors demonstrated working machines that were built in a matter of hours.”
Such achievements have the potential to revolutionize medical devices and the way medical care is delivered to injured workers. Consider the possibilities of digital health.
“It is absolutely one of the greatest transformations in health care right now,” said Kimberly George, senior vice president, senior healthcare advisor for Sedgwick. “One reason is, if we want consumers to be engaged in their wellness and health care, we have to offer new ways for them to be involved; we need them to actively participate in their treatment.”
Among the digital health developments are wearable devices that allow injured workers — and their physicians — to monitor their chronic conditions, or fitness and recovery from an injury. Another use is a digital health tool around medication adherence.
“Think of pharmacy and the lack of compliance or wasted medications,” George said. “There’s a whole realm of medication adherence health tools.”
New medical advancements are creating exciting opportunities to help injured workers recover more quickly. However, industry practitioners say it’s a double-edged sword.
“Medical advances are prolonging lives and increasing function. That’s wonderful,” said Mark Walls, vice president of communications and strategic analysis for Safety National. “But it also increases costs.”
As Walls pointed out, advancements are allowing people with catastrophic injuries to live longer and achieve better function through superior prosthetics. But it potentially creates reserving problems.
“These claims used to top off at $5 million, and a $10 million claim was rare. Now $10 million is becoming more the norm,” Walls said. “Medical advances mean people live longer. The claim tail for total disability is slowly increasing over time.”
Weighing the obvious advantages of scientific developments against the costs is a delicate balance. It’s an issue that the experts are considering carefully.
“Certainly we’ve seen many requests for 3-D prosthetics. While these were being discussed and piloted in the early part of 2014, today they really are here,” George said. “While we need to see how such technology will impact cost and utilization, we want to make sure they can be deployed because these devices may be able to improve the injured worker’s overall health and wellbeing.”
Another example of health care technology coming onto the scene is the exoskeleton that allows paraplegics to stand upright. Despite the benefits, payers are concerned about the costs for such equipment.
“If a physician says it is necessary and appropriate, we are expected to pay for the treatment, the state laws determine this,” White said. “But who determines the price? The manufacturer, distributor or even the medical provider. The going rate for a robotic exoskeleton is anywhere from $70,000 to $150,000 per unit.”
As White explained, devices such as the exoskeleton raise many concerns. “We are monitoring new technologies that have significant potential to impact our business within the next five years. The big questions are how to determine their effectiveness, their costs, and how to reserve appropriately.”
Medical Treatment Guidelines
Increasing medical costs, along with improved outcomes, are among the reasons many states have adopted medical treatment guidelines in recent years. But research among multiple states shows there are wide variances.
“Medical treatment guidelines are a metaphor for what is appropriate care,” said Richard Victor, executive director of the Massachusetts-based Workers Compensation Research Institute. “We and others have done plenty of research that shows physicians in different parts of the country — or city — answer that question very differently. They can’t all be correct.”
Part of WCRI’s focus in 2015 will be to continue that research and “help educate providers on how different they may be from the norm and evaluate the things states are doing to try and improve the quality of care,” Victor said.
The medical treatment guidelines come in many different forms. In addition to those developed by the American College of Occupational and Environmental Medicine and the Official Disability Guidelines published by the Work Loss Data Institute, states like Colorado have developed their own guidelines. Other states use a hybrid of the existing ones.
States are increasingly refining their guidelines in an effort to provide more consistent care to injured workers, and rein in costs. “I also have begun to hear more and more states thinking about fee schedules that are tied to prices paid by commercial/group health insurers rather than by Medicare,” Victor said.
Victor and others said more states are also looking at implementing drug formularies to identify acceptable medications; i.e., those that will be readily paid through the workers’ comp system.
Texas, for example requires preauthorization for certain medications in the workers’ comp system — mainly opioids and others more prone to abuse. A WCRI study based on information from the Texas Department of Insurance indicated a decrease of 67 percent in new claims with non-formulary drugs that required preauthorization between 2010 and 2011. Prescriptions written for non-formulary drugs dropped by about 70 percent, and non-formulary drugs’ share of the total prescription drug costs for new claims decreased by more than 80 percent. Among the states that have taken notice is California.
“We are hearing discussions about the formation and possible implementation of a drug formulary,” said Alex Swedlow, president of the California Workers’ Compensation Institute. “Our recent study modeled what might happen if the current mix and price of pharmaceuticals used in California were subject to either the Texas or Washington State formulary. The results showed that the California workers’ comp system could save up to 50 percent, or $500 million off its $1.2 billion a year spend.”
While the experts see the changes to, and focus on treatment guidelines and formularies as a positive trend, some are troubled by the politics involved. “I don’t accept the fact that human anatomy is different in Florida than California, or any other state,” Walls said. “We should have universally adopted treatment guidelines, like ODG, rather than trying to develop state-specific guidelines. ODG have been developed by leading experts. They are updated frequently. State-based guidelines are often influenced by politics.”
The guidelines are generally geared to evidence based medicine, which uses scientific research to improve consistency in decision making among medical providers. But some physicians and others say EBM is a ‘cookie cutter approach’ that limits providers’ ability to make the best decisions for their patients, based on their education and experience.
“A big focus of my ongoing oversight is going to be how the company can better utilize evidence-based medicine guidelines,” White said. “I think these guidelines have been underutilized and we can leverage them with good decision-making and the right expertise to really ramp up our quality of care, completely change the way we make decisions and how we facilitate outcomes measurements.”
Despite the guidelines, White said most states mandate that payment must be made when a provider decides what is “necessary and appropriate treatment.” He thinks there should be some additional level of oversight to avoid the large diversity in treatment patterns.
“We don’t want to look over a physician’s shoulder,” White said. “But if a doctor wants to use a different treatment, particularly one we have never seen before, let’s find out why. We can’t just be expected to pay for it, especially when it endangers the patient. That’s how we got to where we are in workers’ comp with opioids and physician dispensing.”
White would like to get state legislatures involved in the discussion and create a dispute process based on medical research and evidence based guidelines. In this way they can provide a more cost effective and efficient way to negotiate treatment plans that deviate from the standard of care.
“The problem is, in today’s world, whatever the physician decides at whatever cost, regardless of whether it’s ethical or safe, carriers are generally expected to pay and patients have the burden of living the rest of their lives with the outcome. It’s really the outlier stuff we are most worried about today,” White said.
The issue of physician dispensing of medications from their offices has caught the attention of many in the industry of late. Reports of physician-dispensed medications that cost exponentially more than the same drug dispensed by a pharmacy led many states to adopt legislation to hold down the costs.
Despite those efforts, the cost issue may not be alleviated. Additionally, there are concerns about whether injured workers may be put at risk because of physician dispensing. WCRI has been on the forefront of research into the issue and just released a new study.
“The study raises a question about whether these reforms are sustainable and the finding that there are very creative opportunities to still get much, much higher prices if you are a physician dispensing even with the current reforms,” Victor said. “We’ve done studies in the last year that show if the reforms are successful, prices are still 20 percent to 30 percent higher because pharmacies grant discounts to pharmacy benefit managers that physicians don’t get. So this is on top of all that.”
According to WCRI’s research, physician dispensers in Illinois and California have started to prescribe and dispense common medications at uncommon strengths. So, for example, where a medication may be commonly prescribed in dosages of 5- or 10-milligrams, physicians are dispensing them at 7.5 milligrams.
Because there is a “new manufacturer” involved, the prices of the new strength medications are significantly higher than those of the commonly prescribed dosages. The new strength versions of the medications have taken over a large chunk of the market share among physician dispensers in both states.
“When a new strength comes to market and gets 40 percent market share of physician dispensed medications, either it is superior clinically, or it’s more of the same,” Victor said. “And if it’s superior clinically then I wish the physician dispensers would tell the other physicians because they are not using it at all.”
Another emerging issue and one that is front and center for Sedgwick’s George is that of well-being, especially mental health. She said members of Congress are proposing federal legislation on mandatory mental health language that will be part of the Affordable Care Act.
“It’s an area that is definitely at the forefront and being considered by politicians, employers and health based companies,” George said. “An investment in mental health is an investment in health and wellbeing.”
George, who was invited by former First Lady Rosalynn Carter to attend her 30th Annual Symposium on Mental Health Policy, said it’s an issue that employers need to address in the workplace. “Whether mass shootings or continual workplace absences, mental health issues are impacting virtually every employer in the country today. We have to begin highlighting mental health across the entire health spectrum,” she said. “We need to determine how to identify employees with mental health concerns early on so they can get the care, advocacy and support they need, whatever that might be, in or out of work. It’s a huge issue for employers. It affects productivity as well as their costs.”
Echoing George’s comments was Safety National’s Walls. “Employers are realizing the importance mental health plays in their workforce,” he said. “They are slowly starting to see a wellness revolution. It’s not about incentives for knowing your blood pressure but focused on the whole person and the importance of managing every aspect of this. I for one welcome this.”
2015 General Liability Renewal Outlook
There was a time, not too long ago, when prices for general liability (GL) insurance would fluctuate significantly.
Prices would decrease as new markets offered additional capacity and wanted to gain a foothold by winning business with attractive rates. Conversely, prices could be driven higher by decreases in capacity — caused by either significant losses or departing markets.
This “insurance cycle” was driven mostly by market forces of supply and demand instead of the underlying cost of the risk. The result was unstable markets — challenging buyers, brokers and carriers.
However, as risk managers and their brokers work on 2015 renewals, they’ll undoubtedly recognize that prices are relatively stable. In fact, prices have been stable for the last several years in spite of many events and developments that might have caused fluctuations in the past.
Mark Moitoso discusses general liability pricing and the flattening of the insurance cycle.
Flattening the GL insurance cycle
Any discussion of today’s stable GL market has to start with data and analytics.
These powerful new capabilities offer deeper insight into trends and uncover new information about risks. As a result, buyers, brokers and insurers are increasingly mining data, monitoring trends and building in-house analytical staff.
“The increased focus on analytics is what’s kept pricing fairly stable in the casualty world,” said Mark Moitoso, executive vice president and general manager, National Accounts Casualty at Liberty Mutual Insurance.
With the increased use of analytics, all parties have a better understanding of trends and cost drivers. It’s made buyers, brokers and carriers much more sophisticated and helped pricing reflect actual risk and costs, rather than market cycle.
The stability of the GL market also reflects many new sources of capital that have entered the market over the past few years. In fact, today, there are roughly three times as many insurers competing for a GL risk than three years ago.
Unlike past fluctuations in capacity, this appears to be a fundamental shift in the competitive landscape.
“The current risk environment underscores the value of the insurer, broker and buyer getting together to figure out the exposures they have, and the best ways to manage them, through risk control, claims management and a strategic risk management program.”
— David Perez, executive vice president and general manager, Commercial Insurance Specialty, Liberty Mutual
Dynamic risks lurking
The proliferation of new insurance companies has not been matched by an influx of new underwriting talent.
The result is the potential dilution of existing talent, creating an opportunity for insurers and brokers with talent and expertise to add even greater value to buyers by helping them understand the new and continuing risks impacting GL.
And today’s business environment presents many of these risks:
- Mass torts and class-action lawsuits: Understanding complex cases, exhausting subrogation opportunities, and wrangling with multiple plaintiffs to settle a case requires significant expertise and skill.
- Medical cost inflation: A 2014 PricewaterhouseCoopers report predicts a medical cost inflation rate of 6.8 percent. That’s had an immediate impact in increasing loss costs per commercial auto claim and it will eventually extend to longer-tail casualty businesses like GL.
- Legal costs: Hourly rates as well as award and settlement costs are all increasing.
- Industry and geographic factors: A few examples include the energy sector struggling with growing auto losses and construction companies working in New York state contending with the antiquated New York Labor Law
David Perez outlines the risks general liability buyers and brokers currently face.
Managing GL costs in a flat market
While the flattening of the GL insurance cycle removes a key source of expense volatility for risk managers, emerging risks present many challenges.
With the stable market creating general price parity among insurers, it’s more important than ever to select underwriting partners based on their expertise, experience and claims handling record – in short, their ability to help better manage the total cost of GL.
And the key word is indeed “partners.”
“The current risk environment underscores the value of the insurer, broker and buyer getting together to figure out the exposures they have, and the best ways to manage them — through risk control, claims management and a strategic risk management program,” said David Perez, executive vice president and general manager, Commercial Insurance Specialty at Liberty Mutual.
While analytics and data are key drivers to the underwriting process, the complete picture of a company’s risk profile is never fully painted by numbers alone. This perspective is not universally understood and is a key differentiator between an experienced underwriter and a simple analyst.
“We have the ability to influence underwriting decisions based on experience with the customer, knowledge of that customer, and knowledge of how they handle their own risks — things that aren’t necessarily captured in the analytical environment,” said Moitoso.
Mark Moitoso suggests looking at GL spend like one would look at total cost of risk.
Several other factors are critical in choosing an insurance partner that can help manage the total cost of your GL program:
Clear, concise contracts: The policy contract language often determines the outcome of a GL case. Investing time up-front to strategically address risk transfer through contractual language can control GL claim costs.
“A lot of the efficacy we find in claims is driven by the clear intent that’s delivered by the policy,” said Perez.
Legal cost management: Two other key drivers of GL claim outcomes are settlement and trial. The best GL programs include sophisticated legal management approaches that aggressively contain legal costs while also maximizing success factors.
“Buyers and brokers must understand the value an insurer can provide in managing legal outcomes and spending,” noted Perez. “Explore if and how the insurer evaluates potential providers in light of the specific jurisdiction and injury; reviews legal bills; and offers data-driven tools that help negotiations by tracking the range of settlements for similar cases.”
David Perez on managing legal costs.
Specialized claims approach: Resolving claims quickly and fairly is best accomplished by knowledgeable professionals. Working with an insurer whose claims organization is comprised of professionals with deep expertise in specific industries or risk categories is vital.
“We have the ability to influence underwriting decisions based on experience with the customer, knowledge of that customer, and knowledge of how they handle their own risks, things that aren’t necessarily captured in the analytical environment.”
— Mark Moitoso, executive vice president and general manager, National Accounts Casualty, Liberty Mutual
“When a claim comes in the door, we assess the situation and determine whether it can be handled as a general claim, or whether it’s a complex case,” said Moitoso. “If it’s a complex case, we make sure it goes to the right professional who understands the industry segment and territory. Having that depth and ability to access so many points of expertise and institutional knowledge is a big differentiator for us.”
While the GL insurance market cycle appears to be flattening, basic risk management continues to be essential in managing total GL costs. Close partnership between buyer, broker and insurer is critical to identifying all the GL risks faced by a company and developing a strategic risk management program to effectively mitigate and manage them.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.