Bluegrass State Leads the Opioid Fight
Central Appalachia earned a distinction as the epicenter of the nation’s opioid-addiction epidemic for a number of reasons.
Two key factors are the complex injuries suffered by coal miners and the physical demands placed on workers toiling in other hazardous industries in that region such as logging and trucking.
Others include the region’s economic misfortunes, lax prescribing practices, access to pill mills, and pharmaceutical company marketing. All led to an ongoing drug-abuse scourge that surfaced there in the 1990s, studies and observers report.
“Central Appalachia, which for us is eastern Kentucky, was one of the first areas to see the opioid epidemic explode in the 1990s,” said former Bluegrass State attorney general Jack Conway.
“Because in Appalachia you had mining, you had a lot of heavy industry, trucking, and more workplace injuries on average than you would in other parts of the state. You saw an increase in the prescribing and utilization of opioids and it created an addiction epidemic.”
Now, as the rest of the nation experiences opioid abuse patterns seen early on across Central Appalachia, Kentucky provides examples for battling back against the epidemic.
In 2012, Kentucky became the first state among jurisdictions adopting stricter prescription-drug monitoring programs (PDMPs) with objective criteria mandating when prescribers must register and review a state database of patient prescription histories, Brandeis University’s PDMP Center of Excellence reports.
State PDMPs seek to change provider prescribing practices and prevent patients from doctor-shopping to obtain multiple prescriptions.
Kentucky’s latest PDMP was born from a 2012 comprehensive law adopted to combat opioid abuse.
“Kentucky has a great [PDMP] system,” said Tom Clark, research associate for the Brandeis Center of Excellence. “It is very well supported by the state. Of course, this is all a response to Kentucky being in the epicenter of the prescription drug abuse epidemic and it has been for a long time.”
While all states except Missouri have PDMP laws, participation in many states remains voluntary, said Brian Allen, VP of government affairs for Optum workers’ comp and auto no-fault. In the last three years or so, however, more jurisdictions are making their use mandatory.
“There has been a lot more renewed emphasis on [PDMPs] because everybody has been trying to get their heads around this opioid problem,” he said.
A May 2016 Center of Excellence report with data from Kentucky and the other states indicates that increased PDMP use immediately impacts controlled substance prescribing and doctor-shopping.
Reports linking Central Appalachia’s work injuries to drug abuse have persisted for years.
Yet only a few states have laws as strict as Kentucky’s, requiring all prescribers to register and check their PDMPs when initially prescribing opioids and benzodiazepines, and again every three months when continuing the prescriptions, the PDMP Center of Excellence reports.
Meanwhile, reports linking Central Appalachia’s work injuries to drug abuse have persisted for years.
A 2002 combined U.S. Justice Department and Kentucky State Police assessment described a growing threat from prescription painkillers. The threat was so specific to Appalachia that opioids and opiates became known disrespectfully as “hillbilly heroin.”
“In the eastern coal mining counties of Kentucky, the large-scale diversion and abuse of painkillers are particular problems,” the report warned.
“In the past, coal miners spent hours each day crouched in narrow mine shafts. Painkillers were dispensed by coal mine camp doctors in an attempt to keep the miners working.
“Self-medicating became a way of life for miners, and this practice often led to abuse and addiction among individuals who would have been disinclined to abuse traditional illicit drugs.”
Michelle Landers, VP and general counsel for Kentucky Employers Mutual Insurance, agreed that eastern Kentucky’s historical dependence on coal mines, and related service industries like trucking, helped link workplace injuries and chronic pain with opioid use.
KEMI, which issues policies to coal mines, is the Bluegrass State’s largest workers’ comp insurer.
Coal operations provide one of eastern Kentucky’s few employment opportunities. Mining also produces severe workplace injuries, caused by accidents such as accidents such as cave-ins or heavy machinery malfunctions, Landers said.
“It’s not an industry where you are going to have small injuries,” she elaborated.
“They are typically severe or the chronic type of injuries you expect from people being underground.”
Kentucky’s private-industry workers, in general, experience a high injury rate. U.S. Department of Labor statistics for 2014 ranked Kentucky among 19 states with a recordable injury rate significantly higher than the national average.
Centers for Disease Control and Prevention data for the same year, meanwhile, shows Kentucky among five states with the nation’s highest rate of overdose deaths.
KEMI first discovered a frequent use of the narcotic OxyContin to treat work injuries after contracting with a pharmacy benefit manager in 2001, Landers said. The PBM data revealed questionable practices, such as doctors prescribing high doses of the drugs early in the course of treatment for back strains.
“We were seeing things out there about the high levels of addiction and [overdose] deaths and we didn’t want to contribute to that,” Landers said.
A 2015 study prepared by the Institute of Pharmaceutical Outcomes and Policy at the University of Kentucky reported that since the law’s passage,prescriptions for controlled drugs decreased 4 percent to 8 percent during the same period.
So KEMI became an early adopter of measures like educating adjusters and nurse case managers about the dangers of opioids and teaching them to recognize red flags, such as doctors prescribing the drugs for longer periods than typically appropriate.
KEMI also used PBM data to identify frequently prescribing doctors.
“If you were treating with one of those [doctors] that might be a red flag,” Landers said.
KEMI’s concerted efforts included using its attorneys to engage in medical-fee disputes challenging claims before administrative judges when inappropriate prescribing occurred.
“We have, from early on, taken the approach that if we don’t feel it’s appropriate and we don’t get cooperation from the physician, we are going to challenge it,” Landers said.
Landers will speak at the 25th Annual National Workers’ Compensation and Disability Conference® & Expo on Dec. 1, during a presentation titled “Lessons Learned From Fighting Drug Abuse in the Opioid-Crisis Epicenter.”
The 2012 Kentucky law has limited prescription abuse. In addition to requiring prescribers to report to the state PDMP, it also regulated pain clinics.
A 2015 study prepared by the Institute of Pharmaceutical Outcomes and Policy at the University of Kentucky reported that since the law’s passage, prescribers registering with the PDMP increased by 262 percent, while annual prescriber queries into the PDMP rose 650 percent.
Prescriptions for controlled drugs decreased 4 percent to 8 percent during the same period.
Appalachia still has issues, but the situation is improving.
Yet there remain pockets of physicians in Appalachia who still overprescribe opioids, said Cindy Whitehouse, CEO and founder of Ascential Care, a Lexington, Ky.-based managed care company.
But she agrees the law has helped, and other states could benefit from similarly stringent measures.
“I think we have more tools in the states that have been battling this [opioid epidemic] for some time,” Whitehouse said. “That has made us stronger in the ability to control it.”
Managing Service Providers
Uncovering inconsistencies in an insurer’s or third party administrator’s service performance can ultimately strengthen an employer’s partnerships with the organizations managing injured-worker claims.
Advocates of independent reviews maintain that vendor management quality assurance audits conducted by independent reviewers can reveal weaknesses that impact an employer’s workers’ compensation program.
Yet other observers argue that independent quality assurance audits are becoming a thing of the past and their value diminishing.
Still, about 25 percent of self-insured employers and those with large deductibles seek the audits, said Dan Marshall, chief claims officer U.S. at Aon.
“It is only the most sophisticated buyers that want to look under the hood, so to speak, and get a gauge of the performance of claims service providers,” he said.
Insurers and third party administrators, meanwhile, employ their own teams to conduct highly structured quality assurance, or QA, reviews of their internal claims operations.
They test whether their employees adhere to internally mandated standards and whether their claims managers comply with negotiated service levels. They also evaluate the performance of external claims service providers.
“TPAs [and insurers] do a significant amount of internal quality assurance before a work product goes out,” said Jenny Killgore, VP of insurance services at Athenium Inc., which provides insurers with quality assurance systems for evaluating claims, underwriting processes and vendor-management practices.
Whether insurers and TPAs use internal resources or contract with outside companies for nurse case management, legal defense, MSA compliance, surveillance and other claims management services, QA reviews can reveal whether services are optimally deployed.
Reviews conducted by a TPA’s or insurer’s internal QA team also help those organizations strengthen their employee training programs and learn whether service inconsistencies exist among widely dispersed regional offices.
They also help retain customers as competitive market pressures and QA practices have pushed insurers and TPAs to improve their services over the years, several experts agreed.
But an independent review can help reveal whether employers are indeed well served by the internal QA processes of the claims management organizations they contract with, said Jim Kremer, senior manager, insurance and actuarial advisory services at Ernst & Young LLP.
Independent reviews can help confirm that an employer’s claims-management instructions and service agreements are consistently met and whether the company’s dollars are wisely spent.
“Leading practice would be a focus on claims management quality overall, especially outcomes.” — Jim Kremer, senior manager, insurance and actuarial advisory services, Ernst & Young LLP
“You have standards that are in place at every carrier and third party administrator,” Kremer said. But, he asked, “Are those front-line adjusters, and frankly their supervisors, adhering to those standards?”
QA reviews can assess timely claim intervention, reserving, pharmacy management and medical data management, among others. Audits should evaluate adherence to leading claims-management practices and impact on claims outcomes, Kremer said.
“Large employers have performance guarantees in place, hence requiring audits,” Kremer said. “Leading practice would be a focus on claims management quality overall, especially outcomes.”
An independent review might find, for example, that workloads unintentionally encourage a TPA’s adjusters to relinquish control of claim files to specialists more often than optimal. That can cause employers to pay for nurses or attorneys to complete tasks adjusters are capable of handling.
“There is a cost to that and you certainly don’t want to assign routine tasks that an adjuster should be doing to a nurse case manager or to an attorney,” Kremer said. “That is very expensive and produces what we call ‘expense leakage.’ We see it quite often when we are out auditing in the marketplace.”
Other common findings include inadequate supervision of adjusters and failures to optimally reserve for specific claims, brokers said.
One opportunity for improvement commonly found during Sedgwick Claims Management Services Inc.’s internal audits involves the inability of adjusters to connect with injured employees during attempted follow-up telephone calls, said Darrell Brown, Sedgwick’s chief claims officer.
Observers say that has become an industry-wide problem, especially with the increased use of cell phones.
That inability to connect slows claim management decisions and can result in the increased use of investigations when adjusters don’t receive responses to their queries or when claimants believe they are not being properly cared for, Brown said.
“You can’t have a good outcome if the injured employee is having a bad experience,” Brown said.
During the request for proposal process, when employers shop for new TPA partners, it’s common to ask to see results of the TPAs’ internal QA reviews, said Thomas Ryan, research leader for Marsh’s workers’ compensation center of excellence.
“Sometimes they will sanitize the results [of internal QA audits] and share those with us,” Ryan said. “Others are a little reluctant to do so. But they will at least give us some high-level findings.”
Once a TPA is selected, contract language provides employers with the ability to conduct audits.
Thing of the Past?
Not everyone agrees, however, on the value of QA audits.
Automated claims-handling systems with embedded quality assurance components make independent reviews less necessary today, said Jerry Poole, president and CEO of Acrometis, which provides automated adjuster desktops.
“The quality assurance audit will be a thing of the past,” Poole said.
He said that when making claims decisions, Acrometis’ adjuster systems conduct QA in real time, while audits provide a retrospective review.
Real-time QA provides beneficial data about certain adjuster tasks, such as whether specific claims actions are completed within certain timeframes, Kremer said.
But the systems still cannot sufficiently evaluate certain factors, like the intensity of a claim investigation, he said.
Internal risk management staff at Albertsons Safeway constantly monitor the performance of the TPAs servicing the grocery chain’s workers’ comp claims, and medical outcomes are continually measured, said Bill Zachry, group VP of risk management.
Yet Albertsons Safeway also obtains an independent audit every four or five years, Zachry added.
The Hartford, meanwhile, relies on an internal team, comprised mostly of nurses, to conduct evaluations of the business partners that provide workers’ comp services.
Those services include utilization review, field nurse case management, vocational rehab, pharmacy benefit management, transportation, interpretation, physical therapy and medical provider networks.
QA evaluations are conducted before contracting with such partners, said Dr. Marcos Iglesias, VP and medical director for the insurer. Then each is trained on The Hartford’s QA expectations with follow-up audits. &
Buyers Beware: General Liability Outlook May be Shifting
The soothing drumbeat of “excess capital” and “soft market” to describe the general liability (GL) market is a familiar sound for brokers and buyers. Emerging GL trends, however, suggest the calm may not last.
Increasing severity of GL claims may hit some sectors like a light rain at first, if they have not already, but they could quickly feel like a pelting thunderstorm in others. A number of factors could contribute to the potential jump in GL prices for certain industry segments or exposures, possibly creating “micro” or niche hard markets in the short-term, and maybe even turning the broader market over the longer-term.
“There are trends we’re seeing that will play out slowly. Industries that carry more general liability exposure will and have been hit first and hardest, but it won’t apply across the board initially,” said David Perez, Senior Vice President and Chief Underwriting Officer, for Liberty Mutual Insurance’s National Insurance Specialty operation. “There is ample capital in the market today, which allows a poor performing account to move its policy frequently from carrier to carrier. Poorer performing classes, however, will likely face increased pricing for GL policies and a reduction in capacity.”
The good news for buyers is that they can take action today to lessen the impact these trends and the evolving market may have on their GL programs.
David Perez on the state of the GL market.
Medical and Litigation Trends Drive Severity
One factor increasing claim severity is the rising cost of health care, driven both by greater demand and by medical inflation that is growing faster than the Consumer Price index.
The impact of rising medical costs on commercial auto is well-known. Businesses with heavy transportation exposures are finding it more difficult to obtain coverage, or are paying more for it.
That same trend will impact general liability, just on a slower and more fragmented basis.
“In light of these trends, brokers and buyers should seek to understand how effectively their current or potential insurers defend GL claims, particular in using evidence-based medicine to assess and value the medical portion of a claim, and how they can provide necessary care to claimants while still helping clients control their total cost of risk.”
— David Perez, Senior Vice President & Chief Underwriting Officer, National Insurance Specialty, Liberty Mutual Insurance
“It takes longer for medical inflation to register through the tort system in general liability than it does in auto liability (AL) because auto claims are generally resolved more quickly,” Perez said. “But the same factors affecting severity in AL also exist in GL and as a result, it’s foreseeable that we will not only see similar severity trends in GL, but they may in fact be worse than we’ve seen in commercial auto.”
Industries with greater exposure to severity in general liability claims should be the first wave of companies to notice the impact of medical inflation.
“Medical inflation will drive up costs across the board, but sectors like construction and product manufacturing have a higher relative exposure for personal injury lawsuits.”
The impact of medical inflation on the GL market.
Beyond medical inflation, two litigation trends are increasing GL damages. First, plaintiffs’ lawyers are seeking to migrate the use of life care plans—traditionally employed only for truly catastrophic injuries—to more routine claims. Perez recalled one claimant with a broken thumb and torn ligaments who sought as much as $1 million in care for the injury for the rest of his life.
Second, the number of allegations of traumatic brain injuries (TBI) in GL claims is growing. It can be difficult to predict TBI outcomes initially and poor outcomes can be expensive and long tailed.
“In light of these trends, brokers and buyers should seek to understand how effectively their current or potential insurers defend GL claims, particular in using evidence-based medicine to assess and value the medical portion of a claim, and how they can provide necessary care to claimants while still helping clients control their total cost of risk,” notes Perez.
Changing Legal Landscape
Medical inflation and litigation trends are not the only issues impacting general liability.
Unanticipated changes in court interpretations of policy language can throw unexpected pressure on GL pricing and capacity.
Courts sometimes issue rulings interpreting policy language in a manner that expands coverage well beyond the underwriter’s original intent. Such opinions may sometimes have a retroactive effect, resulting in an immediate impact on not only open, but also closed cases in some circumstances.
Shifts in the Marketplace
In addition to facing price increases, GL brokers and buyers will be challenged by slightly shrinking capacity due to consolidation and repositioning among carriers in the marketplace. “Some major carriers have scaled back their GL writing, resulting in a migration of experienced senior management. As these executives leave, they take their GL expertise and relationships with them, resulting in fewer market leaders and less innovation,” Perez said.
“Additionally, there are new carriers coming into the business that may not have the historical GL loss data to proactively identify trends or the financial strength and experience to effectively service their GL customers and brokers. Both trends make it important for brokers and buyers to work with an insurer that is committed to the GL market and has the understanding and resources to help better manage risks impacting customers.”
Last year saw a high level of mergers and acquisitions in the insurance industry. Buyers should take advantage of that disruption to re-evaluate their needs and whether their insurers are meeting them. Or better yet, anticipating them.
What’s a Buyer to Do?
Buyers—and their brokers— should look to partner with insurers that can spot emerging trends and offer creative solutions to address them proactively.
What should buyers and brokers do, given the trends facing the GL market?
“Brokers and buyers should value insurers that have not only durability and a long history in the general liability business, but also a strong risk management infrastructure,” Perez said. “Your insurer should be able to help you mitigate your specific risks, and complement that with coverage that works for you.”
Beyond robust GL claims and legal management, Liberty Mutual also provides access to one of the insurance industry’s largest risk control departments to help improve safety and mitigate both claim frequency and severity.
In addition, notes Perez, “Even if a company has a less than optimal loss history in general liability, there can be options to provide adequate coverage for that company. The key is to partner with an insurer that has the best-in-class expertise, creativity, and flexibility to make it happen.”
By working closely with their insurers to understand trends and their potential impacts, brokers and buyers can better prepare for the possible GL storm on the horizon.
To learn more about Liberty Mutual’s general liability offering, visit https://business.libertymutualgroup.com/business-insurance/coverages/general-liability-insurance-policy.
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.