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.
Corporations Unite to Lower Health Care Costs
A new agreement to share health care coverage information among some of the largest U.S. corporations – a sweeping effort to reduce surging medical costs – may potentially alter how administration service providers, such as brokers and pharmacy benefit managers, operate.
Known as the Health Transformation Alliance (HTA), the collective seeks to improve how companies provide health coverage and make the current multilayered supply chain more efficient.
The 20 companies involved include Macy’s Inc., American Express Co., and The Coca-Cola Co. Between them, they spend more than $14 billion annually on combined health care for 4 million people, including employees, their dependents and retirees, according to the HTA website.
The HTA’s first pilot projects are expected to launch in 2017 and will help employees obtain more affordable prescription medications. The rest of the major initiatives are planned for 2018 or later. The alliance has not yet indicated how they expect to reduce costs for prescriptions.
“This isn’t necessarily a totally new concept; it’s one that is timely and probably pretty smart,” said Chris Duncan, chief growth officer at EPIC Insurance Brokers and Consultants.
Duncan was a casualty analyst at Ford Motor Co. in the mid-1980s when the automotive company formed an alliance with dozens of other large corporations to help solve the U.S. liability insurance crisis. The companies in the alliance eventually formed XL Group plc. and ACE to provide product liability and D&O coverage.
“This is a continuation of what large employers have been doing for some time; consolidating purchasing powers and business driver insights,” Duncan said.
“I think it’s doable to bind together 20 companies and probably get a better deal than having the PBM in the middle.”
Since the inititative is still in preliminary stages, it is uncertain what changes the collaboration may bring to the corporations or the administration companies serving them.
“We are looking for innovators in the supply chain, the pioneers who want to break from the status quo and work with the group of pioneering employers who want to build a better way.” — The Health Transformation Alliance
“We hope to hear from the supply chain about how it can work with us to recast a system that everyone agrees needs to be improved,” the HTA said.
“We are looking for innovators in the supply chain, the pioneers who want to break from the status quo and work with the group of pioneering employers who want to build a better way.”
Suppliers are also trying to understand how the alliance may change their roles.
“This could be a revenue generating opportunity for Aon, but it will likely take revenue out of the market for smaller brokerage firms,” said Alex Michon, senior vice president with Aon Risk Solutions.
If corporations decide to cut out insurance buying, they may save broker commissions and that could reduce fees, Michon said. But large brokers usually play a dual role in helping obtain insurance plans as well as offering risk and compliance consulting services.
“With the right data and right analysis you could do some interesting things,” said EPIC’s Duncan.
For example, the companies could negotiate a national disease management program for diabetes or cardiac care.
“Literally 20 percent of your employee population will drive 70 percent of your costs so you can concentrate that intervention in a fewer number of partner or vendor intervention points,” Duncan said.
According to its website htahealth.com, the HTA plans to “facilitate contracting opportunities between members of the Alliance and service providers.”
Members will then contract directly with the service provider. The Alliance said it will not receive funds from these contracts or bear legal responsibility for the service provider’s performance under the contract.
“We have considerable work to do, and we expect this will take years to fully implement,” said
Bill Allen, the CHRO of Macy’s Inc. said, in announcing the Alliance.
“This is a major undertaking for each of us, but if we don’t do it now, the growth in health care costs will overwhelm all of us. We are proud to be pioneers who seek to transform and improve the way health care benefits are provided for millions of working Americans.”
“There’s a crisis in medical care and the biggest companies are bringing together their purchasing power to find solutions,” Duncan said.
“I wish them a whole lot of luck because what we’re doing now just isn’t working. We should all watch them carefully.”
The members of the Alliance are:
American Express Co.
BNSF Railway Co.
The Coca-Cola Co.
E.I. du Pont de Nemours & Co.
The Hartford Financial Services Group Inc.
IBM Corp. Ingersoll Rand
International Paper Co.
Lincoln Financial Group
Marriott International Inc.
NextEra Energy Inc.
Pitney Bowes Inc.
Shell Oil Co.
Verizon Communications Inc.
Commercial Auto Warning: Emerging Frequency and Severity Trends Threaten Policyholders
The slow but steady climb out of the Great Recession means businesses can finally transition out of survival mode and set their sights on growth and expansion.
The construction, retail and energy sectors in particular are enjoying an influx of business — but getting back on their feet doesn’t come free of challenges.
Increasingly, expensive commercial auto losses hamper the upward trend. From 2012 to 2015, auto loss costs increased a cumulative 20 percent, according to the Insurance Services Office.
“Since the recession ended, commercial auto losses have challenged businesses trying to grow,” said David Blessing, SVP and Chief Underwriting Officer for National Insurance Casualty at Liberty Mutual Insurance. “As the economy improves and businesses expand, it means there are more vehicles on the road covering more miles. That is pushing up the frequency of auto accidents.”
For companies with transportation exposure, costly auto losses can hinder continued growth. Buyers who partner closely with their insurance brokers and carriers to understand these risks – and the consultative support and tools available to manage them – are better positioned to protect their employees, fleets, and businesses.
Liberty Mutual’s David Blessing discusses key challenges in the commercial auto market.
“Since the recession ended, commercial auto losses have challenged businesses trying to grow. As the economy improves and businesses expand, it means there are more vehicles on the road covering more miles. That is pushing up the frequency of auto accidents.”
–David Blessing, SVP and Chief Underwriting Officer for National Insurance Casualty, Liberty Mutual Insurance
More Accidents, More Dollars
Rising claims costs typically stem from either increased frequency or severity — but in the case of commercial auto, it’s both. This presents risk managers with the unique challenge of blunting a double-edged sword.
Cumulative miles driven in February, 2016, were up 5.6 percent compared to February, 2015, Blessing said. Unfortunately, inexperienced drivers are at the helm for a good portion of those miles.
A severe shortage of experienced commercial drivers — nearing 50,000 by the end of 2015, according to the American Trucking Association — means a limited pool to choose from. Drivers completing unfamiliar routes or lacking practice behind the wheel translate into more accidents, but companies facing intense competition for experienced drivers with good driving records may be tempted to let risk management best practices slip, like proper driver screening and training.
Distracted driving, whether it’s as a result of using a phone, eating, or reading directions, is another factor contributing to the number of accidents on the road. Recent findings from the National Safety Council indicate that as much as 27% of crashes involved drivers talking or texting on cell phones.
The factors driving increased frequency in the commercial auto market.
In addition to increased frequency, a variety of other factors are driving up claim severity, resulting in higher payments for both bodily injury and property damage.
Treating those injured in a commercial auto accident is more expensive than ever as medical costs rise at a faster rate than the overall Consumer Price Index.
“Medical inflation continues to go up by about three percent, whereas the core CPI is closer to two percent,” Blessing said.
Changing physical medicine fee schedules in some states also drive up commercial auto claim costs. California, for example, increased the cost of physical medicine by 38 percent over the past two years and will increase it by a total of 64 percent by the end of 2017.
And then there is the cost of repairing and replacing damaged vehicles.
“There are a lot of new vehicles on the road, and those cost more to repair and replace,” Blessing said. “In the last few years, heavy truck sales have increased at double digit rates — 15 percent in 2014, followed by an additional 11 percent in 2015.”
The impact is seen in the industry-wide combined ratio for commercial auto coverage, which per Conning, increased from 103 in 2014 to 105 for 2015, and is forecast to grow to nearly 110 by 2018.
None of these trends show signs of slowing or reversing, especially as the advent of driverless technology introduces its own risks and makes new vehicles all the more valuable. Now is the time to reign in auto exposure, before the cost of claims balloons even further.
The factors driving up commercial auto claims severity.
Data Opens Window to Driver Behavior
To better manage the total cost of commercial auto insurance, Blessing believes risk management should focus on the driver, not just the vehicle. In this journey, fleet telematics data plays a key role, unlocking insight on the driver behavior that contributes to accidents.
“Roughly half of large fleets have telematics built into their trucks,” Blessing said. “Traditionally, they are used to improve business performance by managing maintenance and routing to better control fuel costs. But we see opportunity there to improve driver performance, and so do risk managers.”
Liberty Mutual’s Managing Vital Driver Performance tool helps clients parse through data provided by telematics vendors and apply it toward cultivating safer driving habits.
“Risk managers can get overwhelmed with all of the data coming out of telematics. They may not know how to set the right parameters, or they get too many alerts from the provider,” Blessing said.
“We can help take that data and turn it into a concrete plan of action the customer can use to build a better risk management program by monitoring driver behavior, identifying the root causes of poor driving performance and developing training and other approaches to improve performance.”
Actions risk managers can take to better manage commercial auto frequency and severity trends.
Rather than focusing on the vehicle, the Managing Vital Driver Performance tool focuses on the driver, looking for indicators of aggressive driving that may lead to accidents, such as speeding, sharp turns and hard or sudden braking.
The tool helps a risk manager see if drivers consistently exhibit any of these behaviors, and take actions to improve driving performance before an accident happens. Liberty’s risk control consultants can also interview drivers to drill deeper into the data and find out what causes those behaviors in the first place.
Sometimes patterns of unsafe driving reveal issues at the management level.
“Our behavior-based program is also for supervisors and managers, not just drivers,” Blessing said. “This is where we help them set the tone and expectations with their drivers.”
For example, if data analysis and interviews reveal that fatigue factors into poor driving performance, management can identify ways to address that fatigue, including changing assigned work levels and requirements. Are drivers expected to make too many deliveries in a single shift, or are they required to interact with dispatch while driving?
“Management support of safety is so important, and work levels and expectations should be realistic,” Blessing said.
A Consultative Approach
In addition to its Managing Vital Driver Performance tool, Liberty’s team of risk control consultants helps commercial auto policyholders establish screening criteria for new drivers, creating a “driver scorecard” to reflect a potential new hire’s driving record, any Motor Vehicle Reports, years of experience, and familiarity with the type of vehicle that a company uses.
“Our whole approach is consultative,” Blessing said. “We probe and listen and try to understand a client’s strengths and challenges, and then make recommendations to help them establish the best practices they need.”
“With our approach and tools, we do something no one else in the industry does, which is perform the root cause analysis to help prevent accidents, better protecting a commercial auto policyholder’s employees and bottom line.”
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.