PBM Legislation Worries Workers’ Comp Payers
Legislation introduced in several states seeking to impose new regulatory authority over group health pharmacy benefit managers could harm workers’ compensation PBMs and claims payers, sources said.
Introduction of similar bills in 11 states has raised concerns among workers’ comp insurers, third party administrators, and some large employers, said Brian Allen, VP of government affairs for Progressive Medical, a workers’ comp PBM.
“We have had customers calling us every day worrying about how it is going to impact us and them,” Allen said. “These are big insurance companies … they are nervous about it and want to know how it’s going to impact them.”
Overall, it appears the bills seek greater transparency in the way group health PBMs set their pricing, said Joe Paduda, principal at Health Strategy Associates. But group health PBM practices differ substantially from those of workers’ comp PBMs and the bills seek to address issues that “have nothing to do with workers’ comp,” he added.
Yet while the bills appear aimed at practices among PBMs serving the group health industry and not workers’ comp PBMs, Allen and others say a spillover into workers’ comp is possible. So several organizations want language inserted into the bills that would clearly exempt workers’ comp PBMs.
“It appears that workers’ compensation PBMs are not the target of this legislation,” the American Insurance Association said in a statement. “That said, AIA supports efforts to include clear exemptions for workers’ compensation PBMs in these bills in order to clarify legislative intent and avoid any confusion down the road.”
“Community” pharmacies seeking more revenue from products they dispense are supporting the bills that would put PBMs under certain state regulatory agencies, such as pharmacy boards, Allen said.
State workers’ comp commissions or insurance departments already regulate workers’ comp PBMs, depending on the jurisdiction, Allen explained. But the legislation could add oversight from additional agencies such as state pharmacy boards.
Complying with regulations developed by two distinct agencies with potentially conflicting goals could cause an administrative burden for workers’ comp PBMs, Allen added.
“We want to make sure we are not swept up into crazy regulatory schemes that would be difficult to manage,” he said.
A new oversight body could also decide to impact workers’ comp PBM pricing, which is already regulated by state fee schedules, Allen said.
“If for some reason the pharmacy board said, ‘you have to pay pharmacists more money,’ that potentially would impact our customers because we would have to pass that cost onto payers,” Allen said.
Workers’ Comp Docket
Operator Wins Benefits for Guillain-Barre Syndrome From Flu Shot
Phillips v. Wyman Gordon Pennsylvania, 31 PAWCLR 128 (Pa. W.C.A.B. 2016)
Ruling: The Pennsylvania Workers’ Compensation Appeals Board affirmed the workers’ compensation judge’s decision awarding benefits to a worker, who alleged that he contracted Guillain-Barre syndrome after receiving a flu shot at work.
What it means: In Pennsylvania, a worker’s act of receiving a flu shot at work arises in the course and scope of his employment even though the shot is voluntary and he receives no benefit or penalty from the employer for receiving or refusing the shot.
Summary: The board affirmed the WCJ’s decision awarding benefits to a machine operator who alleged he contracted Guillain-Barre syndrome after receiving a flu shot at work.
The treating doctor testified that the operator’s condition was caused by the flu shot he got at work because there were no other potential causes identified and that GBS is one of the risk factors of a flu shot. This testimony constituted sufficient support for a finding that the operator’s GBS was caused by his flu shot.
Furthermore, the board found no error in the WCJ’s finding that the operator was in the course and scope of his employment when he was vaccinated at work. By opting to receive the flu shot that the employer made available, the operator was acting in furtherance of the employer’s business and affairs.
Despite the employer’s assertion that the operator’s decision to receive the flu shot was voluntary and that no employee received either a benefit or penalty for either receiving the shot or refusing it, it was clearly in the employer’s best interest to have its employees vaccinated.
By offering flu shots to its employees, the employer was attempting to ensure that there would be a sufficient number of healthy employees able to work and maintain production during flu season. Accordingly, the operator was within the course and scope of his employment when he was vaccinated at work.
Bystander Emotional Injury Claim Barred by Exclusive Remedy Provision
Velecela v. All Habitat Services, LLC, No. SC 19589 (Conn. 08/09/16)
Ruling: The Connecticut Supreme Court held that a suit brought by the wife of a deceased worker for bystander emotional distress was barred by the exclusive remedy provision of the workers’ compensation law.
What it means: In Connecticut, a suit against an employer for bystander emotional distress is barred by the exclusive remedy provision.
Summary: A worker for All Habitat Services was repairing an all-terrain vehicle that was elevated on a lift. During the repair, the vehicle slipped off the lift, crushing and killing him. The worker’s wife arrived to bring him lunch, and she discovered his body under the vehicle.
The wife received workers’ compensation survivor benefits. The wife also sued All Habitat, claiming bystander emotional distress. The Connecticut Supreme Court held that the wife’s suit was barred by the exclusive remedy provision of the workers’ compensation law.
The court explained that the language of the exclusive remedy provision is broad, abolishing “all rights and claims” that fall under the workers’ compensation law, including any rights and claims of workers’ dependents.
The court also noted that emotional distress, by itself, is not a bodily injury, so it can be compensable only if it flows from the bodily injury of another person. Bystander emotional distress results from and arises out of the underlying personal injury or death. When that personal injury or death is compensable under workers’ compensation, an action for bystander emotional distress is barred by the exclusive remedy provision.
Here, it was undisputed that the worker’s injuries and death arose out of and in the course of his employment and were compensable under workers’ compensation, and the wife’s alleged emotional injuries derived from and were caused by those injuries and death. Therefore, the wife’s claim was barred.
A concurring judge pointed out that a claim for a bystander emotional injury would be compensable if the underlying injury fell within an exception to the exclusivity provision.
Worker’s ‘Income Producing’ Activities Support Finding of Overpayment
State ex rel. Perez v. Industrial Commission of Ohio, No. 2015-0532 (Ohio 07/26/16)
Ruling: The Ohio Supreme Court held that a worker received an overpayment of temporary total disability benefits and that he fraudulently misrepresented that he was not working.
What it means: In Ohio, a finding that a worker committed fraud is proper when he misrepresented to the Industrial Commission that he was not working and was not forthcoming with his physicians about his activities.
Summary: A construction worker sustained a work-related injury and was awarded temporary total disability compensation. The worker had also owned and operated an auto repair business. The Bureau of Workers’ Compensation received information that the worker was operating his business while receiving TTD benefits.
During an investigation, the worker was observed performing auto work and meeting customers. Witnesses stated that the worker handled scheduling, diagnosed car problems, received payments, and picked up parts from an auto parts store. The Ohio Supreme Court held that the worker received an overpayment of TTD benefits and that he fraudulently misrepresented that he was not working.
The court rejected the worker’s argument that his business activities were unpaid and minimal and did not directly produce income for the business. The court concluded he was engaged in “more than minimal activities that were income-producing” for the business. Also, the court noted that during the relevant time period, he purchased more than $43,000 in auto parts, an amount that indicated that they were not merely for personal use.
The court also found that the evidence supported a finding of fraud. The worker misrepresented to the Industrial Commission on multiple occasions that he was not working. Also, he was not forthcoming to physicians about his activities with his business.
Psychological Condition Was Reasonably Contemplated at Time of Settlement
Ryan v. Potlach Corp., No. A15-1404 (Minn. 07/13/16)
Ruling: The Minnesota Supreme Court held that a worker had to bring a motion to set aside her settlement agreement with her employer before she could proceed with a claim for a psychological condition.
What it means: In Minnesota, a workers’ compensation settlement agreement can close out the work-related injury that is the subject of the agreement and also conditions and complications that arise from the injury and are within the reasonable contemplation of the parties at the time of the settlement agreement.
Summary: A worker injured her back while working for Potlach Corp. She and Potlach entered into a settlement agreement that provided for a full, final, and complete settlement of her workers’ compensation claims, excluding future reasonable and necessary medical treatment, in return for a lump-sum payment.
Later, the worker filed a claim for a consequential psychological injury. The Minnesota Supreme Court held that she had to bring a motion to set aside the settlement agreement before she could proceed with her claim for a psychological condition.
The court found that a workers’ compensation settlement agreement can close out the injury that is the subject of the agreement and also conditions and complications arising out of the injury. It is not necessary that the condition or complication be specifically referenced in the settlement agreement. The agreement must resolve any conditions or complications that arise out of the injury that were reasonable within the contemplation of the parties at the time of the agreement.
Here, the court rejected the worker’s argument that her depression was a new condition not within the contemplation of the parties at the time of the agreement. The court explained that her depression was a psychological condition that arose out of and was a consequence of her workers’ compensation injury, and therefore, it fell within the scope of the agreement. The court also pointed out that depression can arise from the pain and loss of function associated with a chronic back condition.
Dispute Over Timing of Termination Revives Mine Worker’s Retaliation Claim
Foster v. Mountain Coal Co., LLC, et al., No. 15-1025 (10th Cir. 07/26/16)
Ruling: The 10th U.S. Circuit Court of Appeals reversed and remanded a District Court decision granting summary judgment to an employer on a worker’s Americans with Disabilities Act claim. The 10th Circuit held that triable issues existed regarding the worker’s retaliation claim.
What it means: A worker who alleged he was terminated within hours of requesting an accommodation sufficiently showed causation for an ADA retaliation claim.
Summary: A worker for Mountain Coal Co. injured his neck at work and went to the emergency room. The ER doctor completed a return-to-work slip, but the company refused to accept it because it was not on the company’s form. The worker had his primary doctor complete the form, and he said he dropped it off at human resources. HR said they never received it, and the company accused him of lying. He later dropped off another form signed by his primary doctor.
At a meeting one week later, the worker was suspended. He claimed that he was suspended because he had his primary doctor complete the form even though he had not treated the worker’s neck injury. He told his supervisors that he was going to schedule surgery for his neck.
A week later, he received a letter terminating him effective a few days earlier, allegedly for lying about having dropped off the first note. The letter was written the same day he told another supervisor over the phone that he was going to have surgery. The parties disputed whether the decision to terminate him was made before or after the phone call.
The worker sued, claiming that his statements, once at the meeting and once over the phone, that he was going to have surgery were requests for accommodation and that he was terminated in retaliation for making them. The 10th Circuit held that there were triable issues regarding his claim.
The company argued that the worker’s alleged requests for accommodation were not specific enough to constitute protected activity. The court disagreed, concluding that a reasonable jury could interpret his statements that he was going to need surgery as adequate requests for accommodation.
The company contended that even assuming the requests were adequate the worker could not show causation. The court explained that where the protected activity “is closely followed by an adverse employment action” a worker can rely solely on temporal proximity to show causation.
Here, the court concluded that “because the purported protected activity occurred mere days or even hours before the adverse employment action” the worker sufficiently showed causation.
Furthermore, the parties disputed the reasons for the suspension and termination. The court concluded that if a jury credited the worker’s account — that he was suspended for one reason and terminated for another — then it could find that these inconsistent reasons were sufficient to show pretext.
Worker’s Volunteer Work Falls Outside Scope of Employment
Gray v. Bank of America, 24 ILWCLB 102 (Ill. W.C. Comm. 2016)
Ruling: The Illinois Workers’ Compensation Commission held that a worker’s accidental injury while performing volunteer work at a community event did not occur in the course of her employment even though she cochaired the employer’s community volunteer team.
What it means: In Illinois, where a worker is not paid extra for her work as cochair on her employer’s community volunteer team, her performance reviews are not tied to her volunteer participation, and her volunteer work is not ordered or assigned by the employer, the worker’s injury while participating in a volunteer event does not occur in the course of her employment.
Summary: A project manager for Bank of America was also the cochair of the bank’s community volunteer team. As such, she was responsible for establishing relationships between the bank and the community, including nonprofits as well as different lines of businesses within the bank.
She was reimbursed as part of her salary for the services she performed as cochair of the community volunteer team, but her salary stayed the same regardless of whether she volunteered. The manager was at an event organized by the Girl Scouts of America that bank volunteers were encouraged to attend. While at the event, the manager fell and broke her leg.
The arbitrator found the evidence was insufficient to show that the manager’s injury occurred from an activity that was compulsory or occurred in the course of her employment. The arbitrator noted that the manager was not ordered or assigned to participate in any volunteer program or activity by the bank. Rather, her participation at the event was purely under her own volition and not mandated by the bank.
The arbitrator agreed that the bank encouraged its employees to volunteer in the community, and the bank derived a benefit from employee attendance at community events. However, the manager was not paid extra for her participation, and her performance reviews were not tied to her volunteer participation.
Also, the Girl Scouts event was not sponsored by the bank. The fact that the bank’s corporate presence in the community may have resulted in some benefit incidental to its actual business of banking was too tenuous and intangible to be persuasive in this case. Also, bank employees could choose not to participate in the volunteer networks without negative effect at work. The commission affirmed and adopted the decision of the arbitrator.
Think You Don’t Need Environmental Insurance?
“I don’t work with hazardous materials.”
“My industry isn’t regulated by the EPA.”
“We have an environmental health and safety team, and a response plan in place.”
“We’ve never had an environmental loss.”
“I have coverage through my other general liability and property policies.”
These are the justifications clients most often give insurers for not procuring environmental insurance. For companies outside of sectors with obvious exposure — oil and gas, manufacturing, transportation — the risk of environmental damage may appear marginal and coverage unnecessary.
“Environmental insurance is not like every other insurance,” said Mary Ann Susavidge, Chief Underwriting Officer, Environmental, XL Catlin. “The exposure is unique for every operation and claims don’t happen often, so many businesses view coverage as a discretionary purchase. But the truth is that no one is immune to environmental liability risk.”
Every business needs to be aware of their environmental exposures. To do that, they need a partner with the experience to help them identify exposures and guide them through the remediation claims process after an incident. The environmental team at XL Catlin has been underwriting these risks for 30 years.
“Insureds might not experience this type of claim every day, but our environmental team does,” said Matt O’Malley, President, North America Environmental, XL Catlin. “We’ve seen what can happen if you’re not prepared.”
Susavidge and O’Malley debunked some of the common myths behind decisions to forego environmental coverage:
Myth: My business is not subject to environmental regulations.
Reality: Other regulators and business partners will require some degree of environmental protection.
Regulatory agencies like OSHA are more diligent than ever about indoor air quality and water systems testing after several outbreaks of Legionnaires disease.
“The regulators often set the trends in environmental claims,” Susavidge said. “In the real estate area it started with testing for radon, and now there’s more concern over mold and legionella.”
Multiple hotels have been forced to shut down after testing revealed legionella in their plumbing or cooling systems. In addition to remediation costs, business interruption losses can climb quickly.
For some industries, environmental insurance acts as a critical business enabler because investors require it. Many real estate developers, for example, are moving into urban areas where their clients want to live and work, but vacant lots are scarce. Those still available may be covering up an urban landfill or a brownfield.
“We’re able to provide expertise on those sites and the development risks so the contractor can get comfortable working on it. It’s about allowing our clients to stay relevant in their markets,” O’Malley said. “In this case, the developer is not an insured with a typical environmental exposure. But if there is a contaminant on the worksite, they could inadvertently disperse it. In a high-population urban area, the impact could be large.”
Banks also quite often require the coverage specifically because developers are turning to these locations with higher potential environmental risk.
“Though it’s not a legal requirement, insurance is a facilitator to the deal that developers really can’t operate without,” Susavidge said.
Myth: The small environmental exposure I have would be covered under other polices.
Reality: Environmental losses can result from exposure to off-site events and are excluded by many property and casualty policies.
Environmental risks on adjoining properties can lead to major third party losses. Vapor intrusion under the foundation of one property, for example, can unknowingly underlie the neighboring properties as well. The vapor intrusion can then seep into the surrounding properties, endangering employees and guests.
In other words, your neighbor’s environmental exposure may become your environmental exposure.
O’Malley described a claim in which a petroleum pipeline burst, affecting properties and natural resources 10 miles downstream even though the pipeline was shut off two minutes after the rupture. The energy company that owns the pipeline might have coverage, but what about the other impacted organizations? Many other property policies exclude environmental damage.
Sometimes the exposure is even more unexpected. In 2005, for example, a train carrying tons of chlorine gas crashed into a parked train set sitting in the yard of Avondale Mills — a South Carolina textile plant. The gas permanently damaged plant equipment and forced the operation to shut down.
“It’s not always obvious when you have an environmental exposure,” Susavidge said.
“When there is a big loss or a pattern of losses, the casualty market will typically move to exclude it,” said O’Malley. “And that’s where the environmental team looks for a solution. Environmental coverage has been developed to fill the gaps that other coverages won’t touch.”
Myth: We already have a thorough response plan if there is an incident.
Reality: Properly handling an environmental event requires experience and expertise.
In addition to coverage, risk managers need experience and expertise on their side when navigating environmental claims.
“For many of our clients, their first environmental claim is a very different experience because the claimant is not always a typical third party – it’s a government agency or some other organization that they lack experience with,” Susavidge said. “Our claims team is made up of attorneys that have specific domain experience litigating environmental claims issues.”
Beyond its legal staff, XL Catlin’s claims consulting team and risk engineers come with specialized expertise in environmental issues. 85 to 90 percent of the team members are former environmental engineers and scientists, civil engineers, chemists, and geologists.
“Handling environmental claims requires specialized expertise with contaminants and different types of pollution events,” O’Malley said. “That’s why our 30 years of experience makes a difference.”
Thirty years in the business also means 30 years of loss data.
“That informs us as a carrier how to provide the right types of services for the right clients,” Susavidge said. “It gives us insight into what our insureds are likely to experience and help us determine what support they need.”
Insureds also benefit from the relationships that XL Catlin has built in the industry over those 30 years. When the XL Catlin team is engaged following a covered pollution event, the XL Catlin claims team can deploy seasoned, experienced third party contractors that partner with the insured to address the spill and the potential reputational risk. And they receive guidance on communicating with regulatory bodies and following proper reporting procedures.
“The value of the policy goes beyond the words that are written,” O’Malley said. “It’s the service we provide to help clients get back on their feet, so they can focus on their business rather than the event itself.”
For more information on XL Catlin’s environmental coverage and services, visit http://xlcatlin.com/insurance/insurance-coverage/casualty-insurance.
The information contained herein is intended for informational purposes only. Insurance coverage in any particular case will depend upon the type of policy in effect, the terms, conditions and exclusions in any such policy, and the facts of each unique situation. No representation is made that any specific insurance coverage would apply in the circumstances outlined herein. Please refer to the individual policy forms for specific coverage details. XL Catlin, the XL Catlin logo and Make Your World Go are trademarks of XL Group Ltd companies. XL Catlin is the global brand used by XL Group Ltd’s (re)insurance subsidiaries. In the US, the insurance companies of XL Group Ltd are: Catlin Indemnity Company, Catlin Insurance Company, Inc., Catlin Specialty Insurance Company, Greenwich Insurance Company, Indian Harbor Insurance Company, XL Insurance America, Inc., and XL Specialty Insurance Company. Not all of the insurers do business in all jurisdictions nor is coverage available in all jurisdictions. Information accurate as of September 2016.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with XL Catlin. The editorial staff of Risk & Insurance had no role in its preparation.