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.
Little Progress Reducing Shoulder Claims
While the nationwide frequency of workplace injuries impacting other body parts, such as lower backs, continues on a downward trend, workers’ compensation experts say they have not seen a corresponding drop in workers suffering from shoulder problems.
Shoulder injuries can require longer recovery times than do other body parts, diminishing the likelihood of a quick return to work, several medical experts said.
“Shoulder claims are huge now,” with the joints of an aging workforce wearing down, said Liz Thompson, CEO at Encore Unlimited LLC, a case management company in Stevens Point, Wisconsin. Treatment options are often expensive, particularly for older workers who are more likely to suffer accompanying comorbidities, she added.
Thompson recently analyzed the claims from one insurer client and found that 70 percent of those stemmed from extremity injuries, including many shoulder issues, she said.
Similarly, Judie Tsanopoulos, director of workers’ comp and loss control at St. Joseph Health System in Orange, Calif. said that beginning about three years ago she observed a rise in shoulder injuries and incidences of frozen shoulder.
“We see far more shoulders,” Tsanopoulos said.
When she drilled into her company claims data she found that women aged 40 to 60 years old accounted for many of those shoulder issues, she said.
Other workers’ compensation experts say they have not seen an overall increase in the frequency of shoulder-related injuries. Yet despite nationwide gains in reducing injuries to other body parts, shoulder injuries are not decreasing.
An NCCI Holdings Inc. report released on July 18 states, among other findings, that from 2008 to 2012 the frequency of lost-time claims for most body parts dropped an average of 13.9 percent.
“One notable exception is that the frequency of injuries involving the arm and shoulder, which represent more than 15 percent of all injuries, remained flat over the period,” dropping only 1 percent, according to NCCI’s frequency report.
In contrast, lower back claims dropped 15 percent during the period while upper back claims dropped 7 percent. Upper back claims showed the least amount of claims decline next to the 1 percent drop in arm and shoulders among body parts.
NCCI’s report stated that the flattening trend in arm and shoulder frequency “may be influenced by an older workforce, where rotator cuff injuries are not uncommon.”
Prior to the flattening in lost-time arm and shoulder claims seen from 2008 to 2012, injuries to those body parts had been declining. They decreased 13 percent from 2004 to 2008 while frequency for all lost-time injuries dropped 17 percent, said Jim Davis, an NCCI director and actuary.
In addition to an aging population more likely to suffer shoulder injuries, more treatments may be occurring today when workers complain about shoulder pain.
In contrast to 20 years ago, doctors are increasingly able to diagnose and address shoulder pain complaints that previously went untreated, said Ira Posner, an MD, orthopedic surgeon, and consultant to third party administrator Broadspire.
“So you are seeing a lot more people with a diagnosis now that we couldn’t make before,” Posner said. “People would present with shoulder pain and we didn’t know why they hurt — now we know why they hurt.”
The improved medical quality means doctors are able to help more workers while workers’ comp payers may now be feeling the increase in shoulder treatments.
“That is why you are seeing more pathology in the shoulder being treated, because we understand the shoulder better and we are able to do more for complaints of shoulder pain,” Posner said.
One cost mitigating factor, however, stems from a shift from conducting mostly open shoulder surgeries to performing more orthoscopic and outpatient treatments, added Jacob Lazarovic, senior VP and chief medical officer at Broadspire.
Still, shoulder injuries typically require more recovery time than do other body parts, experts said.
“Recovering from shoulder surgeries is a pretty prolonged process in the best of cases, but it would be even more prolonged for older workers,” Lazarovic said.
The complexity of shoulder joints adds to the problem, medical experts said.
In addition to a longer recovery time, shoulder injuries such as those requiring rotator cuff surgeries make it challenging for employers to return workers to certain jobs, such as those requiring overhead lifting, said Teresa Bartlett, senior VP and medical director at Sedgwick Claims Management Services Inc.
“Shoulder injuries in general are problematic,” Bartlett said. “Regardless of age, it’s the mechanism of the shoulder that tends to be very difficult.”
In response, Thompson at Encore Unlimited is seeing employers increasingly interested in shoulder protection and corresponding loss control programs.
“Anytime you have an injury group that is driving your claims costs, as an employer you have to evaluate what can you do to eliminate some of that risk,” such as making sure the worker fits the job, she said.
5 & 5: Rewards and Risks of Cloud Computing
Cloud computing lowers costs, increases capacity and provides security that companies would be hard-pressed to deliver on their own. Utilizing the cloud allows companies to “rent” hardware and software as a service and store data on a series of servers with unlimited availability and space. But the risks loom large, such as unforgiving contracts, hidden fees and sophisticated criminal attacks.
ACE’s recently published whitepaper, “Cloud Computing: Is Your Company Weighing Both Benefits and Risks?”, focuses on educating risk managers about the risks and rewards of this ever-evolving technology. Key issues raised in the paper include:
5 benefits of cloud computing
1. Lower infrastructure costs
The days of investing in standalone servers are over. For far less investment, a company can store data in the cloud with much greater capacity. Cloud technology reduces or eliminates management costs associated with IT personnel, data storage and real estate. Cloud providers can also absorb the expenses of software upgrades, hardware upgrades and the replacement of obsolete network and security devices.
2. Capacity when you need it … not when you don’t
Cloud computing enables businesses to ramp up their capacity during peak times, then ramp back down during the year, rather than wastefully buying capacity they don’t need. Take the retail sector, for example. During the holiday season, online traffic increases substantially as consumers shop for gifts. Now, companies in the retail sector can pay for the capacity they need only when they need it.
3. Security and speed increase
Cloud providers invest big dollars in securing data with the latest technology — striving for cutting-edge speed and security. In fact, they provide redundancy data that’s replicated and encrypted so it can be delivered quickly and securely. Companies that utilize the cloud would find it difficult to get such results on their own.
4. Anything, anytime, anywhere
With cloud technology, companies can access data from anywhere, at any time. Take Dropbox for example. Its popularity has grown because people want to share large files that exceed the capacity of their email inboxes. Now it’s expanded the way we share data. As time goes on, other cloud companies will surely be looking to improve upon that technology.
5. Regulatory compliance comes more easily
The data security and technology that regulators require typically come standard from cloud providers. They routinely test their networks and systems. They provide data backups and power redundancy. Some even overtly assist customers with regulatory compliance such as the Health Insurance Portability and Accountability Act (HIPAA) or Payment Card Industry Data Security Standard (PCI DSS).
1. Cloud contracts are unforgiving
Typically, risk managers and legal departments create contracts that mitigate losses caused by service providers. But cloud providers decline such stringent contracts, saying they hinder their ability to keep prices down. Instead, cloud contracts don’t include traditional indemnification or limitations of liability, particularly pertaining to privacy and data security. If a cloud provider suffers a data breach of customer information or sustains a network outage, risk managers are less likely to have the same contractual protection they are accustomed to seeing from traditional service providers.
2. Control is lost
In the cloud, companies are often forced to give up control of data and network availability. This can make staying compliant with regulations a challenge. For example cloud providers use data warehouses located in multiple jurisdictions, often transferring data across servers globally. While a company would be compliant in one location, it could be non-compliant when that data is transferred to a different location — and worst of all, the company may have no idea that it even happened.
3. High-level security threats loom
Higher levels of security attract sophisticated hackers. While a data thief may not be interested in your company’s information by itself, a large collection of data is a prime target. Advanced Persistent Threat (APT) attacks by highly skilled criminals continue to increase — putting your data at increased risk.
4. Hidden costs can hurt
Nobody can dispute the up-front cost savings provided by the cloud. But moving from one cloud to another can be expensive. Plus, one cloud is often not enough because of congestion and outages. More cloud providers equals more cost. Also, regulatory compliance again becomes a challenge since you can never outsource the risk to a third party. That leaves the burden of conducting vendor due diligence in a company’s hands.
5. Data security is actually your responsibility
Yes, security in the cloud is often more sophisticated than what a company can provide on its own. However, many organizations fail to realize that it’s their responsibility to secure their data before sending it to the cloud. In fact, cloud providers often won’t ensure the security of the data in their clouds and, legally, most jurisdictions hold the data owner accountable for security.
Risk managers can’t just take cloud computing at face value. Yes, it’s a great alternative for cost, speed and security, but hidden fees and unexpected threats can make utilization much riskier than anticipated.
Managing the risks requires a deeper understanding of the technology, careful due diligence and constant vigilance — and ACE can help guide an organization through the process.
To learn more about how to manage cloud risks, read the ACE whitepaper: Cloud Computing: Is Your Company Weighing Both Benefits and Risks?