Legislative Update

Workers’ Comp Legislation to Watch in 2015

During its Annual Issues Symposium, NCCI identified the top legislative issues affecting the industry for the first quarter of the year.
By: | July 6, 2015

While fee schedules are the most common medical cost containment measures, drug formularies are being considered by several states. That’s according to a look at the latest regulatory and legislative trends impacting the workers’ comp system.

During the first three months of the year, NCCI monitored 676 pieces of legislation affecting the workers’ comp system. During its Annual Issues Symposium, the Florida-based ratemaking and research organization outlined the issues trending in the legislation.

Included in the legislation NCCI monitored were bills from all states and D.C. that were pending, defeated, and enacted, as well as 2016 draft bills. Thirty-one bills were enacted while 78 were defeated, including those that failed, failed due to adjournment of the legislative body, or were vetoed.

While the 2015 legislative session produced a relatively low volume of proposed changes, several issues were noteworthy.

Legislation dealing with benefits affecting first responders, for example, was the predominant workers’ comp issue among the top five categories for the first quarter of the year. Other issues that were debated included the definition of employee, occupational disease, reimbursement/fee schedules, and indemnity benefits.

NCCI also identified the following as the top five categories to watch:

Drug Formularies

While drug formularies are often used in group health, only four states have regulated them for their workers’ comp systems. But studies have indicated formularies can result in savings.

A 2013 study indicated the “closed” formulary adopted in Texas resulted in a decrease of about 80 percent in payments made for non-formulary drug prescriptions. Closed formularies allow only those medications included in a list for workers’ comp claims without preauthorization.

Ohio, Oklahoma, and Washington also have drug formularies. Proposals to implement them have been discussed this year in Arkansas, California, Louisiana, Montana, and North Carolina, according to NCCI.

“Some states have a form of a drug formulary — a preferred drug list,” according to NCCI.

The “key to effectiveness of formulary is the degree of control.”

Fee Schedules

While several states look to formularies to control pharmacy costs, most already have some type of physician and/or facility fee schedules in place. Several states this year considered new ones and/or changes to their fee schedules, including Alaska, Alabama, Florida, Indiana, Minnesota, New Hampshire, North Carolina, and Virginia.

“Fee schedule bill debates typically center around how to set an appropriate fee for the medical care provided,” NCCI said. “In 2015, Connecticut and North Carolina have added new fee schedules; Alaska is expected to later this year. Renewed attempts in 2015 to pass fee schedule bills in New Hampshire and Virginia did not succeed.”

Medical Marijuana

Two developments nationally may change the landscape on the medical marijuana issue. Last December, a law was implemented that bans the Justice Department from using funds to prosecute medical marijuana cases in states where it is legal. In March, legislation was filed to change the classification of marijuana from a Schedule I to a Schedule II drug. While both classifications include drugs “with a high potential for abuse,” only Schedule I drugs are additionally defined as having “no currently accepted medical use.”

So far, 23 states and the District of Columbia have legalized medical marijuana, and four states and D.C. have legalized it for recreational use. This year saw legislation filed in 18 states to legalize medical use of the drug. Bills failed in nine and are pending in the remaining nine states.

“Some states, including those where medical marijuana has been legalized, are taking the position that medical marijuana is not reimbursable,” NCCI said. But it’s “unclear [what the] impact of medical marijuana is on workers’ compensation costs.”

Opt Out

Frustrations with the workers’ comp system have prompted several states to consider joining Texas and Oklahoma in allowing employers to opt out of the traditional workers’ comp system. While the systems in the two states are different, legislation was filed in both to change the way opt out works.

Tennessee and South Carolina also saw proposals to implement opt-out systems; however, supporters say nothing is likely to happen in either state until 2016.  The Association for Responsible Alternatives to Workers’ Compensation is exploring the idea in additional states.

Attorney’s Fees

Fees paid to attorneys involved in workers’ comp claims are regulated by a number of states with many capping a maximum award and others limiting them to a reasonable fee. Several states this year considered bills to increase the fees.

“Some argue that if attorney fees are too low, injured workers cannot get representation,” NCCI said. “Others argue that workers’ compensation is meant to be a self-executing system so a high level of attorney involvement is not required.”

Among the considerations for attorneys’ fees are:

  • The type of fee schedule in effect
  • Whether the fees are based on benefits secured or the total award
  • Whether the fees are paid out of the award or by the payer

Changes in attorney’s fees may impact claim frequency, the average cost of claims, and expenses, NCCI explained. Also, moving from a schedule of fees to an uncapped, reasonable fee standard is expected to result in a “significant increase.”

In Florida, all eyes are on the Supreme Court as it considers whether attorney’s fees caps are constitutional in the case Castellanos v. Next Door Co., et al.

Nancy Grover is the president of NMG Consulting and the Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at [email protected].

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