Tuesday catch-up

I’m going to announce something new tomorrow on the personal front; stay tuned for details…

Until then, here’s what I missed while doing a lot of non-work-related stuff over the last couple of weeks.

Medrisk has launched telerehab, a new service designed to deliver therapy and related services direct to patients at their worksite or home.  I’m a big fan; used appropriately telerehab can help patients heal faster and ensure their home exercises are performed correctly and consistently. (MedRisk is a consulting client).

Medical leadership at Broadspire is changing hands. Dr Marcos Iglesias is taking over from the estimable Dr Jake Lazarovic; Dr Jake has been at Broadspire for as long as I can remember.  He’s always been a pleasure to speak with; humble, highly observant, innovative and focused on always doing the right thing.  Dr Jake has long been one of the good people in our industry.

Dr Iglesias is a friend as well; Marcos has deep experience in occupational medicine as both a provider and insurance company clinical leader.

The first segment of Coventry’s annual drug trend report is out; key takeaways are:

  • opioid utilization dropped 8.5% from 2015 – 2016
  • Average Morphine Equivalents per script decreased 5.6%
  • Total drug costs were down 5.8%

This is yet more evidence that PBMs and payers are doing really good work in cutting employers’ costs and patient risks.  Note to regulators – this is happening across the country; please don’t do things that will hamper PBMs’ efforts to ensure patients get the right drugs.

An excellent review of where the dollars flow in pharma from HealthAffairs; note this is for ALL pharma, not just workers comp or health insurance. (chart from HealthAffairs)

WCRI’s released a series of reports on worker outcomes, following on the heels of an assessment of workers’ comp income benefit adequacy.  WCRI has been focusing on outcomes and worker satisfaction for some time now; kudos to John Ruser and predecessor Rick Victor for this important work.

Finally, a really interesting piece from Harvard Business Review on how some very large employers are dumping health insurers and buying healthcare direct.  I will predict this is going to happen more frequently, and is a big risk for the big four healthplans.  

Compounds in workers’ comp

CompPharma’s second research paper on compounds in workers’ comp was published last week. Authored by pharmacists and government affairs professionals from member PBMs, this paper builds on the ground-breaking research published in our first paper. (I’m president and co-founder of CompPharma)

The first research paper provided a solid foundation to provide stakeholders with a deep understanding of the history, practice, limitations, and issues associated with compounds.

This paper takes a deep dive into patient safety, efficacy, and cost.

It also includes a review of many legal issues surrounding compounds in workers comp and details regulatory and legal cases involving allegedly inappropriate activity by compounders and prescribers.

A few key quotes:

CompPharma supports the use of compounding when prescribed by a licensed practitioner with knowledge of evidence-based medicine supporting the use of a compound for a single patient with special needs that prevent the use of a drug approved by the Food and Drug Administration (FDA). [emphasis added]

the use of topical compounded products is not recommended as first-line treatment for workers’ compensation patients [emphasis added]

CompPharma’s 2014 compound research paper stated, “Pharmacies have received FDA warnings regarding topical lidocaine in concentrations greater than 5% and other topical anesthetics.” Some compounding pharmacists responding to the 2014 paper characterized this statement as a misrepresentation. The authors stand by the statement…

…a chief criticism is that by acting as intermediaries, PBMs profit from the use of compounds and other over-priced medications. In reality, the clinical management programs employed by these companies actually decrease PBMs’ top-line revenue [emphasis added]

The first paper upset a few compounding advocates. Their complaints mostly arose because we didn’t address compounding outside of work comp. Frankly, the paper’s focus was, and the latest paper’s focus still is, purposely limited to workers’ comp. Others are welcome to address non-work comp issues, that’s not what we do.

You can download the paper here – there’s no charge and no registration required.

CompPharma is proud to have been the leading force educating the work comp world about compound drugs; thanks to member PBMs for supporting our work, and a special thank you to

  • Phil Walls, RPh, myMatrixx
  • Deborah Conlon, RPh,  BS Pharm, PharmD, OptumRx
  • Brigette Nelson, MS, PharmD, BCNP, Express Scripts
  • Kevin Tribout, OptumRx
  • Nikki Wilson, PharmD/MBA, Coventry

and Contributing Editor Robert E. Bonner, MD, MPH, Principal, Bonner Consulting Group, LLC.

What does this mean for you?

Compounds can be useful and appropriate for patients with unique and unusual needs. This report provides objective, thoroughly-researched information essential to understanding this issue.

More and stronger evidence that ACA is reducing workers’ comp costs

Is the Affordable Care Act lowering workers’ comp medical costs?

Sure looks that way.

Data from NCCI’s 2016 AIS and HSA clients suggested ACA’s impact was positive and sustained.  Flat-to-declining total medical costs over a two-year period that coincided with the full implementation of ACA were a strong indicator of the law’s positive impact on work comp. Later this week, NCCI’s Kathy Antonello will update us with a first look at the 2016 numbers, and we’ll see if that pattern continues.

I summarized the change in the employed population’s healthcare coverage a while back – noting that many more workers in high-frequency jobs are covered under ACA, a positive factor for work comp. (much more on this can be found here)

Wait, there’s more – Fitch’s just-released review of commercial insurance alluded to the impact of ACA on work comp…

Implementation of the Affordable Care Act (ACA) and a corresponding shift of individual medical care delivery away from workers’ compensation to other markets may also be a factor that bears further study.

Other research from Upjohn analyzes the impact of ACA on workers’ comp.  A couple key points:

  • immediately after workers turn 26 (and thus lose access to their parents’ insurance as allowed under the ACA), the amount of medical treatment paid by workers’ comp goes up – implying that lack of health insurance leads to greater use of workers’ comp benefits.
  • the evidence strongly suggests that the ACA will decrease the likelihood that health care is paid for by workers’ compensation, the size of the cost savings to workers’ compensation is difficult to asses [because]
  • the claiming behavior of people with minor medical needs is influenced by having health insurance. This would suggest that the overall savings to workers’ compensation would be modest. Heaton (2012), however, finds evidence that people with greater medical needs respond to health reform, which suggests that the cost savings to workers’ compensation could be large

There’s a lot more to the Upjohn analysis, and I’d encourage you to read it. Potential issues include access to care and the influence of lower Medicare reimbursement. That said, the authors’ overall summary strongly links ACA to lower work comp claims and medical expenses.

What does this mean for you?

Evidence strongly suggests ACA is positively affecting workers’ comp, lowering claims costs and medical expenses.

Liberty Mutual drops the Research Institute – a missed opportunity

A couple weeks ago Liberty Mutual announced it would be closing its Research Institute in June. The news came as a shock to many, including me. Just two months ago I had lauded Liberty for its ongoing support for research into disability.

Before we discuss the Institute’s demise, allow me to reprise that applause for Liberty’s decades-long commitment to the Institute. Just because they are shutting it down today does in no way diminish the great work it did for years, the commitment by Liberty and its policyholder owners to the greater good. We are all better off for that commitment.

On one level I understand why Liberty did this – it’s the dollars. While no one at Liberty has said so, it looks like a financial move, pure and simple. The Institute’s staff is well-paid, the research itself is likely expensive, and in these times of tight focus on unallocated expense management, cutting the Institute’s non-revenue-generating millions in expenses is a quick way to increase earnings.

But I’d suggest this is a mistake, for two reasons.

First, the financial benefit pre-supposes the Institute is “non-revenue-generating”. That’s true, but it could and should have been used much more effectively to advance Liberty’s brand. Yes, that’s not “revenue-generating” in the strictest sense of the term, but there’s NOTHING more important than a brand.

I asked Liberty’s Communications folks two questions; they kindly responded in a timely manner.

Here’s the first.

MCM – My take is Liberty didn’t aggressively promote the Institute or effectively utilize it in marketing and branding efforts. Yes there was the occasional press release or website mention, but it was rarely front-and-center. Why?
LM – We communicate to our customers and business partners in numerous ways on issues that are most important to help them best manage and mitigate risk. Our Research, Risk Control and Claims expertise all play important roles in helping employers and their employees manage current and emerging risks…
We are also keeping our Hopkinton facility open while discontinuing our peer-reviewed research efforts. Our Hopkinton facility will continue to house our Industrial Hygiene Laboratory and Driver Training program, as well as a personal insurance claims training center.
What is evolving is the way that people live and work, and the dynamics of today’s workplace reflect these changes. Liberty remains committed to helping people live safer more secure lives. We are revisiting our approach to accessing research while at the same time continuing to provide our Risk Control and Claims expertise to help commercial insurance policyholders improve both safety and return to work.

Liberty’s response didn’t address my statement about the relationship between the Institute and the company’s branding efforts. “Communicat[ing} to our customers” is talking to people you already do business with. And, communicating without weaving the brand message into that communication constantly and thoroughly minimizes its usefulness.

In my view Liberty didn’t effectively leverage the terrific work done by the Institute, never really connecting the work it does to support Liberty’s overall “lead safer, more secure lives” brand statement.

The lack of effective brand management is by no means unique to Liberty. Rather it is a major problem for the entire workers’ comp and P&C insurance industries. Every player talks about their people, their great claims management and effective underwriting, but few really differentiate. That is why this industry is commoditized; why buyers switch carriers for a few percent, why risk managers follow their consultants’ advice based on a spreadsheet.

Directly and consistently and broadly and cogently tying the Institute’s work to the impact it had on Liberty customers would have been expensive, arduous, in some cases tedious, and totally worthwhile. It would have greatly strengthened the brand by demonstrating Liberty’s depth of commitment to its brand statement.

My second reason is much more debatable.

In these days of awfully insensitive corporate behavior, the Institute stands as a shining example of doing good work without a direct dollar benefit. It is just the right thing to do. While corporations are obliged to support their shareholders, Liberty is a mutual insurer; its owners are its policyholders. One could, and I am, make the argument that the Institute was and remains prima facie evidence of Liberty’s commitment to its “owners”.

What does this mean for you?
Lots of terrific researchers are looking for work. Please reach out to them; here’s one source. 

Do laws directing injured workers to providers matter?

It’s about the details.

Anyone reading the quick headline from WCRI’s just-published analysis of employer direction may well draw the conclusion that there’s no difference in costs between states where the employee or the employer has the ability to choose the treating physician – a conclusion that would superficially right – but actually wrong.

A summary of the study notes it addresses “injuries that occurred mostly between 2007 and 2010 across 25 states in which either employers or workers control the choice of provider. It excludes states where workers can choose a provider within their employers’ established network.”

(I’m not sure if we’d see a difference if more current claims data were used as after 1/1/2014, full implementation of ACA may have affected claim allocation to work comp or non-work comp insurance.)

Note the nuance here; WCRI is careful to describe the “direction” metric as one dividing states into those where employers or employees have the MOST control. The “line” between employer-choice and employee-choice is really not a line at all, but rather a shading of white to black, with many permutations of grey.

For example, there are states where the employer can direct the patient to a specific doctor, others where the patient can choose from a panel, and still others where direction is only allowed if the employer has some sort of state certification.

Then there’s the ability of the patient to “opt out” for a course of treatment (Illinois) or change physician to another one, perhaps inside the panel or maybe completely outside the employer panel – after some defined period of time.

And let us not forget that employers can suggest, soft-channel, encourage, provide transportation to, or otherwise get an injured worker to a particular doc or facility in almost every state without violating the law – they just can’t FORCE the employee to go to a doc or choose from a panel of docs.

Or, as authors David Neumark and Bogdan Savych state; “it is common for employees to choose the medical provider when policies give employers control over provider choice, and for employers to choose the provider when workers have the right to direct this choice.”

A key statement: states that give “workers the most control over the choice of provider were associated with higher medical and indemnity costs among the small share of the most expensive back-related injuries…” In other words, claims that are harder to diagnose and where there is less unanimity in agreement on preferred treatment tend to be more expensive in employee-choice states. 

What does this mean for you?

My main takeaway is as it’s been for years – employers should do their damndest to get their employees to high quality physicians who know and understand workers comp.  And then get out of their way.

Beware the Ignorant Antagonist

This was the message Accident Fund’s Jeff White delivered in a recent presentation on disruption in insurance – and specifically workers’ comp. A few of Jeff’s slides are shared here…

The idea is simple – things you used to have to do via phone or fax or in person or thru the (gasp) snail mail you can do on your smartphone or tablet – instantly, securely, and at no cost.

Hotel reservation?  Hotels Tonite.

Plane? Get a reservation, get flight status pushed to you, change your seat, get an upgrade.

Get dog food? Amazon Prime.

Nearest coffee? Starbucks app – and pay for it too.

Check on your house? Sure – lock status, turn up the heat, watch home security cameras.

Banking? Deposit checks, pay bills, move money around via your phone.

Sports? Get scores, watch highlights, chat with fellow fans, post pictures, buy tickets.

Travel, retail, security, banking, entertainment – all have been disrupted, middlemen eliminated or drastically changed by adoption of smartphones, spread of a very fast internet, growth of artificial intelligence-driven decision making, internet banking.

This is happening with insurance now, driven by those same technologies, processes, capabilities. Think about the implications; here’s one.

Insurance is risk-sharing for potential losses, but it is a very blunt instrument. Risk is estimated using what are really crude tools to assess exposure, potential cost, liability. Technology allows risk takers and risk assumers to narrow down the actual “risk” a lot, lowering cost of risk and more accurately pricing that risk.  Others with similar risks share the burden – but that burden is much lower due to accurate understanding of exposure.


If a loss occurs, tech can pay the claim instantly.

The graphic below is not a “could be”, it’s a “what actually happened in real life.”

Think this won’t happen in workers’ comp?

Ask a former travel agent – there are lots of them.

Most insurance companies will NOT survive the transition.  That’s because they don’t want it to happen as it will reduce revenues, eliminate the need for executives with newly-irrelevant skills and experience, and make existing infrastructure partially obsolete.

New entrants who don’t have lots of infrastructure to support and business models rooted in current technology and buying patterns are the “Ignorant Antagonists”.  Many of them will fail due to “stupid, ignorant” mistakes – but some will survive, thrive, and come to dominate the insurance industry.

What does this mean for you?

Your company tomorrow will be a lot different than it is today.  If it is around tomorrow. 

 

Work comp disruption and “the important vs the urgent”

A very long time ago a professor in a business school class said “you have to differentiate between things that are important and things that are urgent”.

That may very well be the most valuable lesson I learned in business school – although it’s one I constantly wrestle with.

I bring this to your attention, dear reader, because there’s been a very important series of blog posts sitting in my “drafts” folder for weeks now. I should have finished and posted them a month ago, but more “urgent” things kept coming up. Mea culpa.

So enough of my time-management problems – here’s what’s so important.

Writing in IAIABC’s Perspectives, Jeff White said:

Even more unconventional P2P insurance models are planning to go to market in 2017, some with the intent to cut out the insurance company altogether. Their
plan is to initially appeal to the one-third of the U.S. population that is wildly open to sharing money and property, even if they have never met each other in person before. These companies are adopting models taken straight out of the current Fintech playbook using crowdfunding, microfinancing, and P2P lending models as their guide.

Jeffrey Austin White is the smartest person I know in work comp.  Jeff also has the unique ability to instantly grasp highly technical issues and, more importantly explain them to the rest of us so that we understand the issue, AND get its implications.

You need to read his article, because it explains precisely what the future – peer-to-peer networks, crowd-funding, blockchain – holds for healthcare and workers’ comp.

This future has huge implications for buyers, regulators, suppliers, and other stakeholders. A few examples:

Teambrella will push the limits of our current regulatory system by allowing members to cover their own risk using a distributed network based on the blockchain.

Teambrella’s model will [be]… funded by a closed community of users without a license or the backing of an insurance company, a centralized authority, or state regulators. What? Are they allowed to do that?

Lemonade is one of several new companies, or platforms, that is re-inventing mutual insurance, by operating under what is now referred to as a Peer-to-Peer (P2P) network. This network allows customers to form groups and finance their own claims from a shared pool of funds with excess covered by a re-insurer. In the true P2P model, money left over in the pool, which would normally be profit for the insurance carrier, is either refunded back to the individual participants, paid forward to the next year’s premiums or, in the case of Lemonade, donated to a charitable organization.

Several major organizations are currently engaged in an international insurance pilot project based on blockchain technology. Aegon, Allianz, Munich Re, Swiss Re, XL Caplin and Zurich are among 15 companies that recently announced the launch of the Blockchain Insurance Industry Initiative — B3i.

I’m going to dig deep into this in the next post.

 

On controlling opioid use, work comp leads the way

Outside the workers’ comp world, opioid utilization and costs are increasing significantly, driven by greater use of long-acting opioids.

According to a Prime Therapeutics study of 15 million commercial insurance claims, short-acting opioid prescriptions dropped over a 15-month period, but utilization of all types of long-acting opioids increased.

In contrast, we work comp Neanderthals have been driving down opioid usage for years.

a few data points…

What accounts for the disparity between workers’ comp and group health?

Work comp payers care deeply about outcomes, function, and return to work. Patients taking opioids are much less likely to return to functionality than those on NSAIDs or no drugs at all.

Some payers have dedicated units focused on chronic pain and prescription drug management. Others rely primarily on their PBMs, but almost all insurers and TPAs have been working this issue for years.

PBMs working in the comp sector dedicate a lot of resources to managing opioids. Investments in analytics, PBM – payer interfaces, staff training, clinical guidelines and the like are costly but drive these results.  Staffing – clinicians, pharmacists, data analysts, program managers, highly trained customer service staff – focus on this issue 24/7.

That’s not to say we don’t have a very long way to go; data from CompPharma’s annual survey of prescription drug management in workers’ comp and NCCI indicate spend for controlled substances (mostly opioids) accounts for about 28% of total WC drug spend.

I’m gong to be speaking at this month’s National Heroin and Prescription Drug Abuse Summit on what the real world can learn from workers’ comp.  The main takeaway -despite significant regulatory, economic, and legal barriers inherent in workers’ comp, payers and PBMs have made significant progress.

It’s time for the real world to get on board.

What does this mean for you?

We CAN reduce opioid use – it just takes dedication, resources, and persistence.

Health reform and Work Comp – more data is coming in

The evidence is piling up; ACA is strongly associated with lower work comp premiums. Almost a year ago I attributed improvements in work comp’s medical expense trend to ACA; now, the impact is being seen in improving combined ratios particularly in states that fully adopted ACA’s reforms. (here’s a map of Medicaid-expansion states)

That view is now getting traction outside our little world, with the LA Times covering the issue earlier this week.

Premium decreases are now being seen in Medicaid-expansion states; here are a few examples.

  • Arkansas – 8.4% decrease
  • Michigan – 9.3% decrease in advisory rate
  • Montana – 7.8% decrease in loss costs
  • Nevada – 10.7% decrease in loss costs
  • Oregon – 5.3 % decrease
  • Vermont – 7.9% decrease

(I’ve purposely left out California, which has seen significant rate decreases however other factors beyond ACA are also affecting rates)

Of course, other factors are also in play here, including expanding employment and state-specific reforms. However, when you compare “ACA adopting states” with other states, the overall picture is compelling.

Bill Wilt of Assured Research kindly offered the following observations (more information is available here):

Assured Comment: American Health Care Act (AHCA) Likely Bad for WC Insurers

New 2016 data shows states maximally affected by ObamaCare outperformed WC industry

Newswires are on fire with analysis of the AHCA and its impact on the nation’s medically insured. Advocates point to the CBO’s estimate that it could reduce federal deficits by $337 billion over the ten years 2017-2026. Detractors, and there are many, focus on the CBO’s estimate that some 14 million Americans could lose healthcare coverage by 2021; climbing to 24 million by 2026.

New, 2016 industry data shows that the workers’ compensation loss ratio in states maximally affected by the rollout of the ACA (aka ObamaCare) have begun to outperform states minimally impacted by the ACA (see nearby figure). Our delineation stems from a recent New England Journal study which found that states expanding Medicaid and those introducing state-based exchanges saw the largest increase in the medically insured. In 2016, the WC loss ratios in those 18 states outperformed the 15 minimally impacted states by 440 basis points. The maximally-affected states also outperformed nationwide averages in 2016.

This new data comports with intuition and, increasingly, the anecdotes we pick up from industry sources. The ACA has likely been a contributing factor to the favorable trend in WC loss ratios. The evidence is significant: steadily declining WC loss ratios during the ACA-years, historically low medical inflation and favorable WC loss-reserve development. Most industry experts believe the expansion of the medically insured has resulted in less case shifting and less cost shifting (e.g., fewer fraudulent claims and comorbidities treated under WC).

The AHCA, in its current form, should have the opposite affect; it seems likely to lead to more WC claims and cost shifting – rising loss ratios. The nearly complete unwinding of the expansion in medically insured could accelerate cost-shifting, in turn putting pressure on WC loss trends and reserve margins. The initial wave of newly uninsured (14 million by 2018 according to the CBO) would result from the repeal of the individual mandate. We don’t have an estimate of the working population in that cohort but presume it’s meaningful. The second wave of newly uninsured (another 10 million) would result from changes in Medicaid enrollment. According to WC experts (link here to one prominent blog) some 81% of Medicaid families have at least one member of their family working. That presents plenty of cost-shifting opportunities.

We’d expect the negative impacts of the AHCA, if rolled out in its current form, would first appear in the states benefitting the most from the Affordable Care Act. Large states including California and New York are among the 18 included in our figure above – contact us for a complete listing.

WC rates across the nation have begun to decline – evidence that WC insurers discount favorable trends into their ratemaking. Regulators will probably have little tolerance for preemptive rate increases based on this evidence, but it will be interesting to see if the pace of rate decreases slow. If not, WC loss ratios will have almost surely found their bottom in 2016.

What does this mean for you?

Repealing ACA will be bad news for work comp premium payers, good news for service entities.

WCRI 2017 – California’s outcomes post reform, and plans for the next round of reform

One last post on last week’s excellent WCRI conference; Alex Swedlow CEO of CWCI provided a brief but information-rich profile of California – an Altered State.

The good news…

  • Medical trend has flattened
  • Fewer spine surgeries
  • Fewer Opioid scripts
  • $1.3 billion in system wide savings

One problem that seems almost specific to California – cumulative trauma claims. These claims are particularly problematic in the LA county area – and are outliers in terms of disability duration, cost, indemnity payments.  Moreover, cumulative injury cost are driven by LA county AND attorney involvement.

Medical treatment costs have been essentially flat for five years – due in large part to adoption of an RBRVS-based fee schedule.

The FBI’s involvement in tracking down miscreants in the spinal surgery industry may have been helpful in reducing overutilization of that much-criticized procedure.

Opioid spend has declined for the 5th consecutive year – kudos to the work comp PBM and payers who’ve done this. There’s also been a 26% decrease in cumulative MED over the first two years of the average claim.

This is very good news.

But, as Alex noted, we’ve only moved from the disastrous to the miserable, as opioid use is still far too high.

Overall, while a reduction of 8 percent in medical trend is welcome news, this happened before in the previous attempt to reform California work comp.  After an initial similar reduction, costs zoomed up, necessitating more reform.  So, while Alex is hopeful that trends are positive, he is wary indeed.

A few more key data points

Loss Adjustment Expense is just about equal to indemnity payments and is the highest across almost any comparison group.  And, this expense load has increased dramatically over the last couple of years. Medical cost containment expenses are a big part of this; the data presented was preliminary and thus can’t be cited yet but suffice it to say that costs account for a huge portion of overall medical expense.

Drugs

Rx spend accounts for 12.4% of medical spend but average expense for first 24 months after a claim is incurred is just under $2000 – this has decreased over the last few years.

A formulary is in the offing and it looks like the go-live date of July 1 2017 will happen. While the intent is to improve care and reduce cost, there will have to be strict enforcement for the hoped-for results to actually become real. One of the key issues unresolved is the formulary doesn’t address the difference in the price per pill of identical drugs – the variation can be wide indeed. This is an area that regulators have been focused on, yet none of the current solutions – change in fee schedule or adoption of a formulary – has addressed.

IMR and UR

Only 4.3 percent of medical care sought by treating providers was modified or denied, refuting claims made by other media outlets that there was wholesale rejection and denial of needed care thru the IMR process. Fortunately 99.4% of compound drug rejections were upheld – and over 90% of opioid denials.

What does this mean for you?

Things are getting better in California, but some of the “solutions” offered by regulators are misguided and will actually increase frictional costs. I’m going to dive into this in a post next week.