Insight, analysis & opinion from Joe Paduda
OK, another trip down Esoteric Lane, into the wierd world of WC drug management…
When states set high workers comp fee schedules for drugs, WC medical costs go up, and too many dollars are taken from employers and given to pharmacies and PBMs.
That’s exactly what an organization with the seemingly innocent title “Workers Comp Pharmacy Alliance” is working towards.
Insurance companies, employers, and TPAs rely on vendors to process bills, build and operate networks, manage prescriptions and PT, support litigation, and provide expert advice on problematic medical issues. In many instances the vendors are selected thru a competitive bidding process, wherein the lowest bidder gets the deal, or at the least has a much better chance of landing the business than their more costly competitors.
But in others, the selection process goes on seemingly without end.
California, New York, and Texas are all in various stages of reforming their workers comp systems. Florida’s reforms have been in place for several years, and rates have dropped thru the floor. WC premiums have decreased even more, with some employers seeing cuts of 50%. South Carolina may also see changes, and there are initiatives on the table in several other states as well.
Lower costs are great, for the buyer. Employers can move on to other important issues, shoving risk management initiatives to the bottom of the pile. They can move their business easily, as there are more work comp insurers clamoring for their business, eager to lower premiums even further in an effort to capture market share.
But there can be a significant downside to successful reform efforts.
The financial reporting season for publicly traded companies using the calendar year is just about over. AIG’s numbers look rather good, with a 34.1% improvement in net profits on revenue growth of 3.9%. Sure, the company has had its struggles with regulators, but the overall results are quite impressive.
The increase in profits came on the heels of a $1.8 billion increase in reserves for workers comp claims over 2005. The reserves were bumped up despite an improvement in the loss ratio for the DBG operation (domestic business group, the home of most of AIG’s work comp business) from 82.5% in 2005 to 69.1% in 2006.
No, I’m not obsessed. At least not with the Concentra-FirstHealth merger. But information keeps popping up about various aspects of the deal that a few readers actually find very interesting.
The latest concerns the IME business.
California workers comp rates are likely to drop again. Clearly, the WC reform initiatives are starting to pay off.
That’s good. Sort of.
When rates drop, employers’ costs go down, leaving more money for investment, profits, higher wages, and perhaps even health insurance.
That’s the good news.
Continue reading California’s rate reduction – not all good news
Coventry has hired a new medical director for their workers comp managed care business. Dwight Robertson has long experience in the business (starting in the late eighties); knowledge of the provider, payer, and managed care industries (USHealth Works, Zenith, Crawford, AIG, UnitedHealthcare, Conservco); and a frank, open, and direct style.
He also has recent experience as a First Health customer, a perspective that may help focus his new company on the customer.
Sources indicate Fiserv has terminated its efforts to sell third party biller Third Party Solutions thru Bank of America. This despite Fiserv’s interest in shedding non-core assets, begun under CEO Jeff Yabuki. While Fiserv may still entertain offers, it is unlikely any will approach the rumored goal of $275 million Fiserv was asking for TPS.
While more than a few private equity/venture firms assessed TPS, evidently no term sheets approached the desired valuation. Issues may have included concern about TPS’ “complicated” A/R situation.
Meanwhile, competitor WorkingRx is still for sale…
What does this mean for you?
A temporary continuation of the current awkward third party biller-pharmacy-PBM-payer struggle/business relationship.
The short answer – elimination of a major network and bill review competitor, acquisition of a PBM and case management operator, and an annual revenue increase for Coventry’s specialty division of about $320 million.
Continue reading What Coventry is getting from Concentra – the details
The state of Washington is a monopolistic workers comp state; unless an employer is large enough to be self-insured, it has to buy workers comp insurance from the state itself.
As a monopolistic state, the regulators have even more power than in the highly regulated but non-monopolistic states. One area of particular interest is how the state deals with the WC drug formulary, which specifically excludes Actiq and Lyrica.
Washington’s Health Dept. just released new guidelines on the use of narcotic opioids; the guidelines, their development process, and the impact of same should be watched carefully by regulators, insurers, managed care firms and most of all prescribing physicians.