Tag Archives: opioid abuse

6 Shocking Facts on Opioid Abuse

What is your most pressing employee health issue today?

It’s not cholesterol, weight, sitting or probably anything else you are prioritizing. Instead, by far the major health menace facing your employee population is the opioid epidemic — which, according to Harvard Medical School psychiatrist John Kelly, has reached “DEFCON 5.”

DEFCON 5 is right. There is roughly one opioids prescription written for every adult in the U.S., and the total addiction rate is estimated at 4.6%, which makes it higher than alcoholism and roughly comparable (in the employed population) to diabetes.

Here are five things you need to know:

  1. Opioid abuse has jumped 500% in the last seven years.
  2. The price per milligram of morphine-equivalent paid by employees has declined about 75% in the last 15 years. This is due to more generous coverage (by you!), more use of the formulary and, most distressingly, more pills per prescription. There is virtually no product whose use doesn’t increase as the price falls. And there are very few products whose price falls that much.
  3. The $78 billion all-in cost in the U.S. of opioid use, abuse and treatment works out to about $756 per employee per year. To put that in perspective, that’s about 10 times what you spend on heart attacks and diabetes events (not that those aren’t important, too!).
  4. Workers’ compensation claims costs are 10 times higher when long-acting opioids are involved.
  5. Your ER visit claims coded to opioid issues have probably increased threefold since 2003.

(Yes, we know, that is only five facts. and we promised six. Keep reading…)

How do you solve an opioid problem within your organization?

You can’t look to your wellness vendor to solve this problem. If biometric screens included drug-testing, the employees who need to submit to them wouldn’t. (The legality of the testing would be very questionable anyway.) Asking a health risk assessment question: “Are you addicted to painkillers or heroin?” would generate — at best — the same level of candor wellness vendors observe when they ask about drinking and smoking. You can’t address an addiction that an addict won’t admit to having in the first place.

However, a health literacy vendor – ideally, my firm, Quizzify – can raise awareness of the hazards of opioids in your employee population. Because health literacy quizzes don’t require personal health information, there is no opportunity to lie, no one is being singled out and no one needs to worry that the results aren’t confidential. It’s simply, purely education. The answers are pure facts. (And in our case have passed review by doctors at Harvard Medical School.)

See also: The True Face of Opioid Addiction  

For employees not already using pain meds:

Firstly, employees who are not currently using prescription painkillers need to be made aware of the risks of starting. If there is one health literacy risk worthy of attention — meaning one risk where curing a knowledge deficit (as opposed to trying to change behavior, as with smoking cessation or eating habits) matters — it’s in opioid addiction prevention.

A few facts:

  • It can take as little as three days of use before the first signs of addiction occur. To put this into perspective, even something as minor as prophylactic wisdom teeth removal (not generally recommended by Quizzify anyway) can generate three days of painkiller medication.
  • If you use a 10-day supply as directed, you have a 20% risk of becoming a long-term user.
  • Dose matters. A lot. A high dose for a short duration is 40 times as likely to cause an opioid use disorder as a low dose.
  • Employees’ kids are taking prescription pain meds in numbers far exceeding those of previous generations. This is because they believe them to be safer than street drugs and are easier to get hold of (often from the parents’ medicine cabinets).

For employees already using pain meds:

As mentioned, the percentage of employees using pain meds, 4.6% on average, is roughly the same as the percentage with diabetes. The cost of treating those on pain meds – and their productivity losses (not to mention the possibility to pilferage or other crimes to support the habit) – is much higher than diabetes.

Further, employees are unlikely to seek help on their own. Use of medications designed to treat opioid addiction has grown only about a fifth as fast as opioid use itself. And many employees either don’t know where to turn or are concerned that their EAP conversations are not confidential. Fear of job loss or having a criminal record also impede the likelihood of seeking help. Your health literacy vendor should be able to create the education for you to overcome these natural impediments.

Quizzify’s opioid abuse education includes:

  • Specific contact information for the EAP.
  • “What if I think a coworker is opioid-dependent?”
  • “Are there resources for family members?”
  • “Can I get or renew pain meds from the on-site clinic?”
  • “Is opioid treatment a covered benefit?”
  • “Will human resources find out I am getting opioid treatment?”
  • “What are signs that my children are abusing painkillers?”

What can you do to help?

Your budget allocation for health and wellness should be in proportion to the priorities for health and wellness. As of now, you are likely spending less on educating employees on opioids (not to mention on other health literacy imperatives) than on, for example, weighing employees.

Likewise, employees are probably spending more time figuring out how to cheat on their weigh-ins than on understanding the hazards of opioid use. It’s time to reconfigure these priorities. Teach employees how to avoid, manage and treat opioid addiction before it is too late.

See also: Opioids: Invading the Workplace  

And by “too late” we mean #6 of the facts you need to know:

Far exceeding diabetes and heart attacks, overdoses are the leading cause of death for employees under 50.

We invite you to take Quizzify’s Opioids Awareness Quiz and share it with the top executives, HR administrators and wellness champions within your organization. Your awareness that something needs to be done now will increase. Quizzify offers educational quizzes about opioids for employees. That might be a good place to start.

Opioids: Invading the Workplace

America’s employers are facing a serious drug problem. A 2015 survey of 200 Indiana-based companies conducted by the National Safety Council and the Indiana Attorney General’s Office indicated that a staggering 80% of the state’s employers have had problems with employees abusing prescription opioids such as Vicodin and OxyContin.

“We would expect very similar results in many states,” said Deborah Hersman, president and CEO of the National Safety Council. The Illinois-based nonprofit organization focuses on preventing injuries and deaths at work and in the community. “This is not a local problem. This is a national problem, and it’s very important for employers to understand that this is an issue that they need to pay attention to and not put their heads in the sand.”

Prescription painkiller abuse has reached epidemic proportions across the United States. In addition to endangering the health and well-being of millions of employees, opioid abuse is costing employers billions of dollars in absenteeism and lost productivity, and growing evidence suggests that opioid abuse also affects many unemployed individuals.

“Beyond the loss of productivity, prescription drug abuse can cause impairment, injury and may lead employees to bad choices, such as theft and embezzlement from the employer,” said Indiana Attorney General Greg Zoeller in a news release about the December 2015 study.

See also: How to Attack the Opioid Crisis  

Employers Feel the Pain

On average, opioid misuse costs the U.S. economy $55.7 billion a year, according to the American Society of Addiction Medicine. Employers bear the burden of nearly half of that cost, with an average of $10 billion lost every year from missed work and decreased productivity alone.

Prescription drug abuse has two effects on an employee’s medical costs. First, employees who abuse opioid drugs have significantly higher costs for pharmaceuticals than non-opioid users. Costs for opioid painkillers rose 11.5 percent in 2014, according to pharmacy benefit manager Express Scripts Holding Co. As a result, workers’ compensation claim payers spent an average of $1,583 per injured worker for prescription drugs in 2014.

Furthermore, opioid abusers have significantly higher healthcare costs than non-abusers — $10,627 higher annually — according to a research article in the Journal of Managed Care & Specialty Pharmacy.

The Illusion of Relief

While highly effective in the short term, opioids are also dangerously addictive. This is because opioids produce a sense of pleasure due to their effect on brain regions involved in reward mechanisms. Adding to their danger is the fact that opioids tend to induce tolerance, which means that over time larger and larger doses are needed to achieve the initial effect.

A 2015 Healthentic study on the cost of painkiller abuse borne by U.S. companies found that for pain related to common workplace injuries such as soft-tissue injuries (bruises and musculoskeletal problems that affect muscles, bones and joints), opioids are no more effective at reducing pain than over-the-counter alternatives such as Tylenol, Advil or generic ibuprofen.

Less risky treatments for pain include nonsteroidal anti-inflammatory drugs, nerve blockers and other medicines including anti-seizure drugs and antidepressants which have pain-relieving properties. Other important options for managing the pain of workplace injuries include physical therapy, massage and acupuncture. It is also vital to treat any concomitant depression in the injured worker, as depression makes pain feel more acute and causes the sufferer to feel hopeless and helpless.

Steps Employers Can Take

Employers have a variety of options to ensure the long-term health of employees while improving productivity and lowering employment costs. The first is to demand adherence to evidence-based prescribing guidelines for pain treatment from all participating providers in their medical, workers’ compensation and occupational health programs. There is technology available now that can alert payers to providers who prescribe according to current treatment guidelines and those who don’t.

Employers also should educate employees about the risks of opioid drug use to help prevent drug misuse. For example, employees should know that a substantial subset of opioid users become addicted with their very first prescription, so care is warranted to ensure that patients with chronic pain know both the advantages and disadvantages of taking opioids right from the start.

Lastly, employers should provide confidential access to treatment for employees who find themselves in a position of opioid dependency. Employee Assistance Programs (EAPs) or wellness programs should be able to connect employees with effective treatment programs for their opioid use disorder, their depression and whatever else is impeding their ability to full productivity.

See also: The True Face of Opioid Addiction  

The Connection With Unemployment

A new study suggests unemployment also might be one of the factors behind the dramatic rise in opioid use disorder. The paper, published by NBER, finds that as the unemployment rate increases by one percentage point in a given county, the opioid death rate rises by 3.6 percent, and emergency room visits rise by 7 percent.

Rather than more people getting injured when jobs are scarce, the authors suspect that the increased use of painkillers is a “physical manifestation of mental health problems that have long been known to rise during periods of economic decline.” Depression and pain go hand-in-hand, in other words: “Not only does depression make people more sensitive to pain,” they note, but also, “opioids have been shown to help relieve depressive symptoms.” Pain, opioids and depression are all interrelated and all must be managed to achieve what both injured workers and payers would regard as success.

One can conclude from all of this evidence that opioid use disorder is increasingly rampant among both employees and those who are unemployed. Opioid misuse now may be a national problem, but the solution needs to start locally. Employers are uniquely positioned to demand accountability from providers and to join with their neighborhood social service agencies and nonprofits focusing on the opioid issue collectively to intervene in and reduce the prevalence of this debilitating epidemic.

Winning the War Against Opioid Addiction and Abuse

As we move forward with winning the war against opioid addiction, it can sometimes be challenging to read the daily headlines and stay positive, especially around the holidays. A December article titled “Drug Abusers May be Injuring Pets to Get Pain Killers” shared how police officers and community leaders informed the Ohio attorney general’s office that people have been abusing drugs rightfully prescribed to pets. The US News HealthDay story titled “Secure Your Prescription Drugs When Hosting Holiday Parties” warned readers about the importance of securing prescription drugs in a safe location before guests arrive. When stories deteriorate to addicts intentionally harming their dogs and to people worrying about holiday guests raiding medicine cabinets, rock bottom isn’t far away.

However, 2013 positioned us well for achieving improved results during 2014. Some of last year’s positive developments include:

1.   State law changes establishing clearer standards of care, reporting and tracking of controlled narcotics, bans on abused narcotics, etc.

2.   State and federal agencies aggressively prosecuting individuals who prescribe opioids illegally or  operate “pill mills,” revoking registrations of some pharmacies and compelling healthcare providers and pharmacies to surrender or forfeit their medical licenses to state medical/pharmacy boards

3.   Physician-led education efforts like the Physicians for Responsible Opioid Prescribing

4.   Medical boards actively addressing the inappropriate and illegal dispensing of drugs

5.   Heightened awareness of the neonatal abstinence syndrome crisis in the U.S.

6.   Workers’ compensation insurers leveraging advanced analytics, physician education efforts, evidence-based pain diagnoses and utilization reviews to reduce injured worker reliance on addictive prescription drugs

7.   The Food and Drug Administration’s Risk Evaluation and Mitigation Strategy

8.   The issuance of the October 2013 Trust for America’s Health report titled “Prescription Drug Abuse: Strategies to Stop the Epidemic”

9.   Continuing prosecution and sentencing of healthcare providers

10. Efforts by national medical organizations

The first eight developments were addressed in the authors’ first quarter 2013 Physician Insurer magazine article titled “The Opioid Abuse Epidemic, Turning the Tide” and our Dec. 2, 2013 Property Casualty 360 Claims Magazine article titled “10 Strategies to Combat the Rx Abuse Epidemic – An Insurers Perspective.”

This article will expand on the last two developments and share some thoughts on what may be in our future when it comes to winning the war on opioid addiction and abuse.

Prosecution and sentencing of healthcare providers

2013 was marked by the successful prosecution and sentencing of healthcare professionals involved in various forms of prescription drug diversion. Arguably the most notable of these was the 39-year prison sentence given to David Kwiatkowski, the former New Hampshire hospital technician who caused dozens of people to become infected with hepatitis C when he injected himself with pain killers using syringes that were then used on patients. Kwiatkowski admitted in August to stealing the drugs and leaving used syringes for hospital use for years, despite knowing he was infected with hepatitis C. His case drew national attention to the problem of prescription drug diversion among healthcare workers; caused a number of institutions to finally take a fresh look at their human resource policies and systems being used to detect diversion; and, has, we hope, sent a strong message of deterrence to all healthcare drug diverters — it is only a matter of time before you get caught!

Efforts by national medical organizations (NMOs)

On an extremely positive note, we are beginning to see NMOs join the fight to help stem the opioid epidemic. On Dec. 10, 2013, the American College of Physicians released a position paper titled “Prescription Drug Abuse: A Policy Position Paper From the American College of Physicians.” The goal of the paper was to provide physicians and policy-makers with 10 recommendations to address the significant human and financial costs related to prescription drug abuse. The recommendations include support for additional education, a national prescription drug monitoring program, establishment of evidence-based nonbinding guidelines regarding recommended maximum dosage and duration of therapy, consideration of patient-provider treatment agreements and the passage of legislation by all 50 states permitting electronic prescription for controlled substances.

In turn, in January 2014, the American Academy of Pediatrics (AAP) Committee on Drugs and Section on Anesthesiology and Pain Medicine issued a report titled “Recognition and Management of Iatrogenically Induced Opioid Dependence and Withdrawal in Children.” The clinical report recommended guidelines for prescribers to follow when weaning children from opioids. As noted by lead author Jeffrey Galinkin, MD, “[t]he key reason the AAP was keen to publish this paper and go forward with this guideline is that people are unaware that patients can get drug-specific withdrawal symptoms from opioids as early as five days to a week after having been on an opioid chronically.”

This recommendation was immediately followed by the Centers for Medicare and Medicaid Services (CMS) Jan. 10, 2014, Federal Register Volume 79, Number 7 publication of proposed rules revising the Medicare Advantage (MA) regulations and prescription drug benefit program (Part D) regulations to help combat fraud and abuse in these programs. The proposed rules include requiring prescribers of Part D drugs to enroll in Medicare, a feature that CMS believes will help ensure that Part D drugs are prescribed only by qualified individuals. As reported by Medscape Medical News, CMS is also seeking the authority to revoke a physician’s or eligible professional’s Medicare enrollment if:

• CMS determines that he or she has a pattern or practice of prescribing Part D drugs that is abusive and represents a threat to the health and safety of Medicare beneficiaries or otherwise fails to meet Medicare requirements; or

• His or her Drug Enforcement Administration certificate of registration is suspended or revoked; or

• The applicable licensing or administrative body for any state in which a physician or eligible professional practices has suspended or revoked the physician or eligible professional’s ability to prescribe drugs.

Furthermore, CMS proposes employing data analysis to identify prescribers and pharmacies that may be engaged in fraudulent or abusive activities. In Table 14 of Federal Register Volume 79, Number 7, CMS’ Office of the Actuary estimates the savings to the federal government from implementing its proposed provisions will be $83 million in calendar year 2015, $132 million in 2016, $171 million in 2017, $364 million in 2018 and $589 million in 2019.

Source: CMS

Innovation in our future

In addition to the above efforts, companies continue to innovate and research new ways to address historical challenges.

Vatex Explorations is building a real-time individual-dose monitoring system called Divert-X to reduce drug trafficking, misuse and addictions that result from routine medical care. Divert-X monitors a patient’s individual doses through the electronic transmission of data identifying the time of dose access, location and other measures. The analysis of the data in real time helps physicians and pharmacists identify drug-taking behaviors that fall outside of norms, allowing early intervention before misuse or addiction set in.

In 2012, the Food and Drug Administration approved an ingestible sensor that can be used to track real time data about your pill consumptions habits. The sensor, developed by Proteus Digital Health, was first approved for use in Europe before coming to the U.S. The ingestible sensor is part of the digital health feedback system, which includes a wearable sensor and secure app and is largely focused on serving the transplant population and patients with chronic illnesses. The authors could envision a day when the system could help in the battle against opioid addiction.

Insurance companies are doing a better job of leveraging advanced analytics to understand their opioid-exposed population and the prescribing habits of the physicians treating their injured workers. Through the review of medical bills (e.g., date and types of service and payment, ICD-9 diagnosis codes, CPT-4 procedure codes, etc.) and pharmacy data (e.g., bill frequency,  aggressive refills, NDC drug codes, quantity used, generic vs. brand, supply days, use of prescriber, pharmacy name, etc.), insurance companies can identify usage and treatment patterns that fall outside of expectations using cluster analyses, association rules, anomaly detection and network “link” analyses.

Law enforcement continues to push the envelope in finding innovative ways to combat drug diversion. Take, for example, the strategy developed in consultation with the National Association of Drug Diversion Investigators and Oklahoma Bureau of Narcotics to curb false reporting of the loss or theft of prescription drugs in Stillwater. According to a police spokesman, most physicians in Stillwater require patients to obtain a police report before they will write a replacement prescription for lost or stolen medications. This requirement resulted in an increase in the number of police reports filed, but a new problem emerged. How could anyone determine whether those police reports were legitimate? In response, the Stillwater police department created a database to record the names of any individual who reported the loss or theft of a prescription drug. The department now requires the individual to take a polygraph test before it will accept any subsequent report of a lost or stolen prescription drug. Fail that polygraph, and criminal prosecution may follow. Query: If this strategy were employed nationwide, would the medicine cabinet at home be guarded more closely?

Conclusion

There is no doubt we have come a long way in the battle against opioid addiction in a relatively short time. Although there is a lot of road left to travel, 2014 is well-positioned to carry forward the effective efforts from last year. Given the innovative spirit of the U.S. and passion of everyone involved in winning this fight, a better long-term solution could be just around the corner.

Workers’ Compensation Comes of Age

With close to $40 billion in net written premium, the workers’ compensation line of business is an important driver of financial success for many property/casualty insurers. It has come a long way since its inception roughly 100 years ago. 

As we move forward into the second century of workers’ compensation, it’s possible to anticipate many of the challenges (and opportunities) that are coming. What follows is a checklist of areas to watch.

CLAIMS FREQUENCY—Many aspects of the U.S. economy should help keep claims frequency flat or negative in the near future, including:

An increasing underground economy

In April, Mark Koba, a senior editor at CNBC, chronicled the growth of a large shadow economy of workers who, because they are unable to find regular employment, are taking jobs under the table with no reportable income or taxes. Since these workers have no workers’ compensation insurance protection, medical costs may shift from the workers’ compensation system to the health care system. With some estimates showing construction employment at just 75 percent of 2007 levels, it’s possible that a portion of these jobs are being filled by under-the-table workers. If that’s the case, these traditional higher-frequency classes may not show up as heavily in the industry’s calculations as they have in the past—moderating frequency trends going forward.

Growth in Social Security disability payments

Also in April, CNN Money reported a 29% increase in the number of Americans with little or no employment income who receive disability payments. For those who were formerly employed, the increase was a staggering 44%. In 2011, according to the CNN report, the federal government spent almost $250 billion on disability payments to some 23 million Americans. Although this is a ballooning liability for the federal government, the impact on workers’ compensation insurers is largely in the opposite direction. As workers who are less than healthy exit the workforce, the remaining pool of healthier workers will lead to claims frequency decreases in the future.

Expansion of other state and federal backstops

Since the recession began, there’s been a dramatic increase in federal and state assistance. A March article that appeared on the MoneyNews website reported that the number of food stamp recipients reached a record high in 2012, with an average of 46.6 million people receiving food stamp benefits each month. According to Supplemental Nutrition Assistance Program (SNAP) data, total food stamp benefits increased from $30.4 billion in 2007 to $74.6 billion in 2012, a 145% increase. As state unemployment benefits and other backstop programs cover more people for longer periods, the pool of future workers’ compensation claimants likely to file claims shrinks. When individuals leverage government backstop programs and choose not to work, workers’ compensation insurers benefit.

Older workers not retiring

People are working longer. For the manufacturing industries, this most likely means a dramatic reduction in the number of new employees entering the workforce. Although older workers have higher claims severity, new workers have significantly higher claims frequency.

Workplace health and safety efforts

The risk management and environmental, health, and safety departments of companies continue to focus on enhancing return-to-work programs, promoting workplace wellness, and improving workplace safety. These efforts continue to bear fruit, especially as the workforce ages and the adverse impacts of obesity receive more attention.

Part-time to full-time bias on frequency

Workers’ compensation frequency is often calculated as a ratio of the number of lost-time claims per an adjusted payroll amount. To the extent that recent payroll increases have been driven by more part-time workers converting to full-time work, the doubling of exposure for current workers isn’t the same as doubling the number of workers. In the short term, a heavier reliance on existing employees working longer hours very likely will help make frequency statistics look better. This trend could reverse if smaller employers keep their head count under 50 employees or reduce employee hours to part time (under 30 hours) to mitigate the impact of the employer mandate in the Affordable Care Act (ACA). Newly added part-time workers are likely to bring higher claim frequency, while workers taken below the 30-hour threshold to avoid employer-mandated health care might have an increased incentive to shift claims to workers’ compensation.

SEVERITY—A number of coalescing factors could drive medical and indemnity severity higher in the years ahead, including:

Rising interest rates

With the Federal Reserve finally winding down its quantitative easing programs, interest rates will be heading higher. To the degree that this coincides with an improving economy, indemnity severity is likely to tick up with rising wage pressure. Medical severity, which historically has run at roughly double the medical consumer price index, is likely to rise from the 3% levels we are experiencing today. Severity trends in the 6% to 7% range may be manageable in light of today’s rate increases, but it will be difficult to expand profit margins over the long term if medical inflation returns to double-digit levels.

Claims predictive modeling

Companies increasingly are using advanced analytics to identify claims for triage as early as the first notice of loss. By identifying the highest severity claims, assigning the appropriate resources for triage, and doing a better job on referrals from special investigative units, companies are favorably affecting the duration and severity of claims.

Obesity

The obesity statistics are staggering. The Centers for Disease Control and Prevention (CDC) estimates that in 2010, 36% of Americans age 20 or older were obese. The Robert Wood Johnson Foundation in a 2012 report predicted that obesity rates for adults over the next 20 years would reach or exceed 44% in every state in the United States, and exceed 60% in 13 of those states. Recent NCCI studies show that the ratio in the medical costs per claim of obese to nonobese claimants at the end of five years is 5.3, and the duration of obese claimants is five times that of nonobese claimants. Given the fact that workers of all ages are struggling with maintaining a healthy weight, workers’ compensation costs will only increase as other comorbidities associated with obesity increase costs.

An aging workforce

As workers age, gradual changes in hearing, vision, strength, and balance may lead to increased probabilities and durations of workplace injuries, including sprains, strains, slips and falls, carpal tunnel syndrome, knee and shoulder problems, hip replacements, and back issues. A 2012 NCCI study, however, concluded that an aging workforce appears to have far less of a negative impact on workers’ compensation claims costs than was previously thought. Although there’s evidence that injured workers older than 35 years have higher costs than those younger than 35, costs associated with injured worker cohorts older than 35 tend to be quite similar. And while older workers have more costly injuries, the NCCI observed that such injuries are becoming more prominent in younger workers.

While the NCCI has presented conflicting data on the claim costs of older workers, we know that the number of older workers in the workforce will nearly double in the next 15 to 20 years. The U.S. Department of Health and Human Services estimates that the 39.6 million persons age 65 years or older today will increase to roughly 72.1 million by 2030. That equates to roughly one in every five Americans being 65 or older. While the jury is out on the precise impact of an aging workforce on claim frequency and severity, an aging workforce increases the likelihood of more severe injuries and longer claim durations.

LONG-TERM TRENDS—On the plus side, several trends are emerging that could benefit workers’ compensation insurers in the long run, including:

Price transparency

When the Surgery Center of Oklahoma in Oklahoma City started posting its prices online four years ago, it forced competing area hospitals to follow suit. Although it will take time to catch hold across the country, greater price transparency in the delivery of health care could benefit workers’ compensation insurers. Running counter to this trend is the pace of consolidation in health care. The ACA, with its focus on accountable care organizations (ACOs), electronic medical records, and other coordination-of-care rewards, is fueling consolidation in health care at an unprecedented rate. With increased consolidation comes increased local pricing power, and workers’ compensation insurers could find themselves on the wrong end of that pricing pendulum.

Opioid use

The epidemic of opioid abuse that had swept the nation is finally starting to abate. State governors, attorneys general, and legislatures are passing laws to toughen criminal and administrative penalties for doctors and clinics, establishing standards of care for doctors who prescribe narcotics, increasing the reporting and tracking of prescriptions, and limiting reimbursements to physicians who dispense prescription drugs to no more than a certain percentage above cost. State agencies, local agencies, and the U.S. Drug Enforcement Administration also are aggressively prosecuting individuals involved in illegal prescribing activity and “pill mills,” causing physicians, nurse practitioners, and pharmacies to surrender their federal licenses to dispense controlled substances. In the most serious cases, the offenders have had to surrender their medical licenses to state medical/pharmacy boards. Physicians and medical boards also have developed resources to guide physicians on responsible opioid prescribing, and there’s been a rise in the number of physicians who have had their licenses suspended by state medical boards for the unlawful distribution of controlled substances and for prescription drug fraud. Organizations like the Federation of State Medical Boards and Physicians for Responsible Opioid Prescribing also have joined the fight.

Given the high-profile nature of these efforts to define the proper use of opioids in treating injured workers, it’s likely the workers’ compensation line will see an effect. With medical expenses exceeding 60% of workers’ compensation costs, 20% of that going toward prescription drugs, this would be a welcome development.

Medical tourism

Medical tourism continues to grow as an option for patients all across America. An airline magazine recently had advertisements from hospitals outside the United States showing savings of 50% to 80% on procedures such as knee and hip replacements that are common in workers’ compensation. The general cost in the United States for a knee replacement was shown at $34,000, versus the overseas cost of just $10,000. A hip replacement was listed as $35,000 versus the overseas cost of just $11,000. Even with the cost of airfare, transportation, and hotel accommodations, the potential savings are significant (acknowledging that we aren’t attempting to control for quality or safety differences). With several companies and health insurers investigating offering medical tourism options to their employees and insureds, there could come a day when workers’ compensation insurers could leverage these tremendous savings to help drive down severity for certain procedures. While businesses may welcome the cost savings, we recognize that persuading state legislatures and injured workers to agree to these practices could be difficult.

The ACA

Several economist and workers’ compensation industry stakeholders have predicted that the ACA will create shifts in the workers’ compensation industry. But exactly how isn’t clear. Many refer to the Massachusetts Health Care Reform Act to bolster the argument that the ACA will lower overall health care costs and workers’ compensation costs. Under Massachusetts health care reform, costs within the workers’ compensation system decreased. Although ACA is more complex, similar provisions in the two laws allow a comparison of the impact on the workers’ compensation system. Analysis by RAND in 2012 found that expanding coverage to previously uninsured individuals resulted in a drop in workers’ compensation costs in Massachusetts. Finding an association between being insured and the frequency of workers’ compensation claims, RAND concluded that expanding the population holding group health insurance could reduce cost shifting to workers’ compensation.

In a May blog posting, Joe Paduda, a principal at Health Strategy Associates, affirmed his belief that the overall effect of the ACA on workers’ compensation would be positive, citing among other things, that it would lessen the motivation for cost shifting and fraudulent claims. Others have argued that increasing access to care and expanding preventive services, coupled with employer-sponsored wellness initiatives, should make the working population healthier overall, leading to a reduction in claim frequency and faster recoveries when injuries do occur.

On the other hand, some speculate that the ACA will increase workers’ compensation costs over time by straining already scarce primary care resources and causing longer wait times for treatment. The projected shortage of primary care physicians could make it more difficult for injured workers to find a physician. This, in turn, could lead to increased costs because of extended disability durations while waiting to see a physician. Others have pointed out that a decreasing supply of physicians and increasing patient demand could drive costs higher. Other factors that could affect cost shifting are significant increases in copayments and high-deductible health plans—costs that employees must bear. This could motivate some employees to file workers’ compensation claims for nonoccupational injuries.

According to findings from a recent study by Assured Research, a connection between increased health insurance coverage and decreased workers’ compensation costs isn’t supported by the data. The study evaluated health insurance penetration rates by state from 1999 to 2011 and corresponding statewide workers’ compensation loss ratios. After adjusting for national workers’ compensation trends, the results showed 31 states with rising health care penetration that resulted in decreased loss ratios. On the other hand, 20 states with rising health care penetration experienced increased loss ratios.

Immigration reform

There are approximately 11 million undocumented people living in the United States. Many don’t file workers’ compensation claims for fear of being deported. The general consensus is that legalizing undocumented immigrants will increase workers’ compensation claims. At the same time, immigrant workers are more prevalent in high-risk sectors such as agriculture, construction, and landscaping. With an influx of workers into a high-risk injury class, the potential impact on frequency and severity in the workers’ compensation system can’t be overlooked.

Anticipate and Plan

British Prime Minister Benjamin Disraeli once quipped, “What we anticipate seldom occurs, what we least expect generally happens.” Still, it’s important to anticipate and plan for the future risk. There’s little doubt that change is looming for workers’ compensation insurers and that actuaries have a key role to play in identifying and managing the transformation.

Authors

Denise Gillen-Algire and Kevin Bingham collaborated with Bill Van Dyke and William Wilt in writing this article.

Bill Van Dyke, an associate of the Casualty Actuarial Society and a member of the Academy, is a specialist leader at Deloitte Consulting LLP in Hartford, Conn. He has extensive actuarial experience in managing and performing workers’ compensation unpaid claim reserve and pricing analyses for state funds, insurers, reinsurers, state agencies, municipalities, self-insured corporations, and captives.

William Wilt, a fellow of the Casualty Actuarial Society, is president of Assured Research, a research and advisory firm focused on property/casualty insurance. Prior to forming Assured, he held diverse roles as an actuary, as a credit and equity analyst, and in corporate development.

This article first appeared in the November | December 2013 issue of Contingencies Magazine and is © 2013 American Academy of Actuaries. Reprinted with the permission of the American Academy of Actuaries.  All Rights Reserved.