Statehouse Watch: Workers' Compensation News

On June 13, 2024, the California Department of Industrial Relations, Division of Workers’ Compensation (DWC) published amended proposed rule changes to the Physician and Non-Physician Practitioner and Pharmaceutical Fee Schedules. These changes will add to costs for both program administration and the delivery pharmacy services. We first reported on these proposed rule changes in April. Since that time, written and verbal comments were collected and reviewed leading to the latest amendments.

The June comment period led to several significant proposed rule changes:

• The physician dispense fee increased from $0 to $10.05;
• The number of days to implement the rule, following its adoption, increased from 90 days to within 180 days;
• the compound dispensing fee increased from $4.05 to $10.05; and
• CA DWC will post a weekly updated Pharmaceutical Fee Data File

The following proposals did not change after the last comment period:

• Drug ingredient cost is defined as the lesser of the following:

  - National Average Drug Acquisition Cost (NADAC)

  - Wholesale Acquisition Cost (WAC) if there is no NADAC

  - Federal Upper Limit

  - Maximum Allowable Ingredient Cost

• Two-Tier Dispensing Fee of $10.05 or $13.20^[1]

MyMatrixx Actions

MyMatrixx by Evernorth successfully argued for an extension to implement the change from 90 to 180 days. We will submit another comment letter to the DWC and continue to encourage the state to adopt policy that makes sense for our clients, contains costs, and prioritizes medication safety for injured workers.

The most recent proposed rule change reinstating dispensing fees to physician dispenser reimbursement encourages the continuation of physician dispensing, increasing concerns over higher employer costs and patient safety. We believe the practice of physician dispensing bypasses the benefits of a pharmacy benefit manager and ignores critical patient safety alerts that are typically identified and communicated to retail pharmacies before medications are dispensed. Physician dispensing also introduces other safety issues including:

• Lack of licensed pharmacist for medication checks and patient counseling
• Lack of regulatory oversight for medication labeling, record keeping, and storage
• Lack of supervision of the dispenser
• Increased fees and costs for employers
• Potential conflict of interest for the dispensing physician by means of financial gain

How You Can Get Involved

The California DWC will accept additional comments on these proposed rule changes until June 28, 2024. All comments will be considered in the state’s rule-making process. Written comments should be addressed to:

A template letter to the regulator addressing some of the concerns is available here to download. Feel free to add your company information to the form and use this as is or add additional comments specific to your organization’s concerns with the rule changes. All written comments on the latest proposed changes to the regulations must be received by 11:59 p.m. on June 28, 2024.

Following the comment period ending June 28, 2024, MyMatrixx anticipates the state will publish the final adopted rule in July 2024. We will communicate details of the required changes at that time.

Please contact your MyMatrixx Account Management team if you have any additional questions.

[1] • For pharmacy-dispensed drugs and compounded medications (*National Provider Identifiers (NPIs) are designated by Medi-Cal based on pharmacy volume.

May 2024: The New York State Assembly is currently considering NY SB 1974/AB 1219, which, if enacted as written, will prohibit prescription drug safeguards that currently protect an injured worker being treated for a workers’ compensation injury.

If enacted as written, the bill will override some prescription safeguards by:

• Negating the requirement to file or submit a medical report for prescription reauthorizations;
• Disregarding state medical treatment guidelines related to prescription reauthorization;
• Allowing a prescription to be filled even when an independent medical examiner disagrees with reauthorization; and
• Allowing for reauthorization even if the maximum medical improvement has been reached

The bill was introduced by New York Assemblyman Bronson − the newly appointed Chair of the Labor Committee − representing District 138 in Rochester, NY. This bill, like his many previous bills, opposes the employer’s ability to utilize managed care within their workers’ compensation programs. This will result in higher prescription drug cost for the employer, as well as provide higher payouts for pharmacies.

We at MyMatrixx by Evernorth are actively engaging with the sponsors and legislative leaders to raise our concerns on this bill. While we continue to urge them not to pass this harmful legislation, hearing directly from employers would help raise the seriousness of this issue.

This bill could move quickly through the Assembly before the Legislature adjourns on June 6, 2024. If your company does business in New York, particularly in Rochester, NY, please contact the Assemblyman via email at bronsonh@nyassembly.gov or by phone at 585-244-5255 and the Speaker of the Assembly, Carl E. Heastie, via email Speaker@nyassembly.gov or by phone 518-455-3791 and urge them not to pass this legislation.

MyMatrixx Actions

MyMatrixx will monitor the progress of the bill and continue to advocate on behalf of our clients, so the bill serves the benefit of our clients and injured workers and not the pharmacy.

If you have questions regarding this bill, please contact your MyMatrixx Account Management team.

On November 1, 2022, the Florida Division of Workers’ Compensation (DWC), Department of Financial Services sponsored a workshop to hear from dispensing physicians, pharmacists, carriers and payers regarding differing opinions and concerns on the practice of physician dispensers in the state. At the meeting, the division distributed drafts of proposed rules to regulate the process. Several points were raised, including those made by our own MyMatrixx Clinical team led by Alan Rook, Executive Clinical Consultant. Effectively, Alan highlighted a need for change related to inflated pricing for topical creams dispensed in a doctor’s office. Additionally, he noted the necessary role of pharmacists in ensuring safety guardrails on all prescriptions, since many physicians are not always aware of or licensed to provide that service.

Among the many concerns raised, a powerful message given to regulators was the fact that the state budget is overwhelmed by unreasonably high reimbursement rates and the role of the pharmacist in workers’ compensation is being diminished.

MyMatrixx submitted a comment letter to advocate for no change to the current rules or limitations on physician dispensing, by limiting physician dispensing to only the first 14 days after the date of injury.

A new proposed rule was published in December 2022 and a hearing was held on January 13, 2023 in order to hear further comments. Many of these comments were the same as those presented on November 1. MyMatrixx will once again comment on behalf of our clients for the Division to focus only on what the statute allows; namely to clarify the administration of physician dispensing and establish reasonable procedures for the prior authorization process in Florida’s workers’ compensation program.

All comments are due to the Division by January 20, 2023. Let us know if you have questions or want to submit your own comments for the Division to consider.

Statehouse Watch will continue to engage and monitor for developments and will provide updates when available.

State legislatures have been busy this year focusing on PBM activity imposing new regulation within that industry. Most state legislatures have concluded their activity for the year adjourned for 2022. Most impactful from the myMatrixx perspective were trends ranging from:

• PBM licensure
• Pricing
• Therapy mandates
• Medical cannabis and workers’ compensation reimbursement

Following is a summary of workers’ compensation (WC) bills that were enacted, along with proposed bills that failed to pass, however, may be revisited when states reconvene their legislative sessions in 2023.

PBM Licensure bills

Iowa

• IA HB 2384
  Effective June 13, 2022, Iowa has new requirements for PBMs to implement regarding state reporting and enhanced duties of PBMs. Although WC applicability remains unclear, we anticipate the Department of Insurance will draft rules this year to guide the industry through the new law.

Nebraska

• NE L 767
  Enacted in the spring of 2022, this new law will require myMatrixx to be licensed in the state of Nebraska as a PBM. Effective 1/1/2023, this PBM licensure bill also applies to WC and requires reporting to the Department of Insurance, mandated pharmacy contracting provisions, and a requirement to update MAC pricing every 7 business days. It requires that PBMs provide a right to appeal MAC pricing within 15 business days, and that they investigate and resolve appeals within 7 business days. The law requires that any accredited specialty pharmacy willing to accept a network’s terms and conditions be permitted to participate.

New York

• NY SB 3762 & SB 7837
  For the first time, PBMs are required to register with the state for licensure. myMatrixx has submitted the required PBM application and annual report for state approval. The new law grants authority to the superintendent to prescribe rules concerning PBM pricing models, state reporting and duties.
  
  The state has announced it will work with interested parties over the next few months to promulgate rules, which will likely be adopted by 4^th quarter 2022. myMatrixx is engaged with the state to offer input.
  

Pricing

Pharmacy reimbursement mandates were heavily debated in states this session. Provisions that were considered typically took the form of prohibiting requiring reimbursements no less than NADAC, a set dispensing fee, or both. A number of states also considered spread pricing bans. Note these bills failed to pass and or alter pricing methodology.

Colorado

• CO HB 1122
  Enacted - It initially proposed PBM pricing must contain NADAC floor pricing. This was not supported by the Governor as written. The Legislature passed an amended version omitting that section.

Iowa

• IA HSB 623
  Failed - Requirements were NADAC floor pricing and higher dispensing fee.

Kentucky

• KY HB 203
  Failed - Mandated NADAC floor pricing + $10.64 dispensing fee.

Maryland

• MD HB 1009
  Failed - Mandated NADAC floor pricing + Medicaid dispensing fee.
  
• MD HB 755
  Failed - Prohibition of spread pricing.

South Dakota

• SD SB 163
  Failed - Mandated NADAC floor pricing + $10.50 dispensing fee
  

Step Therapy & Prior Authorization Transparency

Another State legislation trend in 2022 included step therapy processes. Providers are interested in seeing clarity in the specific rules and documentation necessary for a prior authorization request to be granted. The solution they legislated is to provide those protocols on a website, giving the provider easy access to the process.

Kentucky

• KY SB 140
  Enacted – effective date 1/1/23 – Requires Disclosure of Step Therapy protocols for all prescribing providers on a website.

Maine

• ME HB 453
  Failed – Would have required transparency of protocols on a website.

New Jersey

• NJ AB 1255
  This bill is currently moving through the legislative process and seeks to require increased transparency including specific online reporting.

New York

• NY SB 8798
  Working through the legislative process – Would require transparency of protocols on a website
  

Medical Cannabis and Workers’ Compensation

For over a decade, state legislatures have debated medical cannabis regulation including claims reimbursement for medical use. With cannabis still considered illegal on the federal level, states grapple with how to legitimize this alternative treatment for all patients, including the injured worker treated under a workers’ compensation program.

Maine

• ME HB 1391
  Failed - Allows an insurance company, to reimburse a qualifying patient for costs associated with the medical use of marijuana.

Mississippi

• MS HB 194
  Failed - Allows state chartered financial institutions to provide financial services to licensed cannabis institutions registered with the state Department of Health.

New Jersey

• NJ AB 3511
  This bill is still moving through the legislative process. Under the bill, an employer or workers' compensation insurance carrier/private passenger automobile insurance carrier shall provide coverage for costs associated with the medical use of cannabis except upon intervention by the federal government to enforce the "Controlled Substances Act“.

New York

• NY AB 242
  Working through the legislative process. This bill, if passed, will compel coverage of Medical Marijuana as a prescription drug which includes applicability to WC.

South Dakota

• SD SB 17
  Enacted - Clarifies carriers and payers including WC, are not compelled to reimburse a person for costs associated with the medical use of cannabis.

Bills are still being introduced in the 2022 state legislative sessions. For perspective, the State House Watch team reviews hundreds of bills per week for potential impact to the workers’ compensation and/or pharmacy benefit manager industry. Trending policy issues this year in workers’ compensation are:

• COVID-19
• Pharmacy reimbursement
• PBM licensure
• Pharmacy contracting mandates
• Pharmacy any willing provider requirements
• Pharmacy appeals procedures
• Medical Marijuana regulations

View the 2022 State Legislative Session Calendar.

While it is still early in most state sessions, one item to make note is that PBM licensure is a very popular idea nationally. To date, there are 12 states with active PBM licensure or new regulation requiring licensure, registration or state reporting mandates which will potentially impact WC PBMs. In most cases, state lawmakers are attempting to regulate or license PBMs that are operating in the health insurance space.

However, other lines of business can be caught up in the process and it’s been difficult to engage policy makers on what may be the unintended consequences of PBM regulation in the WC arena. . Some regulators consistently try to apply the rules of health insurance to workers’ compensation issues even though it may not be necessarily consistent with the underlying goals of their regulatory efforts.. The following outlines some major differences in these two insurance products:

• Health plan coverage is designed to protect the consumer from the high cost of health care. Typically, both the employer and employee pay the insurance premiums. Cost sharing is a universally used tool by the commercial health plan industry for the purpose of keeping costs of medical services lower. Health insurance is part of the employee compensation package. This coverage benefits the plan member, not the employer directly. In most cases, employers are not required to provide it by law.
• Workers’ compensation coverage is designed to pay medical costs for treatment of “on the job” injuries of a worker and protect the employer from the cost of law suits for negligence contributing to the worker’s injury. Deductibles, co-insurance or any injured worker out-of-pocket expenses are not imposed in workers’ compensation. Only the employer pays the insurance premiums. It is property casualty insurance. It is important to note, employers in most states are required by law to provide it.

By viewing these two very different insurance products as the same is problematic. Adding contracting mandates, state reporting, penalties and administration add up to more administrative burden for the employer and increase in price for the delivered service to injured workers. In the workers’ compensation business these added regulations do not benefit the insurer, employer or injured worker and may unnecessarily lead to higher costs for all parties.

This year, the states have been very active regarding legislation in the pharmacy benefit management (PBM) industry. myMatrixx has been monitoring movement from 32 states in 56 different state bills imposing new restrictions on PBMs. Out of those 32 states, there were 10 that would impact workers’ compensation pharmacy services. Out of those 10, two bills were enacted, one is on the Governor’s desk for action and one was vetoed.

Below are four that are worth noting:

• West Virginia HB 2263 was enacted. This bill creates pharmacy choice for the injured worker, changes pricing methodology, mandates the offering of a transparent contract model and PBM state reporting.
• Wisconsin SB 3 generally requires pharmacy benefit managers to be licensed with the commissioner of insurance or to have an employee benefit plan administrator license under current law.
• Delaware HB 219 has passed both chambers and is now on the Governor’s desk for a signature. The expectation is it will be enacted. If so, it will make changes to pricing methodology, contracting models, post adjudication reimbursement adjustment and PBM reporting.
• OK SB 737 passed the state House and Senate, but was vetoed by the Governor. If enacted, it would have prohibited direction of care for pharmacy.

See the Policy Tracking Map for further details regarding these enacted and pending bills.

myMatrixx was actively monitoring legislation with changes in this category in 11 states this year. Some are still moving through the process. Some of those of interest are outlined below:

• MO HB 438 failed the legislative process, however it may return in 2022. It would have required the Department of Health to promulgate rules and regulations regarding opioid prescriptions for all health care professionals with the authority to prescribe opioids. These rules would be consistent with the Centers for Disease Control and Prevention (CDC) Guidelines for Prescribing Opioids for Chronic Pain. This would include instruction on when to initiate or continue opioids for chronic pain, selection of opioid type, dosage and duration of use of opioids. It is helpful to note that in 2021, Missouri was the last state in the country to adopt the requirement for establishing a prescription drug monitoring program under SB 63.
• ME SB 496a was not enacted during the 2021 regular session. If enacted, it would have established a regulatory framework to provide psilocybin products to Mainers. This bill has been carried over to the next session. Similar to the new law in Oregon, it would allow those over the age of 21 to purchase psilocybin products and consume them under the supervision of a licensed psilocybin service facilitator. This substance has been used to treat mental health disorders such as depression, and anxiety.
• NE L 583 as enacted states that effective January 1, 2022, no prescriber shall issue any prescription for a controlled substance unless such prescription is issued using electronic prescription technology.
• NH H 143 is on the Governor’s desk for enactment. If it passes it will be effective January 10, 2022. Under the bill, a patient shall be entitled to receive a paper prescription instead of an oral or electronically transmitted prescription, except prescriptions for controlled drugs.
• UT HB 15 as enacted, modifies the Utah Controlled Substances Act. It removes an exception to the limit on prescriptions for certain controlled substances after a surgery. It also requires a practitioner to check the controlled substance database and consult with other practitioners when issuing a long-term prescription for an opiate or a benzodiazepine under certain circumstances.
• UT HB 265 was enacted and will be effective January 1, 2022. It amends current the provision and requires a controlled substance be transmitted electronically unless certain exemptions apply.

In the 2021 Legislative cycle, the National Average Drug Acquisition Cost (NADAC) has been proposed as a state solution for a pharmacy pricing solution in the states of Arizona, West Virginia and Oklahoma. NADAC is the result of a survey process the Centers for Medicare and Medicaid Services (CMS) use to estimate pharmacy pricing for drugs acquired by retail pharmacies and dispensed to patients. State Medicaid programs can utilize this information to determine the reimbursement rates to pharmacy providers. Unfortunately, this pricing method does not show the true average cost of pharmacy pricing today.

CMS issues a voluntary survey to 2,500 randomly selected retail community pharmacies across the country. A small group of pharmacies determines the NADAC benchmark since the typical response rate is 18-24%, or 450 to 600 responding pharmacies.

Not included in the survey results are rebates and off-invoice discounts pharmacies get from suppliers. Also, the submitted data is not verified and validated. Larger retail pharmacies tend to abstain from responding to the survey. The majority of the respondents to the survey are independent pharmacies and they set this benchmark.

Larger chain pharmacies typically are better able to leverage purchasing power with the drug wholesaler to gain a lower drug acquisition price. Since this is not true for smaller pharmacies, not only will they be getting a higher reimbursement for their drugs, so will the chain pharmacies, since their lower pricing only gives them more margin. This higher price will be invoiced to the payers or patients and the benchmark removes incentives for pharmacies to acquire drugs at the lowest costs available, potentially stifling competition in the market. With the rising cost of health care and the drive to make prescriptions affordable, this method of pricing should be avoided.

This map, created by the National Conference of State Legislators, shows current state Cannabis laws as of April 2021. Given the continuing debate regarding cannabis decriminalization in the United States, myMatrixx is watching its impact to the workers' compensation market. The states of Georgia, Maryland, Minnesota, Montana, New Jersey and New York were actively legislating this matter. Since it is on the DEAs drug Schedule I, however, it is under prohibition at the Federal level.

The US House of Representatives passed the Secure and Fair Enforcement Act April 19, 2021. It was also introduced in the US Senate under S910 on March 23, 2021. If this bill were enacted, it would not legalize cannabis. What it would do is prohibit a federal banking regulator from penalizing a depository institution for providing “banking services” to a cannabis related business in states that allow it.

Will it pass? It is hard to predict; however, it is growing in favor. The Senate version has not been scheduled for hearing yet, but is assigned to the Committee on Banking, Housing and Urban Affairs. It is important to note it has 38 co-sponsors. It now has bipartisan support with 8 republicans signing on as co-sponsors. Could 2021 be the year?

Two bills –NY SB 1026 & NY HB 1013- in the state of New York are working through the legislative process. SB 1026 passed out of the state Senate this month and is being debated in the House. If enacted it would prohibit employers/insurers from practicing managed care by requiring injured workers to only utilize in network pharmacies. It will permit the employee their choice of pharmacy. While this seems harmless, unfortunately it would remove safety checks for drug utilization in the process, negatively impacting the employee and the employer would also have to pay for higher drug costs.

If you have workers' compensation business in New York and determine this bill may be problematic, you should contact the House bill sponsor: Assembly Member Harry Bronson | Phone: 518-455-4527. Since it does have unintended consequences, he should be made aware of your concerns.

The National Association of Insurance Commissioners (NAIC) drafted a new Pharmacy Benefit Manager Model Act in 2020. This was adopted by the Pharmacy Benefit Manager Regulatory Issues Subgroup (the Subgroup) and is currently under review and accepting comments to be considered for adoption by this subgroup until December 22. The Subgroup may consider including provisions on PBM prescription drug pricing and cost transparency in the new NAIC model. Progress on this act will continue throughout 2021. The model currently does not impact the workers’ compensation PBM industry.

Physician dispensing refers to the practice where doctors dispense repackaged medication out of their office directly to patients. Repackaging is the act of taking a finished drug product from its original container and placing it in a different container without manipulating the drug itself. Repackaging can be done for a variety of reasons; to reduce medication errors, for convenience or to distribute a large quantity of bulk medication into smaller tubes or packages.

States recognize physician dispensed drugs as a way to ensure that patients pick up prescriptions or can get medication, such as when there is a lack of pharmacy access in rural areas. However, there are also physicians who take advantage of repackaging to inflate the price of the drugs dispensed. To combat these practices, states have or may pass regulations controlling physician dispensing.

Generally, regulations restricting physician dispensing fall under three categories:

1. States require repackaged medication to be billed under the original manufacturers National Drug Code (NDC). This prevents repackaged drugs from being billed at a new inflated NDC.
2. States prohibit doctors from collecting the dispensing fee, which is generally allowed by the state fee schedule for drugs dispensed at pharmacies.
3. States may prohibit physicians from dispensing medications from their office unless it is an emergency, or the patient lives in a rural area where it is not practical to have the medication dispensed from a pharmacy.

While there are legitimate reasons for physician dispensing, it is important for insurers to educate their injured workers about filling prescriptions through pharmacies so they can be consulted by a pharmacist and to avoid potentially dangerous drug interactions. Employers and insurers want an injured worker to have the appropriate treatments necessary for recovery. In workers’ compensation, overutilization and lack of justification of medical necessity are areas of concern potentially impacting the workers’ health as well as adding an inflated cost to that care.

As many are aware, the New York State Workers’ Compensation Board (WCB) established a prescription drug formulary in 2019. Regulations regarding the refills and renewals for that formulary originally had a compliance date of June 2020. Due to the Covid-19 pandemic, the WCB recently extended the effective date again to June 7, 2021.

According to the WCB, insurers, self-insured employers and third-party administrators must notify health care providers and claimants of the new effective date on or before April 1, 2021. On or after June 7, 2021, all refills or renewals of prescriptions must use a drug formulary medication unless prior authorization has been obtained before the date of the refill or renewal.

A refill means any subsequent fill of a prescription when the number of refills is explicitly included in the original prescription. A renewal means a prescription that the injured worker has been taking, but which there are no available refills.

New York Workers Compensation Board announces a new business information system, OnBoard, to increase efficiency and transition to a paperless system. It is anticipated the limited first phase to include Prior Authorization process will roll out in the Spring of 2021. The final launch scheduled for 2023 will introduce the Board’s web-based claim’s platform to replace the legacy, paper based systems.

For more information see the states link OnBoard: Building A New Web-Based Claims System (ny.gov) This will include more information on upcoming webinars and included FAQs and Fact sheets.

In 2020 there have been states regulating fee schedule changes and California stands out as worth noting, even though California Assembly Bill 2294 failed to pass. Titled the Medical Provider Network Transparency Act of 2020, it addressed changes that included:

• Adoption of a pharmacy fee schedule with not less than 120% of fees prescribed in Medicare and 100% of cost paid to physician plus $250
• Fee Schedule adjusted to conform to Medicare and Medi-Cal payment
• New reimbursement and billing formula for Compounded Drugs based on sum of allowable fee per ingredient, plus dispensing fee allowed by Medi-Cal. If physician-dispensed maximum not to exceed 300% of documented paid costs and not more than $20 above documented paid costs

Several insurers, as well as myMatrixx, submitted comments expressing concerns with the legislation. This bill did not get the legislative support it required to survive the process.

Medical Marijuana and Workers Compensation in New Jersey is being discussed and legislated in NJ AB 1708. If passed as written, it will provide for payment by Workers Compensation insurers or employers for medical treatment using marijuana associated with a WC injury. The bill allows the employer or carrier to pay the employee directly for costs with the proper receipt from that employee if they are barred from paying the dispensary directly.

This bill allows the federal “Controlled Substance Act” (CSA) to prohibit the payment for this treatment. The CSA regulates the manufacture and distribution of controlled substances such as hallucinogens, narcotics, depressants and stimulants. Marijuana is currently listed along with heroin as a controlled substance, a Schedule I drug, meaning it has a high chance for abuse and no medical benefit. In a 2016 analysis conducted by the DEA, they state there is also evidence of pharmacological effect and a risk to public health.

For the first time in history, on December 4, 2020, The U.S. House of Representatives voted 228 to 164, to decriminalize marijuana. The states have been challenging this currently with 45 states adopting decriminalization and/or allowing medical marijuana as a treatment in 2020. The mention of the CSA may be a way to move forward quickly with insurer claim payment, if congress is successful in removing this drug from the schedule I, or if federal regulators continue to not enforce this section of the Act.