New York Governor Kathy Hochul recently vetoed S 1974A, a bill that would have added exceptions to the ability of employers and insurers to direct care by requiring injured workers to use network pharmacies in the state’s workers’ compensation system. Hochul stated the bill would increase litigation, add bureaucratic steps for the New York State Workers’ Compensation Board (WCB), and lead to delays in obtaining needed medication. The bill also would have increased costs for employers and carriers by requiring reimbursement to out-of-network pharmacies that do not agree to negotiated rates. The veto of this legislation is a victory for our industry undoubtably thanks to the combined advocacy of our stakeholders and clients.
As indicated by Governor Hochul in her veto, the WCB is proposing regulation changes that would provide a process for out-of-network pharmacy use in situations when a condition or injury has not been established or there is another legal objection. Of this proposed change, Hochul said it seeks to accomplish the intent of the bill and more efficiently address concerns without causing delay.
Today’s law ensures patient safety, access to care and saves on medication costs
Existing state workers’ compensation law allows an employer or workers’ compensation insurer to require injured workers to obtain all injury-related prescribed medications from designated contracted pharmacies, except in an emergency. The use of designated pharmacy networks has offered a significant tool for payers to control medication costs while still ensuring patient safety and access to care for injured workers. The WCB has regulations outlining how the direction of care process should take place.
What S 1974A would have changed
The now-vetoed S 1974A, would have:
- Weakened the ability of an employer or insurer to direct care using exceptions based primarily on the failure to authorize or reauthorize a medication within 72 hours of the request.
- Entitled the out-of-network pharmacy that filled the medication based on the exceptions to submit a claim for payment at the fee schedule rate or the usual and customary charges for the medication.
- Permitted the out-of-network pharmacy to continue to dispense that medication to the injured worker after that initial payment.
WCB Proposed Regulations Would Make It Easier to Go Out of Network
On December 13, the same day of the governor’s veto, the WCB issued a notice that it would formally propose amendments to the regulations and posted an advance copy of the amendments and related documentation here. The WCB states that an alternate regulatory approach is more streamlined and efficient and would make it easier for an injured worker to go out of network for medications while avoiding unnecessary litigation and hearings that would be required under S 1974A. The WCB states it expects its changes to be “cost neutral” overall, and that compliance costs will be balanced by anticipated reduction in frictional costs associated with resolving disputes.
The proposed rule changes would require that a self-insured employer or carrier (payer) provide written notice of its decision to not pay for prescribed medication pending resolution of a legal objection contending the medication treats a non-established body site or that the payer has not accepted liability for the body site or condition.
- Upon receipt of that notice, the injured worker may use a non-designated (out-of-network) pharmacy during the period that the legal objection is pending.
- Prior to that notice, the designated pharmacy must dispense the prescribed medication, and the payer will be responsible for the cost. Failure to dispense and pay for medications prior to providing that notice could subject the payer to penalties of at least $2,000, with increased penalties for any subsequent non-compliance.
- When the payer notifies the injured worker they may go out of network, the payer assumes the risk if the medication is later determined to be its responsibility, the payer must reimburse the injured worker or out-of-network pharmacy at the fee schedule rate plus 25%.
Additionally, when the payer has previously served the injured worker with the notice of their ability to go out of network due to the pending legal issue, they must re-serve them the initial notice that first informed the injured worker of the requirement to use a designated pharmacy before requiring them to resume use of a designated pharmacy. The proposed regulations also clarify that the WCB’s drug formulary applies to body parts or conditions not yet accepted.
Moving Forward
Official notice of the proposed rulemaking will be published in the December 31, 2024, edition of the State Register, and public comments will be accepted for 60 days after that. Comments on the proposed changes can be emailed to the WCB at regulations@wcb.ny.gov. We encourage our clients and other interested payers to review the proposed changes and consider submitting comments to the WCB with any concerns.
The MyMatrixx Regulatory Affairs team has been tracking these actions for some time and will continue to monitor the WCB’s regulatory process in this area and engage where appropriate, as we know changes to direction of care may have effects on the ability of our clients and payers throughout the state to leverage network pharmacies to control costs while ensuring patient safety and access of injured workers to causally related and medical appropriate medications for their accepted workplace injury. We are reviewing the proposed regulation language in more detail for our own potential comments to the WCB.
Bills like S 1974A attempting to weaken or un-do pharmacy direction of care have been attempted for several years in New York. The new legislative session will start next month, where new bills can be introduced, and our team will be tracking developments there as well throughout the session.
Questions on this topic for the MyMatrixx Regulatory Affairs team can be sent to MMXRegulatoryAffairs@MyMatrixx.com. For more information on policy developments like this in workers’ compensation impacting pharmacy in states across the country, please visit and bookmark Statehouse Watch at MyMatrixx.com.