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Getting a workers compensation drug formulary passed as part of New York state’s 2017-18 budget topped the list of priorities for insurance industry and employer advocates involved in the budget process.
The budget, which was due April 1, was finally passed April 9 after negotiations between Gov. Andrew Cuomo and leadership of the New York State Legislature produced an agreement on multiple details. The final budget included several workers comp provisions, including relaxing rules about coverage for first responder mental injuries, ensuring swift hearings for injured workers not receiving benefits and the implementation of the workers comp formulary for prescription drugs.
“This was our No. 1 priority, and obviously, we are very pleased the final enacted budget requires the (New York State Workers’ Compensation Board) to create a formulary by the end of the year,” said Alison Cooper, vice president for the Washington-based American Insurance Association.
Ms. Cooper pointed to recent studies that show formularies are effective at reining in prescription drug costs, including a 2014 study by the Cambridge, Massachusetts-based Workers Compensation Research Institute that suggested a drug formulary in New York could reduce drug costs by 29%, and a 2016 study from the Boca Raton, Florida-based National Council on Compensation Insurance Inc. that predicted formularies can save states at least 10% in drug costs.
“The evidence is there and it has proven that a formulary does rein in prescription drug costs,” Ms. Cooper said. “Oftentimes we will have overprescribing or a tendency to prescribe the brand name drugs when there may be a generic version that is perfectly acceptable and would have the same intended outcome.”
AIA is taking a wait-and-see approach to the provision that eases the requirements for first responders to claim comp benefits for mental stress injuries. The budget says the New York State Workers’ Compensation Board may not disallow a first responder’s claim for mental injury based on extraordinary work-related stress incurred at work if the stress is found to be not greater than that which usually occurs in the normal work environment. Ms. Cooper said mental stress claims tend to be subjective and could open the system to abuse.
“It always takes time for significant reforms to be fully implemented,” said Kristina Baldwin, vice president of state government relations for the Chicago-based Property Casualty Insurers Association of America in an email to Business Insurance. “Most of the reforms are effective immediately. The revised permanency impairment guidelines and prescription drug formulary should be implemented by January 1, 2018. Ultimately, these reforms should reduce loss costs and make the workers compensation system more efficient which should have a positive impact on premium rates and assessments.”
Ms. Baldwin said the association partnered with the business community in supporting cost reduction measures in the budget, some of which were included. The association will continue to support Senate Bill 5338, which would allow workers compensation rates to take into account individual risk factors of the policyholder, such as the business safety record, employee training and other factors which would affect pricing of policies and provide additional safety incentives, she said.
The Albany, New York-based Business Council of New York State Inc., which represents 2,400 member businesses, also was pleased with the workers comp reforms outlined in the budget. The council said in an email to Business Insurance that employers will realize cost savings not only from the drug formulary but also from a cap on classification of maximum medical improvement at 2.5 years by creating a credit to employers for temporary payments beyond that threshold. The budget also guarantees development of new impairment guidelines, to be adopted by Jan. 1, 2018, that adhere to modern medical evidence and outcomes, the council said.
“The Business Council made passing meaningful workers comp reform its No. 1 priority, and with the inclusion of significant cost-savings in this year’s budget, we got the job done,” said Heather C. Briccetti, president and CEO of the council, in a statement on the council’s website. “New York's employers will now stand to save hundreds of millions of dollars annually on their workers compensation costs.”
The Buffalo Niagara Partnership, a privately funded economic development organization and regional chamber of commerce in Western New York, said it worked closely with employer organizations to advocate for workers comp reforms in the state budget. The partnership said the cap on maximum medical improvement classification at 2.5 years significantly reduces a costly process that currently can sometimes take up to seven years.
However, the group said while it is pleased with the workers comp provisions enumerated in the final budget, it believes there is more work to be done to bring down workers comp costs. New York has the third-highest workers comp premiums in the nation, behind California and New Jersey, with a rate of $2.83 per $100 of payroll, according to a study published in October by the Oregon Department of Consumer and Business Services.
“More must be done to reduce program costs while providing the care and compensation injured workers deserve,” said Dottie Gallagher-Cohen, president and CEO of the Buffalo Niagara Partnership, in a statement on the organization’s website. “We remain one of the most taxed and overly regulated states in the country and our economy continues to pay the price.”
The New York State AFL-CIO called some of the workers comp reforms that were originally proposed to be included in the budget an “all-out assault on injured workers” by cutting benefits for amputees, workers killed on the job and those who are permanently injured. But the group claimed some victories in the budget process.
“We said we would prevent benefit cuts, and we did,” said New York State AFL-CIO President Mario Cilento. “In addition, we maximized and maintained benefits for the most seriously injured workers which will allow them to continue to lead their lives with dignity after being injured on the job.”
Florida could be the next state to adopt a drug formulary for its workers compensation system as it looks to control costs from compound prescriptions and other drugs.