Workers’ compensation is the third-largest line in property & casualty insurance, accounting for 9% of all P&C net premiums, according to a J.D. Power analysis of S&P Global Market Intelligence data. Four states comprise 37% of direct premiums written for workers’ compensation in the United States: California, New York, Florida and Illinois. Although the workers’ compensation line has been profitable and the operating ratio below 100% for more than three years, rising healthcare costs and other economic conditions create variability and areas of risk and opportunity for insurers and employers.
One of the greatest challenges facing the industry in workers’ compensation claims is the prescription of opioids for pain management. Opioid dependence can be an unintended consequence of a workplace injury/claim, creating a crisis for the claimant and their family, as well as higher care costs for the insurer, employer, and health care providers. Sedgwick, the world’s largest third-party administrator, reports that finding alternatives to pain management, expanding autonomous claims processes and controlling opioid prescriptions are among the top issues workers’ compensation insurers need to address in 2018.
In America, many states already have or are adopting new regulations to help curb the opioid prescription abuse crisis. This will help claimants, insurers and other workers’ compensation stakeholders avoid not only rising claim costs but also unintended opioid dependence and associated rehabilitation costs.
For example, California recently adopted a drug formulary that health providers have been using since January 2018 to guide proper prescription coverages. Also, the governor of Florida recently signed legislation to help reduce opioid addiction and require health provider training and education standards. Many other states also have taken legislative and other actions intended to mitigate the opioid crisis. It is yet to be determined the total impact these regulations will have on opioid prescriptions and workers’ compensation claims, so it is critical for the industry to continue to monitor claims and leverage innovative interventions and protocols that mitigate risks.
Insurers and employers have partnered with health providers, states and other parties to help improve workers’ compensation claim outcomes and reduce the high expenses associated with claims that involve opioids.
Looking into workers’ comp claims
The question is often asked: Does any of this make an impact?
To answer this question, J.D. Power formed an alliance with the Sedgwick Institute to examine workers’ compensation claims and the effect of opioid use by injured employees. Based on comparative data from Sedgwick Claim Management Services during 2012-2016, looking at a subset of their total workers’ compensation claims database, prescription spending on workers’ compensation claims that involved opioids and those claims that did not involve opioids both continued to decline steadily during this period, down 5 percentage points overall. In mid-2013, Sedgwick introduced several new pharmacy management programs for workers’ compensations claims with a full launch by mid-2014. These programs include a pharmacy and provider network with star ratings, education, medication safety alerts and best practices which appear to be impacting this risk.
However, looking specifically at workers’ compensation claims that were resolved within two years of being filed, spending on claims involving opioids was still much greater than claims that did not involve opioid prescriptions. In 2015, the expense differential on total prescriptions for claims including opioids vs. those with no opioid prescriptions was $405. For claims with even longer durations, or those open for five or more years, the expense differential jumped to more than $1,000.
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Additionally, the duration of workers’ compensation claims that included opioid prescriptions continued to decline during this time frame, indicating health provider education and enhanced claim management of prescriptions may have improved claimant outcomes, even when an opioid was still being prescribed as part of the treatment regime. In this same time frame, the average duration for claims with opioid prescriptions that closed in the same year as filed declined from 10.2 days to 8.3 days. Duration for long-tailed claims (those resolved within three years) fell from 137.6 days to 119.6 days. Additionally, the frequency of opioids prescribed in a claim with a drug prescription also declined, from 4.0 in 2012 to 2.5 in 2015.
The data also show that neck and trunk injuries that result in a workers’ compensation claim are most likely to require an opioid prescription, and that neck injuries also have one of the longest claim durations of any type of injury. Further, the industries with the highest incidence of opioid prescriptions during the life of a claim included Rubber/Plastic Manufacturers and Apparel/Other Finished Product Manufacturers, in both of which 16% of claims included opioid prescriptions, followed by Heavy Construction (14%) and Primary Metal Manufacturers (13%).
Industries with the lowest incidence of opioid prescriptions in a workers’ compensation claim were Education Services and Food & Beverage Establishments, both at 6% incidence.
The cost of pain relief
Looking at the Sedgwick claims data, the average drug expenditure for workers’ compensation claims open for five or more years that involved opioid prescriptions was $6,217 compared to $936 for non-opioid claims of the same duration. This equates to an average expense differential of $5,281 per claim for prescription spending. In addition, 2% of all claim types were still open after five or more years. With a $5,281 price differential on claims that involved opioids, the incremental expense increased exponentially, causing issues for claimants, employers and insurers.
When a workers’ compensation claim involves an opioid, it is not only more expensive but is also more likely to have a longer duration. Three-fourths of claims filed in 2016 that didn’t involve an opioid prescription closed within the same year, compared to just 42% of claims that involved an opioid prescription.
With differing state mandates and regulations, the effect on states is also a critical benchmark for insurers, health providers and other stakeholders to understand. As stated, the national average of opioid prescription frequency has been on the decline since 2012. Among larger market-share states, California, which once outpaced the national average by 14 percentage points (2012 Q1), was below the national average by 1 percentage point in 2016 Q1. Also, as of 2016 Q2, Florida, Illinois, and New York were also below or at the national average.
A long term problem
Prescription trends in workers’ compensation claims show that opioid use has decreased since 2012; however, when opioids are involved, claim durations are more likely to extend beyond the year in which they were filed and to be much costlier for both insurers and employers. Although the enormous financial expenditures of the opioid workers’ compensation crisis (which incepted in the mid-2000s) are on the decline due to the work of state regulators, as well as employer and health provider education and claim mitigation programs, the effect on injured workers remains significant.
Claim professionals must continue to validate the need for each prescription drug during the life of a workers’ compensation claim and provide cutting-edge training and education about the proper use of and administration of opioids, as well as the latest information about the best pain treatment practices and alternative treatments for pain management that might avoid the need for opioid prescriptions.
Alternative pain treatment is a growing field in which acupuncture, chiropractic treatment, CBT and mindfulness practices have begun to gain traction with medical professionals. For example, Ohio’s Medicaid department has extended its coverage to include acupuncture treatments for low-back pain and migraines, and more than 13 other states have taken similar steps. Technology also offers new and different alternatives to opioids, with Travelers recently announcing it is testing a new virtual reality technology to treat pain and help manage the related workers’ compensation expenses.
To have a meaningful and lasting effect, workers’ compensation insurers and other claim handlers must continue to partner with employers, state regulators, health care providers and claimants themselves to leverage state-of-the-art claim practices and ensure the best outcomes for their claimants and employers. To continue to influence trends in opioid abuse, insurers and other claim professionals must invest in and leverage the latest pain management interventions, technologies, training programs and alternative medicines and continue to push for new and different treatments and processes that not only have the most promise for eliminating the scourge of opioid abuse but also eliminate the addiction it typically produces.