Delaware Workers’ Comp Task Force Issues Report, Recommendations

May 15, 2013

Delaware’s state task force charged with examining Delaware’s workers compensation insurance rates published a report and 18 recommendations to address double-digit rate increases in recent years.

The task force, led by Delaware Lieutenant Governor Matt Denn, was established earlier this year to address rising average workers’ comp rates in the state.

Main recommendations include a two-year inflation freeze on medical providers’ fee schedules, as well as a reduction in the inflation rate allowed for hospital treatment, and reductions in allowed reimbursements in some medical categories. Additionally, the panel also recommends that workers’ comp carriers’ requests for rate hikes receive “a high level of scrutiny.”

The following are the recommendations the panel issued on Monday.

1. Place tighter controls on workers compensation medical costs

  • The task force said it does not believe that it is yet necessary to take some of the “extraordinary steps” that other states have taken with respect to control of workers compensation medical reimbursements. But the task force said it does believe that additional cost control measures should be added to those implemented in 2007.
  • Freeze all inflation increases for medical providers for a period of two years. Although the Delaware Code provides that the state’s medical reimbursement fee schedule for workers comp injuries, and the statutory formula for reimbursement of hospitals and ambulatory surgical centers, be adjusted each year for inflation, the task force recommends a two year freeze in inflation increases for all medical providers who currently receive one under state law.
  • Change the inflation index for hospital reimbursements from CPI-medical to CPI-urban. The state’s 2007 workers comp reforms allowed hospitals and ambulatory surgical centers to receive annual inflation increases based upon the medical consumer price index, rather than the non-medical consumer price index. The decision in 2007 to limit most providers to the non-medical CPI for their annual increases was designed to be a long-term control on workers compensation medical costs. For reasons of equity, and because hospital costs significantly exceed those of other providers for many of the most common workers compensation procedures, the task force believes that future hospital and ambulatory surgical center inflation increases after the two-year freeze expires should be limited to CPI-urban just as they are for all other medical providers.
  • Minimize the number of procedures that are reimbursed outside the state’s fee schedule, and place all CPT and HCPCS codes, radiology and pathology/laboratory reimbursements on the fee schedule. The task force recommends that all medical procedures other than a trivial number which do not have “relative value units” be placed on the state’s fee schedule. Previously, many procedures were not on the fee schedule, which allowed for those procedures to be reimbursed at 85 percent of their 2006 costs plus inflation.
  • Place ambulatory surgical center reimbursements on a fee schedule. The task force recommended that 19 Del.C. § 2322B(9), which governs reimbursement of ambulatory surgical centers, be amended to require the Health Care Advisory Panel (HCAP) to develop a fee schedule for ambulatory surgical centers in a manner similar to the process outlined in Sections 2322B(1) through 2322B(4) for doctors.
  • Place new price controls on the cost of pharmaceuticals used by workers comp recipients. The Health Care Advisory Panel should recommend changing the pharmacy reimbursement for workers compensation patients from 100 percent AWP (average wholesale price)/actual charge to a system where AWP is defined and reimbursement is AWP minus 12 percent for brand name drugs or 20 percent for generic drugs, plus a dispensing fee. HCAP will also recommend a ban on adding charges for repackaging and a ban on oxycontin use for patients who are not already receiving it, and will recommend adoption of the DMAP preferred drug list.
  • Place a new cap on the frequency and cost of drug testing. One of the most significant increases in utilization in recent years has been repeat drug tests ordered by doctors treating workers compensation patients, the panel said. To place a reasonable control on these serial drug tests, HCAP should order a cap of four times per year absent pre-authorization from an insurer, banning confirmatory testing unless the point-of-care testing is not consistent with the prescriber’s expectations based on the current prescription, and changing the allowed charge from 85 percent of current charge to a maximum of $100.
  • Revise downward the permitted number of therapy treatment visits for a workplace injury, and timely reconsider other treatment protocols for workers comp recipients. Therapy treatments constitute one of the largest aggregate components of workers compensation medical costs, and the number of workers comp related therapy treatments between Year 1 and Year 2 increased significantly. For that reason, the task force recommends that HCAP revise downward the number of therapy treatments presumptively permitted for an injury to a workers comp recipient.
  • Place a new cap on the reimbursement for anesthesia. The task force recommends that HCAP change the reimbursement formula for anesthesia from 85 percent of current charge to a flat fee, indexed for inflation.
  • Amend the Delaware Code to impose a time limitation on appeals of utilization review decisions. The Delaware Supreme Court recently invalidated a time limitation on appeals of utilization review decisions, because the time limitation had been established by regulation rather than by statute. The time limitation should be written into the Delaware Code, so that there is some level of finality to decisions about whether certain types of medical care have been over utilized.

2. Ensure that insurance carriers’ requests for rate increases receive a high level of scrutiny.

The task force said several panel members expressed concern about whether the rates ultimately approved for workers comp carriers were justified by the actual increases seen in medical costs, and whether carriers were overstating the amount that they needed to reserve in order to pay future claims. In addition, several members expressed frustration that some amount of rate increase appeared to be driven by the failure of individual carriers to be sufficiently diligent about enforcing existing medical cost controls when paying claims. The following recommendations are targeted at ensuring that a high level of scrutiny is applied to rate increase requests by carriers.

  • Change Title 18, Section 2610 of the Delaware Code to require appointment by the Department of Insurance (DOI) of an attorney to represent ratepayers through the rate-setting process, with authority for the appointed attorney to retain an actuarial expert and demand additional data and other factual information from the applicant. By appointing an outside advocate for rate-payers and providing that advocate with adequate time, data, and expert assistance to prepare for a rate hearing, DOI can ensure that the hearing officer for any rate increase application will hear evidence of any excessive reserve requests or other unnecessary costs being sought by carriers during the Delaware Compensation Rating Bureau’s (DCRB) annual rate filing.
  • Require that both DCRB and DOI provide an estimate for the rate impact of each of the task force’s recommendations or, if no estimate can be provided, explain why no estimate can be provided), as part of the 2013 rate filing and analysis.
  • Require that both DCRB and the Insurance Department provide an estimated rate impact based on analysis of initial medical cost data resulting from implementation of Senate Bill 238, as part of the 2013 rate filing and analysis.
  • Require by statute that any rating bureau, as part of its annual lost cost filing with DOI, provide the Data Collection Committee with data indicating the total medical cost increases for each individual carrier with a 1 percent or greater share of the Delaware market whose losses are included in the data underlying the rate filing. The Data Collection Committee shall, in turn, direct DOI to conduct an examination of any carriers whose medical expenses are deemed by the Data Collection Committee to be so high as to warrant further examination.
  • Require that standing committees established to monitor and respond to changes in medical costs receive more frequent reports from insurance carriers and have the ability to properly analyze those reports.

3. Make the state’s laws encouraging injured workers to return to work more effective.

  • Place primary responsibility for ensuring that employers are informing doctors of available light duty work on the employer’s workers comp insurance carrier. Specifically, the task force recommends changing Delaware law to require that once an injury is deemed a compensable “lost time” case and an Agreement as to Compensation is entered into by the carrier and/or employer and the injured worker, the insurance carrier shall be required to send a Modified Duty Availability Report to the employer and ensure that it is completed and delivered to the physician. The trigger for the Modified Duty report will no longer be the Report of Workers Compensation Injury from the physician.
  • Require that any inspection to determine an employer’s eligibility for the workplace safety discount on its insurance premiums include verification that it has completed Modified Duty Availability Reports for all workplace injuries in the prior three years. The task force recommends that this requirement be phased in over a three year period, given its findings that few employers have been completing these forms to date.

4. Improve the state’s workplace safety program to both increase its usage and ensure that it accurately determines which workplaces are using appropriate safety practices.

  • Revise Title 19, Section 2379 of the Delaware Code to require that employers inform any entity conducting a workplace safety examination of the details and outcomes of any workers compensation claims filed against the employer in the prior three years in Delaware. Any report recommending that an employer receive a workplace safety credit should explicitly discuss such claims and why they did or did not impact the employer’s eligibility for a workplace safety credit.
  • Revise Title 19, Section 2379 to make the workplace safety credit available to an employer who has been certified by its carrier to have a safe workplace following an examination which is at least as rigorous as that conducted by the state’s workplace safety inspectors. Under this recommendation, the Department of Insurance would promulgate regulations to allow insurance carriers to have their workplace safety examinations certified as being at least as rigorous as existing state examinations.

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