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Specialty Pharma

Cancer Drugs a Growing Cost Driver in Workers’ Comp

Presumption laws combined with newer, more expensive cancer drugs are a one-two punch municipalities can ill afford.
By: | November 1, 2017 • 4 min read

In recent years, opioids grabbed a prominent role as one of  the biggest pharmaceutical costs in workers’ comp, but with the proliferation of state presumption laws and a rash of chemotherapeutic specialty drugs either hitting the market or in the works, cancer drugs could be poised to become the next pharmaceutical cost driver.

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Over the course of the last decade, at least 36 states passed presumption of compensability laws, which makes some first responders diagnosed with certain types of cancer eligible for workers’ compensation on the presumption that the individual obtained the disease on the job.

While these bills vary widely, the majority of presumption bills cover firefighters for cancers and other conditions presumed to be caused by their exposure to a known carcinogen. Some of the cancers typically outlined as covered include lung, brain, kidney, bladder, rectal and skin cancer, and often also include non-Hodgkin’s lymphoma, leukemia and multiple myeloma.

Phil Walls, the chief clinical officer of myMatrixx, a pharmacy benefit management company owned by Express Scripts and based in Tampa, Fla., said he’s heard payers comment that presumption laws and the specialty drug market keep them up at night.

“Cancer [in workers’ comp] prior to presumption laws was a relatively rare event,” he noted. “For those insurers that cover [these first-responder] populations, I think this is going to have a big impact. Chemotherapy is very expensive. We continue to see escalating drug prices, with most of these within the specialty drug market.”

A recent Express Scripts study noted that more than 830 oncology drugs are in the pipeline.  The company projects that the health care industry can expect to see an increase of more than 20 percent in cancer drug spending each year through 2019, mainly due to patients using these expensive drugs as maintenance therapy.

Elam Herr, assistant executive director, Pennsylvania State Association of Township Supervisors

Firefighters and other first responders who may be covered by presumption of compensability laws make up a statistically insignificant portion of the overall workers’ compensation market.

However, a major cancer claim expense could be fiscally damaging for a small municipality, said Brian Allen, vice president of governmental affairs for San Diego, Calif.-based Mitchell Pharmacy Solutions and a board officer for the American Association of Payers, Administrators and Networks.

Public safety employees represent less than 3 percent of the general working population, but if a firefighter or two goes out on disability because of a cancer presumption, it could increase a small city’s claim costs by 20 to 25 percent, he said.

Premiums Impacted

Allen also noted that most of the expensive oncology drugs new to the market weren’t factored into the fiscal analysis conducted by states that have passed these presumption bills, further impacting the bottom line of smaller municipalities.

Elam Herr, assistant executive director of the Pennsylvania State Association of Township Supervisors, said that when Pennsylvania passed its presumption of compensability bill in 2011, the response by insurers was to drop them. The bill enabled firefighters to report retroactive claims going back 10 years.

“Starting out with claims for 10 years and no reserves as of day one, all the insurance companies and trust bailed on the municipal governments,” Herr recalled, referring to the township members of the association.

Those small municipalities were forced to seek coverage for their predominantly volunteer fire departments through the State Workers’ Insurance Fund, which led to premium jumps ranging from 20 to 40 percent for townships, he said.

“If there’s one thing American people want, it’s the biggest and best of everything. If there’s a miracle drug out there, they’re going to want it.” — Elam Herr, assistant executive director, Pennsylvania State Association of Township Supervisors

Since Pennsylvania’s bill took effect, 261 firefighters petitioned for coverage under the cancer presumption, but only 19 are volunteer firefighters — a smaller figure than Herr and others anticipated.

However, he is still wary about the impact of the law and increasingly expensive oncology drugs.

“I think any type of drug today will drive up cost,” he said. “If there’s one thing American people want, it’s the biggest and best of everything. If there’s a miracle drug out there, they’re going to want it.”

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Representatives of the Arizona League of Cities and Towns are similarly concerned about the impact of presumption bills on comp coverage. In 2016, the Arizona legislature added 12 new cancers to the presumption statute, including skin and prostate cancers, which are common in Arizona.

Arizona’s law allows workers who served as firefighters and peace officers for at least five years to file claims within 15 years of their last date of employment.

“We’re in a new era for workers’ comp for all employers … we’ve got a mix of factors that create the potential for quite a lot of cost,” said Alex Vidal, a legislative associate at the Arizona League of Cities and Towns.

“In terms of drug costs, when you’re treating something as complicated of cancer, the health insurance system is best set up to handle that type of treatment. In workers’ comp, because of their fee schedule system and restrictions, [the system] isn’t able to get the kind of savings that health insurers get, and medical costs can be more expensive.” &

Angela Childers is a Chicago-based writer specializing in health care and business management. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

High Net Worth

High Net Worth Clients Live in CAT Zones. Here’s What Their Resiliency Plan Should Include

Having a resiliency plan and practicing it can make all the difference in a disaster.
By: | September 14, 2018 • 7 min read

Packed with state-of-the-art electronics, priceless collections and high-end furnishings, and situated in scenic, often remote locations, the dwellings of high net worth individuals and families pose particular challenges when it comes to disaster resiliency. But help is on the way.

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Armed with loss data, innovative new programs, technological advances, and a growing army of niche service-providers aimed at addressing an astonishingly diverse set of risks, insurers are increasingly determined to not just insure against their high net worth clients’ losses, but to prevent them.

Insurers have long been proactive in risk mitigation, but increasingly, after the recent surge in wildfire and storm losses, insureds are now, too.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy,” said Laura Sherman, founding partner at Baldwin Krystyn Sherman Partners.

And especially in the high net worth space, preventing that loss is vastly preferable to a payout, for insurers and insureds alike.

“If insurers can preserve even one house that’s 10 or 20 or 40 million dollars … whatever they have spent in a year is money well spent. Plus they’ve saved this important asset for the client,” said Bruce Gendelman, chairman and founder Bruce Gendelman Insurance Services.

High Net Worth Vulnerabilities

Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

As the number and size of luxury homes built in vulnerable areas has increased, so has the frequency and magnitude of extreme weather events, including hurricanes, harsh cold and winter storms, and wildfires.

“There is a growing desire to inhabit this riskier terrain,” said Jason Metzger, SVP Risk Management, PURE group of insurance companies. “In the western states alone, a little over a million homes are highly vulnerable to wildfires because of their proximity to forests that are fuller of fuel than they have been in years past.”

Such homes are often filled with expensive artwork and collections, from fine wine to rare books to couture to automobiles, each presenting unique challenges. The homes themselves present other vulnerabilities.

“Larger, more sophisticated homes are bristling with more technology than ever,” said Stephen Poux, SVP and head of Risk Management Services and Loss Prevention for AIG’s Private Client Group.

“A lightning strike can trash every electronic in the home.”

Niche Service Providers

A variety of niche service providers are stepping forward to help.

Secure facilities provide hurricane-proof, wildfire-proof off-site storage for artwork, antiques, and all manner of collectibles for seasonal or rotating storage, as well as ahead of impending disasters.

Other companies help manage such collections — a substantial challenge anytime, but especially during a crisis.

“Knowing where it is, is a huge part of mitigating the risk,” said Eric Kahan, founder of Collector Systems, a cloud-based collection management company that allows collectors to monitor their collections during loans to museums, transit between homes, or evacuation to secure storage.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy.” — Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

Insurers also employ specialists in-house. AIG employs four art curators who advise clients on how to protect and preserve their art collections.

Perhaps the best known and most striking example of this kind of direct insurer involvement are the fire teams insurers retain or employ to monitor fires and even spray retardant or water on threatened properties.

High-Level Service for High Net Worth

All high net worth carriers have programs that leverage expertise, loss data, and relationships with vendors to help clients avoid and recover from losses, employing the highest levels of customer service to accomplish this as unobtrusively as possible.

“What allows you to do your job best is when you develop that relationship with a client, where it’s the same people that are interacting with them on every front for their risk management,” said Steve Bitterman, chief risk services officer for Vault Insurance.

Site visits are an essential first step, allowing insurers to assess risks, make recommendations to reduce them, and establish plans in the event of a disaster.

“When you’re in a catastrophic situation, it’s high stress, time is of the essence, and people forget things,” said Sherman. “Having a written plan in place is paramount to success.”

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Another important component is knowing who will execute that plan in homes that are often unoccupied.

Domestic staff may lack the knowledge or authority to protect the homeowner’s assets, and during a disaster may be distracted dealing with threats to their own homes and families. Adequate planning includes ensuring that whoever is responsible has the training and authority to execute the plan.

Evaluating New Technology

Insurers use technologies like GPS and satellite imagery to determine which homes are directly threatened by storms or wildfires. They also assess and vet technologies that can be implemented by homeowners, from impact glass to alarm and monitoring systems, to more obscure but potentially more important options.

AIG’s Poux recommends two types of vents that mitigate important, and unexpected risks.

“There’s a fantastic technology called Smart Vent, which allows water to flow in and out of the foundation,” Poux said. “… The weight of water outside a foundation can push a foundation wall in. If you equalize that water inside and out at the same level, you negate that.”

Another wildfire risk — embers getting sucked into the attic — is, according to Poux, “typically the greatest cause of the destruction of homes.” But, he said, “Special ember-resisting venting, like Brandguard Vents, can remove that exposure altogether.”

Building Smart

Many disaster resiliency technologies can be applied at any time, but often the cost is fractional if implemented during initial construction. AIG’s Smart Build is a free program for new or remodeled homes that evolved out of AIG’s construction insurance programs.

Previously available only to homes valued at $5 million and up, Smart Build recently expanded to include homes of $1 million and up. Roughly 100 homes are enrolled, with an average value of $13 million.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work.” — Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“We know what goes wrong in high net worth homes,” said Poux, citing AIG’s decades of loss data.

“We’re incenting our client and by proxy their builder, their architects and their broker, to give us a seat at the design table. … That enables us to help tweak the architectural plans in ways that are very easy to do with a pencil, as opposed to after a home is built.”

Poux cites a remote ranch property in Texas.

Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“The client was rebuilding a home but also installing new roads and grading and driveways. … The property was very far from the fire department and there wasn’t any available water on the property.”

Poux’s team was able to recommend underground water storage tanks, something that would have been prohibitively expensive after construction.

“But if the ground is open and you’ve got heavy equipment, it’s a relatively minor additional expense.”

Homes that graduate from the Smart Build program may be eligible for preferred pricing due to their added resilience, Poux said.

Recovery from Loss

A major component of disaster resiliency is still recovery from loss, and preparation is key to the prompt service expected by homeowners paying six- or seven-figure premiums.

Before Irma, PURE sent contact information for pre-assigned claim adjusters to insureds in the storm’s direct path.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work,” said Curt Goetsch, head of underwriting for Ironshore’s Private Client Group.

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“If you’ve got custom construction or imported materials in your house, you’re not going to go down the street and just find somebody that can do that kind of work, or has those materials in stock.”

In the wake of disaster, even basic services can be scarce.

“Our claims and risk management departments have to work together in advance of the storm,” said Bitterman, “to have contractors and restoration companies and tarp and board services that are going to respond to our company’s clients, that will commit resources to us.”

And while local agents’ connections can be invaluable, Goetsch sees insurers taking more of that responsibility from the agent, to at least get the claim started.

“When there is a disaster, the agency’s staff may have to deal with personal losses,” Goetsch said. &

Jon McGoran is a novelist and magazine editor based outside of Philadelphia. He can be reached at [email protected]