WC Cost Trends

Increase Seen in Questionable Drug Screens

New research reveals workers’ comp claimants receiving urine drug tests when doctors have not prescribed opioid pain medications.
By: | February 3, 2015 • 5 min read

Research results to be published later this year will document growing incidences of giving workers’ compensation claimants urine drug tests even when doctors have not prescribed opioid pain medications.

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Medical treatment guidelines call for doctors to use urine drug screen testing to determine whether patients they have prescribed addictive opioids to engage in aberrant behavior, such as doctor shopping for multiple prescriptions or selling the drugs rather than consuming them as prescribed.

But new California Workers’ Compensation Institute research results document a growth in cases of injured workers given drug tests even though a doctor has not prescribed opioid pain killers, said CWCI President Alex Swedlow.

“We see people getting tested to a greater and greater extent and more injured workers getting tested regardless of whether or not they have an opioid prescription,” Alex Swedlow, California Workers’ Compensation Institute president

Swedlow plans to publish the new findings in advance of CWCI’s upcoming annual meeting.

Questions about the overuse of drug screens as unnecessary workers’ comp cost drivers are not new, having surfaced nearly three years ago. But the new CWCI research is based on recent claims data and shows “continued significant increases” in drug testing with questionable application, Swedlow said.

“We are seeing continued, significant increases in the percentage of drug tests relative to all lab tests, the average number of tests per claim, as well as the percentage of the injured workers who are receiving drug tests without a corresponding schedule II or III opioid prescription,” Swedlow said. “We see people getting tested to a greater and greater extent and more injured workers getting tested regardless of whether or not they have an opioid prescription.”

Swedlow believes the practice has become “a real revenue center.” His new research will update CWCI’s past findings on opioid-related drug screening.

While CWCI’s research is based on California claims data, observers expect that similar practices occur in other jurisdictions.

Across the nation, geographic pockets exist where drug-testing overutilization occurs and other regions where underutilization occurs, said Michael Gavin, president of PRIUM, a workers’ comp cost containment company owned Ameritox, a pain medication monitoring entity.

Gavin pointed to a Workers Compensation Research Institute study released last year reporting that sizable increases in drug testing occurred across some states while the percentage of longer-term opioid users receiving testing services remained low in other states.

Organizations such as the American College of Occupational and Environmental Medicine (ACOEM) and various state agencies developed medical treatment guidelines that include the recommended drug screening.

Their work followed an alarming epidemic of patients overdosing or becoming dependent or addicted to the medications.

The following increase in drug screening came with criticisms that the overuse of the testing drives unnecessary expenses for workers’ comp payers.

No Evidence of Drop in Pain Meds

CWCI reported in 2012 that drug testing was becoming a significant workers’ comp cost driver. It estimated that for 2011, California insurers and self-insured employers spent $98 million for the drug tests.

CWCI’s study found that the volume of drug testing rose 4,537 percent from 2004 to 2011, increasing from 4,012 tests to 186,023. The average amount paid per test, meanwhile, rose from $81 to $207.

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Observers in other states similarly complained of a sudden spike in bills for drug-testing while raising concerns that the tests were often administered in cases where they were not necessary.

Even though research such as CWCI’s work shows the drug screening of injured workers has skyrocketed, he has yet to observe a corresponding drop, to the extent he would expect, in the prescribing of the narcotic pain medications, said Brian Carpenter, senior VP, product development and clinical programs for pharmacy benefit manager Healthcare Solutions Inc.

Drug tests uncovering claimant’s aberrant behavior have resulted in doctors halting opioid prescriptions and notifying workers’ comp payers who have closed such claims, Carpenter said.

Logically, though, he would expect a greater decrease in the number of opioid medications prescribed by doctors because workers’ comp payers are footing the bill for more and more of the drug tests.

“Drug screening creates some mitigation,” Carpenter said. “I am not saying that it doesn’t. But you are not seeing what you would expect to see with those kinds of increases in uses of those tests. You are not seeing the decreased use in opioids as we should see with increased urine drug screens.”

You would expect to see some decrease in opioid prescribing accompany the urine tests, although not in an exact proportion to the amount of testing, said Kathryn L. Mueller M.D., a medical professor at the University of Colorado in Denver.

Not all drug screen test results pointing to patient abnormal behavior lead to a doctor discontinuing a pain medication prescription, added Mueller, who is also ACOEM president and medical director for Colorado’s Division of Workers’ Compensation.

Drug testing is “the medical standard of care so there shouldn’t be a question of whether it has to be done,” Mueller said.

She knows of plenty of cases where Colorado doctors have immediately stopped prescribing opioids due to test results, Mueller said.

“Part of what you have to understand is we are not doing it for the money, we are doing it for the patient care,” Mueller added.

Testing protects both patients and doctors by preventing overdoses, deaths, the illegal sale of prescribed drugs and other problems, Mueller added.

Yet the overuse of tests does occur, driving claims’ payer expenses, Mueller said. About 10 percent to 20 percent of patients show a need for a “shift in therapy,” away from being prescribed opioids, Mueller continued.

That means drug screen testing can’t possibly be useful every time a script for opioids is written, especially when the majority of patients are not misusing the drugs or are not likely to do so in the future.

But sufficient scientific evidence on how often testing should occur is lacking, so more studies are in order, Mueller said.

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“That is something that should be looked into,” she said.

Care should be taken in making blanket statements regarding the use of drug screening in cases where opioids are not prescribed, Gavin added. Doctors could be evaluating patients for many other prescribed drugs which can also be dangerous if used improperly.

Still, adjusters and medical personnel alike may not be acting on drug test results showing a patient’s questionable behavior, Gavin said. Greater education is needed to improve their responses.

“There are a number of inconsistent urine drug screens that should lead to medical change, but do not because the medical community is under-prepared to use the tool that has been placed at their disposal,” he said.

Roberto Ceniceros is senior editor at Risk & Insurance® and chair of the National Workers' Compensation and Disability Conference® & Expo. He can be reached at [email protected] Read more of his columns and features.

More from Risk & Insurance

More from Risk & Insurance

Risk Report: Hospitality

Bridging the Protection Gap

When travelers stay home, hospitality companies recoup lost income through customized, data-defined policies.
By: | October 12, 2017 • 9 min read

In the wake of a hurricane, earthquake, pandemic, terror attack, or any event that causes carnage on a grand scale, affected areas usually are subject to a large “protection gap” – the difference between insured loss and total economic loss. Depending on the type of damage, the gap can be enormous, leaving companies and communities scrambling to obtain the funds needed for a quick recovery.

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RMS estimates that Hurricane Harvey’s rampage through Texas could cause as much as $90 billion in total economic damage. The modeling firm also stated that “[National Flood Insurance Program] penetration rates are as low as 20 percent in the Houston area, and thus most of the losses will be uninsured.”

In addition to uninsured losses from physical damage, many businesses in unaffected surrounding areas will suffer non-physical contingent business interruption losses. The hospitality industry is particularly susceptible to this exposure, and its losses often fall into the protection gap.

Natural catastrophes and other major events that compromise travelers’ safety have prolonged impacts on tourism and hospitality. Even if they suffer no physical damage, any hotel or resort will lose business as travelers avoid the area.

“The hospitality industry is reliant on people moving freely. If people don’t feel safe, they won’t travel. And that cuts off the lifeblood of the industry,” said Christian Ryan, U.S. Hospitality and Gaming Practice Leader, Marsh.

Christian Ryan
U.S. Hospitality and Gaming Practice Leader, Marsh

“People are going away from the devastation, not toward it,” said Evan Glassman, president and CEO, New Paradigm Underwriters.

Drops in revenue resulting from decreased occupancy and average daily room rate can sometimes be difficult to trace back to a major event when a hotel suffered no physical harm. Traditional business interruption policies require physical damage as a coverage condition. Even contingent business interruption coverages might only kick in if a hotel’s direct suppliers were taken offline by physical damage.

If everyone remains untouched and intact, though, it’s near impossible to demonstrate how much of a business downturn was caused by the hurricane three states away.

“Hospitality companies are concerned that their traditional insurance policies only cover business interruption resulting from physical damage,” said Bob Nusslein, head of Innovative Risk Solutions for the Americas, Swiss Re Corporate Solutions.

“These companies have large uninsured exposure from events which do not cause physical damage to their assets, yet result in reduced income.”

Power of Parametrics

Parametric insurance is designed specifically to bridge the protection gap and address historically uninsured or underinsured risks.

Parametric coverage is defined and triggered by the characteristics of an event, rather than characteristics of the loss. Triggers are custom-built based on an insured’s unique location and exposures, as well as their budget and risk tolerance.

“Triggers typically include a combination of the occurrence of a given event and a reduction in occupancy rates or RevPar for the specific hotel assets,” Nusslein said. Though sometimes the parameters of an event — like measures of storm intensity — are enough to trigger a payout on their own.

For hurricane coverage, for example, one policy trigger might be the designation of a Category 3-5 storm within a 100-mile radius of the location. Another trigger might be a 20 percent drop in RevPAR, or revenue per available room. If both parameters are met, a pre-determined payout amount would be administered. No investigations or claims adjustment necessary.

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The same type of coverage could apply in less severe situations where traditional insurance just doesn’t respond. Event or entertainment companies, for example, often operate at the whim of Mother Nature. While they may not be forced to cancel a production due to inclement weather, they will nevertheless take a hit to the bottom line if fewer patrons show up.

Christian Phillips, focus group leader for Beazley’s Weatherguard parametric products, said that as little as a quarter- to a half-inch of rain over a four- to five-hour period is enough to prevent people from coming to an event, or to leave early.

“That’s a persistent rainfall that will wear down people’s patience,” he said.

“A rule of thumb for parametric weather coverage, if you’re looking to protect loss of revenue when your event has not actually been cancelled, you will probably lose up to 20 to 30 percent of your revenue in bad weather. That depends on the client and the type of event, but that’s the standard we’ve realized from historical claims data.”

The industry is now drawing on data to establish these rules of thumb for more serious losses sustained by hospitality companies after major events.

“Until recently the insurance industry has not created products to address these non-physical damage business interruption exposures. The industry is now collaborating with big data companies to access data, which in turn, allows us to structure new products,” Nusslein said.

Data-Driven Triggers

Insurers source data from weather organizations that track temperature, rainfall, wind speeds and snowfall, among other perils, by the hour and sometimes by the minute. Parametric triggers are determined based on historical storm data, which indicates how likely a given location is to be hit.

“We try to get a minimum of 30 years of hourly data for those perils for a given location,” Phillips said.

“Global weather is changing, though, so we focus particularly on the last five to 10 years. From that we can build a policy that fits the exposure that we see in the data, and we use the data to price it correctly.”

New Paradigm Underwriters collects their own wind speed data via a network of anemometers that stretch from Corpus Christi, Texas, all the way to Massachusetts, and works with modeling firms like RMS to gather additional underwriting information.

The hospitality industry is reliant on people moving freely. If people don’t feel safe, they won’t travel. And that cuts off the lifeblood of the industry.– Christian Ryan, U.S. Hospitality and Gaming Practice Leader, Marsh

While severe weather is the most common event of concern, parametric cover can also apply to terrorism and pandemic risks.

“We offer a terror attack quote on every one of our event policies because everyone asks for it,” said Beazley’s Phillips.

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“We didn’t do it 10 years ago, but that’s the world we live in today.”

An attack could lead to civil unrest, fire or any number of things outside an insured’s control. It would likely disrupt travel over a wide geographic region.

“A terrorist event could cause wide area devastation and loss of attraction, which results in lost income for hospitality companies,” Nusslein said.

Disease outbreaks also dampen travel and tourism. Zika, which was most common in South America and the Caribbean, still prevented people from traveling to south Florida.

“Occupancy went down significantly in that region,” Marsh’s Ryan said.

“If there is a pandemic across the U.S., a parametric coverage would make sense. All travel within and inbound to the U.S. would go down, and parametric policies could protect hotel revenues in non-impacted areas. Official statements from the CDC such as evacuation orders or warnings could qualify as a trigger.”

Less data exists around terror attacks and pandemics than for weather, though hotels are taking steps to collect information around their exposure.

“It’s hard to quantify how an infectious disease outbreak will impact business, but we and clients are using big data to track travel patterns,” Ryan said.

Hospitality Metrics

Any data collected has to be verified, or “cleaned.”

“We only deal with entities that will clean the data so we know the historical data we’re getting is accurate,” Phillips said.

“There are mountains of data out there, but it’s unusable if it’s not clean.”

Parametric underwriters also tap into the insured’s historical data around occupancy and room rates to estimate the losses it may suffer from decreased revenue.

Bob Nusslein, head of Innovative Risk Solutions for the Americas, Swiss Re Corporate Solutions.

“The hospitality industry uses two key metrics to measure loss of business income. These include occupancy rate and revenue per available room, or RevPAR. These are the traditional measurements of business health,” Swiss Re’s Nusslein said.  RevPAR is calculated by multiplying a hotel’s average daily room rate (ADR) by its occupancy rate.

“The hotel industry has been contributing its data on occupancy, RevPAR, room supply and demand, and historical data on geographical and seasonal trends to independent data aggregators for many years. It has done an exceptional job of aggregating business data to measure performance downturns from routine economic fluctuations and from major ‘Black Swan’ events, like the 9/11 terrorist attacks, the 2008 financial crisis or the 2009 SARS epidemic.”

Claims history can also provide an understanding of how much revenue a hotel or an event company has lost in the past due to any type of business interruption. Business performance metrics combined with claims data determine an appropriate payout amount.

Like coverage triggers, payouts from parametric policies are specifically defined and pre-determined based on data and statistical evidence.

This is the key benefit of parametric coverage: triggers are hit, payment is made. With minimal or no adjustment process, claims are paid quickly, enabling insureds to begin recovery immediately.

Applying Parametric Payments

For hotels with no physical damage, but significant drops in occupancy and revenue, funds from a parametric policy can help bridge the income gap until business picks up again, covering expenses related to regular maintenance, utilities and marketing.

Because payment is not tied to a specific type or level of loss, it can be applied wherever insureds need it, so long as it doesn’t advance them to a better financial position than they enjoyed prior to the loss.

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Parametric policies can be designed to fill in where an insured has not yet met their deductible on a separate traditional policy. Or it could function as excess coverage. Or it could cover exposures excluded by other policies, or for which there is no insurance option at all. Completely bespoke, parametric coverages are a function of each client’s individual exposures, risk tolerance and budget.

“Parametric insurance enables underwriting of risks that are outside tolerance levels from a traditional standpoint,” NPU’s Glassman said.

The non-physical business interruption risks faced by the hospitality industry match that description pretty closely.

“Hotels are a good fit for parametric insurance because they have a guaranteed loss from a business income standpoint when there is a major storm coming,” Glassman said.

While only a handful of carriers currently offer a form of parametric coverage, the abundance of available data and advancement in data collection and analytical tools will likely fuel its popularity.

Companies can maximize the benefits of parametric coverages by building them as supplements to traditional business interruption or event cancellation policies. Both New Paradigm Underwriters and Beazley either work with other property insurers or create hybrid products in-house to combine the best of both worlds and assemble a comprehensive risk transfer solution. &

Katie Siegel is an associate editor at Risk & Insurance®. She can be reached at [email protected]