Winter 2023/2024

State of States



Sandy Shtab, Healthesystems VP of State & Industry Affairs, comments on regulatory activity across the country.

With each issue of RxInformer, we strive to deliver timely and relevant information about the evolving trends impacting workers’ comp, and this season’s theme is “ideas that may blow your mind,” with two topics in this issue including artificial intelligence (AI) and psychedelic substances such as psilocybin, the key compound in “magic mushrooms.”

Once reserved for movie plots and novelists, AI has already begun to change how we work, how we manage data and predict outcomes, and how we care for injured workers. Meanwhile, mind-altering drugs like psilocybin, MDMA and ketamine are gaining serious traction as potential treatment options for treatment resistant depression, PTSD and other conditions which may be considered work-related or exacerbated by a work-related injury.

Artificial Intelligence: Oversight is on the Horizon

The advancement of AI products and services goes beyond workers’ comp and healthcare, touching government, the arts, and mainstream media, presenting the potential to change the world.

From a business perspective, these tools are marketed as a pathway to increased efficiency, reduced labor costs, and more. The insurance industry is implementing AI to perform basic tasks such as mailroom scanning, routing, and automating responses to emails – as well as complex data analysis, including bill review, litigation management, claim reserving, and reacting to complex clinical data in electronic prior authorizations and summarizing medical histories.

AI is driving business leaders to transform their claims and organizational operations in ways we could not have envisioned a decade ago. At the same time, the industry is taking a cautious approach towards adopting AI strategies, as there are risks associated with the lack of transparency and regulation around how AI works, what data AI relies upon for its output, and the ambiguity around liability and ownership of its outputs. 

While insurance executives are looking to AI technology to solve business problems from talent sourcing to managing large volumes of medical data, lawmakers, medical experts and legal experts are calling for regulation of AI technologies, standards, and operating rules. Currently there are only a few aspects of AI that are subject to regulation, including data and patient privacy laws (Gramm-Leach-Bliley Act, HIPAA) and anti-discrimination laws (ADA, Civil Rights Act), but none of these laws were drafted with AI in mind. For that reason, federal lawmakers recently introduced The National AI Commission Act to help lay a foundation for comprehensive regulatory structure around AI.  

If enacted, the National AI Commission Act would establish a bipartisan Commission to study how to properly regulate AI. The Commission would explore three key areas of AI: examination of the existing regulatory oversight of AI, developing recommendations for a new or existing government agency to oversee AI regulation, and assessing the levels of risk to AI applications to specify which offer unacceptable risk, medium and minimal risk.  

The Commission would be comprised of experts in technology, civil law, ethics, and government, and would report semi-annually to Congress on their activities over a two-year period. The Commission would also consider how legislation can mitigate risks and harm from AI, including, for example, the spread of misinformation.

Some tech organizations have raised concerns around this effort, asking for eventual future regulation to be crafted in such a way that it does not interfere with innovation. With many steps left in the political process, bill language may change; however, if the act is adopted as written, the two-year timeline for the Commission to develop recommendations is a relatively long period, as compared to the pace of tech advancement.

The European Union (EU) has positioned themselves as a leader in this area, as their priority to “make sure that AI systems used in the EU are safe, transparent, traceable, non-discriminatory and environmentally friendly” is further along than U.S. efforts. They have already established their rules for safe and transparent AI, including a prohibition on AI for the purpose of biometric surveillance, emotion recognition, and predictive policing. The EU also requires mandatory disclosure if generative AI like ChatGPT is used to produce content of any kind. 

Some fear that US is lagging behind the European strategy to regulate, and companies may find themselves having to comply with European standards and the likelihood of state regulation. This harkens the 2018 passage of EU data privacy laws and states laws passed in California, New York and Virginia, where Congress lagged behind on a comprehensive data privacy law.

The same thing is happening already with AI legislation. Just this year, Connecticut, Texas, and West Virginia established their own AI workgroups to develop a statewide regulatory framework. Because these efforts are not coordinated between states or the federal government, there is a significant risk that we could be left with another patchwork of laws across multiple states, causing confusion and inefficiency for organizations operating across states or globally.

There are many questions left to be addressed by lawmakers, dealing with the transparency and accountability of the outputs from AI. In other words, what happens when things go wrong because of bad output from AI? Who is ultimately responsible? Who owns the rights to work the AI is producing?

There are many questions that must be adequately answered to ensure we are effectively guiding AI, rather than allowing short-sighted planning to lead to preventable complications – and perhaps catastrophes – from unchecked automation.

At this time, several regulations have been proposed regarding the regulation of AI technology in healthcare.

  • The Office of the National Coordinator for Health Information (ONC) has proposed a rule that would require electronic health record systems using AI to provide their users with information about how the technology works, including a description of the data it uses1
  • The White House Office of Science and Technology Policy has put forth a “Blueprint for an AI Bill of Rights,” which identifies five principles to guide the design, use, and deployment of “automated systems”2
  • California has a bill pending (SCR 17) which affirms the state’s commitment to the principles outlined in the aforementioned “Blueprint”1
  • Illinois’s Innovation and Technology Act (H3563) would establish a task force to investigate and provide a report on generative artificial intelligence1
  • Connecticut’s S1103 would establish an Office of Artificial Intelligence1
  • Maryland H996, which failed, would have punished any person who designs and creates AI software that is able to cause physical injury or death1

As of today, few laws or regulations specific to artificial intelligence exist. However, legislators at the both the state and federal levels are actively investigating the issue, and numerous AI-related rules and regulations have been proposed or are pending.

For more on AI’s applications in healthcare and our industry, see The Real Promise of Artificial Intelligence in Healthcare and Workers’ Comp in this issue of RxInformer.

Psychedelic Regulation

Traditionally associated with recreational use in the 1960s and 70s,  psychedelics such as psilocybin, ketamine, MDMA, and LSD have risen in popularity and public acceptance over the last decade, prompting many states and municipalities to adopt regulation around the sale, possession, and use of these substances.

A recent study found twenty-five U.S. states have considered legislation or ballot measures on psychedelics since 2019, and legislative activity has steadily increased year over year, even during the height of COVID.3 The study also used analytical modeling and AI to analyze marijuana legalization patterns and predicted psychedelic drug legalization is likely in most states in the next 10-15 years. 

However, the medical community requires more research to understand the application of these drugs as a legitimate medical treatment. For more on the clinical research being done with psychedelics, see Changing Minds? Unlocking the Potential of Psychedelics in Mental Health Therapy in this issue of RxInformer.

While the subject of most proposed bills is decriminalization, many of the bills include provisions for the funding of medical studies on psychedelics research, while others address the “right to try” for terminally ill patients.

The first state to adopt comprehensive legislation on psychedelics was Oregon. Measure 109 passed in 2020 by popular vote and was the first constitutional amendment of its kind in the US. It came on the heels of law changes in 2019 when the local city councils in Oakland and Denver both voted to decriminalize possession of psilocybin mushrooms, though neither city established resources for lawful manufacturing, quality standards, public outreach initiatives or law enforcement training.

Oregon’s ballot measure was different because it not only decriminalized psilocybin mushrooms, but it created an oversight board, establishing licensing standards, purity and potency testing for psilocybin products, and training requirements for treatment centers and counselors.  After nearly three years of rulemaking, the Oregon Health Authority (OHA) established eligibility requirements for patients and granted its first psilocybin service provider license in May 2023. The OHA anticipates there will be approximately 30 more service center licenses approved by the end of 2023. With a long waiting list of patients, only three approved growers in the state, and one approved lab testing facility, the demand for this form of treatment is well beyond the capacity of the industry to produce these psychedelic products.    

Psychedelics as a potential medical treatment is getting attention at the federal level too. In 2022 the National Institute of Mental Health and the National Institute of Drug and Alcohol Abuse jointly introduced resources for researchers interested in working with psychedelics. More recently, in June 2023, the FDA issued a guidance document for public comment titled Psychedelic Drugs: Considerations for Clinical Investigations. This non-binding guidance to industry provides information to those developing psychedelics for the treatment of psychiatric disorders like depression, PTSD, substance abuse disorders and more, providing details on manufacturing standards and clinical study controls. 

In the face of regulatory, legal, and clinical exploration of psychedelics advances in the coming years, insurers and employers should take care to follow these developments closely. A decade ago, it was unfathomable that employers would have to reimburse an injured worker for marijuana or protect their job if employees were using marijuana for an approved medical condition.

However, time has shown changing societal attitudes and a growing demand for alternative treatment for diagnoses, and this will likely open the door for some level of eventual coverage in the workers’ comp arena, and perhaps even some employment protection law changes in the next few years. 

The pathway to legalization and legitimacy can easily follow the same track as was initially established by cannabis in the workplace over the last few years. One cannot help but ponder if we will collectively address the existing friction between state and federal law with psychedelics. Only time will tell.

State of States

Medical Provider Network Processes Continue to Receive Attention

There have been many attempts to reform the Medical Provider Network process. Assembly Bill 1278 failed to advance, which would have allowed MPNs to resume posting scheduling entity contact information on look-up directories. This bill was in response to a 2022 DWC Bulletin which notified stakeholders that MPNs were no longer permitted to list nonprofessional organizations, management firms, scheduling and coordinating companies, and other non-provider entities on their rosters.

This clarification of existing MPN policy caused disruption and confusion for insurers, injured workers, and medical providers. Though the bill did not advance, industry stakeholders have been working directly with the DWC to address concerns around directory lookups, seeking a regulatory path to implement some of the same changes that were proposed in the bill.

WCIRB and CWCI Report on Pharmacy Spend and Medical Payments

The California Workers’ Compensation Insurance Rating Bureau (WCIRB) recently published its Annual Report, reporting on premiums, loss experience and indemnity and medical benefits.

Some of the most notable findings:

  • Pharmaceutical costs per claim, which slightly increased in 2020, returned to the pre-pandemic levels, decreasing 86% since 2012
  • Average medical paid on lost time claims in 2022 was similar to medical payments made for lost time claims in 2001, primarily due to system reforms. In contrast, average medical costs in other workers’ comp systems have grown sharply
  • Despite medical cost reductions, the average medical paid on lost time claims is still about 33% above the median state
  • Administrative expenses remain higher than in other states, with California payers paying about $0.46 for every $1 spent in medical benefits, almost double the median state
  • In 2022, out of the $4.3 billion paid for medical benefits, 28% went to physicians, 5% to medical supplies and equipment, 1% to pharmaceuticals, and 12% to inpatient and outpatient services

The report also highlights that despite reforms, California continues to have the longest duration of medical payments compared to other states. Interestingly, while pharmaceuticals only comprised 1% of overall medical costs, drug costs continue to be an issue.

The California Workers’ Compensation Institute (CWCI) published its final report in a series of reports on low-volume, high-cost drugs, which have led to increased spend. This final report in the series focused on a handful of musculoskeletal and ulcer drugs that are a small share of prescriptions but represent a disproportionate share of the total drug spend for their groups, to include viscosupplements and the muscle relaxants chlorozoxazone, and metaxalone.

In regard to ulcer drugs in the report, generics initially helped reduce average payments, however, between 2018 and 2021, average payments for these medications jumped almost 80%, and some of that increase was due to physician dispensing. These findings may ultimately inform future changes in the MTUS formulary on a go forward basis.

PTSD Presumption for All Employees

Governor Ned Lamont signed Senate Bill 913 into law, making PTSD a compensable injury – without the need for accompanying physical injury – for all workers, regardless of injury, if they experience a qualifying traumatic event on the job. This law goes into effect on January 1, 2024. This bill is notable because in a number of states, PTSD presumptions are only available to first responders. The new law establishes a uniform standard for PTSD for all occupations.

PBM Regulations Carve Exemption for Workers’ Comp

Senate Bill 1550, effective as of July 1, 2023, established the Prescription Drug Reform Act, further regulating PBMs. The law now requires PBMs to obtain a certificate of authority as an administrator, disclosure of pharmacy ownership affiliations, transparency and contracting requirements, rebate pass-throughs, and prohibits spread pricing for health plans.

The bill initially contained concerning language which may have created issues for workers’ comp carriers in their administration of drug benefits, but with input and collaboration from workers’ comp payers and PBMs, language was added to the bill to carve out workers’ comp plans, preventing disruption in how pharmacy benefits are processed and paid in Florida.

DWC Now Has Power to Independently Update Provider Fee Schedule

Florida House Bill 487 was enacted on June 8th, allowing the DWC to independently update the Health Care Provider Reimbursement Manual without legislative ratification. Effective 2024 and onward, the DWC will publish updated reimbursement rates by July 1st each year, with those changes taking effect on January 1st of the subsequent year. The change will ensure more timely adjustments to physician and professional reimbursement rates, which have been traditionally stuck in limbo for multiple years while awaiting legislative ratification.

The bill also ratifies the 2020 fee schedule recommendations, submitted to the legislature three years ago, making the “newest” version of the Florida Workers’ Compensation Health Care Provider Reimbursement Manual effective on July 1, 2023. The bill makes several other changes, providing some clarity on billing, authorization, and reimbursement for physician-dispensed medications, and removing outdated medical treatment guidelines that are no longer applicable.

It remains clear that the ongoing concerns about physician dispensing of medications cannot be adequately addressed without a legislative bill that specifically grants direction of pharmacy services to the carrier and/or employer, or a limitation on the quantity and duration of time a physician can dispense in a worker’s comp claim. Despite the DWC's best efforts, ongoing challenges related to insurer denials and provider disputes are unlikely to go away without a more comprehensive approach to addressing this as a patient safety issue and continued medical cost driver.

Medical Marijuana Legalized

Kentucky became the 38th state to legalize medical marijuana, following the signing of Senate Bill 47. Kentucky’s medical marijuana program sets out eligibility parameters for patients to access marijuana. It also specifically notes that workers’ comp carriers are not required to reimburse medical cannabis.

Permanent Rule for Telehealth Services

The New York Workers’ Compensation Board adopted a permanent telehealth rule prohibiting board authorized chiropractors, acupuncturists, physical and occupational therapists from performing telehealth services. In addition, the rule sets billing requirements such as when telehealth visits for certain authorized providers are considered medically appropriate.

This rule replaced the emergency rule that has been in place since the COVID-19 pandemic and took effect July 11, 2023.

Initiatives to Expand Provider Types in Workers’ Comp

House Bill 3412 was signed into law, allowing physician assistants to treat workers’ comp patients for 180 days from the date of first visit on the initial claim. This bill may help to ease the need for increased access to medical care, especially in underserved communities.

House Bill 3150 did not advance but would have established full attending physician status to chiropractors equal to that of medical doctors and surgeons. The bill aimed to resolve accessibility issues reported by chiropractors. Because the bill failed to move, chiropractors will remain “Type B” providers, which means they may assume the role of attending physician for a maximum of 60 days or 18 visits, whichever occurs first. If an injured worker needs chiropractic care beyond that time, a physician referral is required. Proponents of this bill argued chiropractors are the best for treating non-severe back injuries but acknowledged that most issues were resolved within the 60-day/18-visit care period that Type B providers are allowed.

Sales Tax Excluded on Medical Exams in Work Comp

On June 18th, Texas Governor Greg Abbott signed Senate Bill 1122, which exempts medical exams performed by doctors to determine workers’ comp benefits from sales and use tax. Sales tax on exams has been of concern since February of 2022 when the Comptroller Office informally advised a stakeholder that designated doctor exams were subject to sales tax. This bill addresses the concerns regarding sales tax on designated doctor exams and extends to required medical examinations, maximum medical improvement, and impairment ratings as well.

Texas Publishes Final COVID-19 Factsheet

The DWC published their final COVID-19 factsheet, indicating that they will not issue further data calls due to low numbers of new claims.

Data in the report was collected from 74 carriers and presents information up through April 30, 2023, exploring claim frequency, distribution by industry, indemnity benefits, and medical costs paid. According to the report, carriers reported nearly 100,000 COVID-19 claims, with the greatest number reported in January 2022.

A little more than half of the claims (51%) and fatalities (55%) involved first responders and correctional officers, with most COVID-19 claimants being male (63%) and under 40 years of age (56%).

More than two-thirds of all claims (72%) involved injured employees who tested positive or were diagnosed with COVID-19, and carriers denied less than half (39%) of COVID-19 positive test claims.

Despite more than 27,000 denials of COVID-19 claims with positive tests or diagnoses, only 258 disputes were filed as of April 30, 2023.

Approximately 34% of COVID-19 claims had medical or indemnity benefit payments associated with them, and carriers paid a total of $48.3 million in medical costs with $10.8 million (22%) for professional services and $1.5 million (3%) for pharmacy.

Research and Reports on National Trends

NCCI and WCRI are two of the most trusted and prolific organizations specializing in the analysis of the national workers’ comp marketplace. Here are two of the most recent reports, which were compiled using data supplied by the carrier community, which informs these organizations’ statistics and research.

NCCI's 2023 State of the Line Report  

According to the National Council on Compensation Insurance (NCCI), despite the unsettled environment of the last few years, the workers’ comp system is performing well and remains healthy.

NCCI’s 2023 State of the Line Report provides an exclusive review of trends, cost drivers, and other developments shaping the workers’ compensation industry. Report highlights include:

  • The calendar year combined ratio for workers’ comp is 84%, a sign of underwriting profitability
  • Premiums had an 11% increase in 2022, resembling rates of 2019
  • Despite physicians having the largest share of medical paid dollars in 2021, this service category had the lowest price increase in 2022 at 0.7%, followed by pharmaceuticals with only a 2.2% rise
  • Though medical supplies and other services (home health, skilled nursing, transportation, and miscellaneous services) had the smallest shares in medical cost distribution, these same services had the largest price changes between 2021 to 2022, with approximately 5% increases
  • COVID-19 incurred losses totaling $628 million with an average claim severity of $5,300
  • The cumulative change in claim frequency over the pandemic period, 2019 – 2022, is an estimated 5% decrease

The report also provides data on lost time claim frequency by industry group, cause of injury, indemnity claim severity, and other industry insights.

WCRI Publishes Medical Price Index, 15th Edition

The Workers’ Compensation Research Institute (WCRI) published the 15th edition of their Medical Price Index, which compares prices paid for a similar set of medical professional services for treating injured workers across 36 states and monitors price changes from 2008 to 2022, representing 87% of workers’ comp benefits paid in the U.S.

The purpose of this study is to help policymakers and stakeholders conduct meaningful comparisons of prices across states and to track price changes, and to discuss price trends in relation to fee schedules. The study focuses on professional services billed by physicians, physical and occupational therapists, and chiropractors. Key highlights include:

  • States with no professional fee schedule saw prices 38-173% higher than a 36-state median of study states when compared to states with fee schedules
  • Growth in prices ranged from negative 5% in Illinois to 62% in Washington, with states lacking fee schedules experiencing a median 35% growth rate
  • Professional services account for roughly 42% of workers’ comp spend
  • Major fee schedule changes resulted in significant fluctuations in overall prices paid across eight study states: Arizona, Illinois, Kentucky, Massachusetts, New York, North Carolina, Texas, and Virginia


  1. National Conference of State Legislators. Artificial Intelligence 2023 Legilsation. Updated April 18, 2023.
  2. The White House. Blueprint for An AI Bill of Rights. Accessed July 2023.
  3. Siegel JS, Daily JE, Perry DA, Nicol GE. Psychedelic Drug Legislative Reform and Legalization in the US. JAMA Psychiatry. 2023;80(1):77–83. doi:10.1001/jamapsychiatry.2022.4101


Since 2010, the semi-annual RxInformer clinical journal has been a trusted source of timely information and guidance for workers’ comp payers on how best to manage the care of injured worker claimants and plan for the challenges that lay ahead. The publication is an important part of Healthesystems’ proactive approach to advocating for quality care of injured workers while managing the costs associated with treatment.