Summer 2024

State of the Nation



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

The first half of every year is busy with most legislatures in session from March through May. Considering that it’s an election year, much of the activity is focused on consumer protections and healthcare costs – and this year is no exception.

Throw in a little technology flair to the mix, and you have an abundance of activity which may or may not ultimately change the landscape across three areas: artificial intelligence and its impact on healthcare policy, enabling the medical use of psychedelics, and PTSD and cancer presumptive coverages for first responders.

States and Feds Work to Implement AI Policy in Healthcare Law

Artificial intelligence (AI) remains top of mind for many in the healthcare and workers’ comp sectors, with significant policymaking and regulatory developments across the nation.

White House and the VA Take Action

Late last year, President Biden signed an Executive Order (EO) on artificial intelligence (AI) focused on safeguarding AI and managing its risks. The order seeks increased transparency from AI companies regarding their model operations and introduces new standards aimed at areas of safety, privacy, and consumer/worker protections. The order directs numerous actions by federal agencies, while employing a range of legal and policy tools to help promote U.S. leadership on AI and address the growing concerns surrounding its use. The EO sets out timelines ranging from 30 days to a year for agencies to act.

The Veterans’ Administration gave a peek into their working plan on governance strategy for AI, which has been in development since 2020. Their Chief Technical Officer presented its latest findings and progress report at HIMSS in March 2024, including broad-stroke information about their governance strategy, IT use cases, infrastructure, and workforce development. Their approach may be an indicator of forthcoming actions by other government entities, including the Center for Medicare Services, which is often the bellwether for how health insurers move forward with their Health IT standards & policies.

Additionally, the National Association of Insurance Commissioners (NAIC) adopted a Model Bulletin on the Use of Algorithms, Predictive Models, and Artificial Intelligence (AI) Systems by Insurers. While not a model law or regulation, the AI model bulletin serves as a guidance document, creating uniformity among state insurance regulators as it related to how insurance carriers may deploy AI tools into their systems and processes. The NAIC document emphasizes the need for insurers to responsibly govern their AI program, ensure adequate risk management oversight, and work towards eliminating bias to ensure fair and equitable outcomes for all consumers. Many payer and healthcare organizations were involved in the development of the model bulletin, citing their concerns about the lack of uniformity in the development of state specific reporting requirements, and a lack of coordination between states and federal government, which may slow down innovation.

State-Specific Action

As AI continues to gain attention in the news and amongst policymakers, a handful of states have introduced bills that address concerns about the use of AI for the purpose of medical decision making.

California SB 1120, supported by the California Medical Association, would require insurers to disclose use of AI for utilization review processes. The bill goes a step further than the dozen or so other states with similar bills filed, by specifically requiring insurers using AI to maintain a licensed physician to supervise all AI decision making tools used in utilization review for authorizing health care services.

New Jersey Assembly Bill 3858 requires health insurance carriers to disclose on their website whether or not a carrier uses an automated utilization management system and how many claims were reviewed using the automated utilization management system in the previous year. Additionally, the bill permits the Department of Banking and Insurance to audit at any time a payer's automated utilization management system and the data the payer collects in using that system.

New York Assembly Bill 9149 requires health insurers to disclose information to insureds and enrollees on the utilization of artificial intelligence algorithms during the utilization review process.

And finally, Oklahoma HB 3577 and Pennsylvania HB 1663 feature nearly identical language, which would require health insurers to disclose to providers and individuals whether AI is used in the insurer’s utilization review process. Insurers would be required to disclose information on their websites and submit the algorithms and training data sets used to the respective states’ Departments of Insurance.

Psychedelics Are Gaining Attention with FDA and States

Clinical research demonstrating the potential benefits for psychedelics to treat mental illnesses continues to grow, with the FDA announcing recent developments. The backdrop of this evolving research also continues to fuel state-led therapy initiatives.

FDA Considers Use Potential

The FDA has officially accepted for Priority Review the New Drug Application (NDA) for MDMA capsules in combination with psychological intervention for the treatment of PTSD. While this has been long coming, with the FDA working closely with researchers to expedite research, this latest action sets a decision date for MDMA’s potential clinical approval by August 11, 2024.

Shortly after this development, the FDA granted Breakthrough Designation to MM120, a formulation of LSD developed by MindMed, a biopharmaceutical company specializing in psychedelics, for the treatment of generalized anxiety disorder. Clinical trials of MM120 showed meaningful and significant improvements when administered as a single dose in a clinical setting, without additional therapeutic intervention. Due to the urgent need for anxiety treatments and its promising early results, the FDA has fast-tracked MM120's development. MindMed plans to start Phase 3 of its clinical trials in the second half of 2024.

States Consider Treatment Bills

The FDA milestones are present against the introduction of 13 different state bills that would enable psychedelic therapy. Each bill varies greatly, but there are similar themes across them.

California Senate Bill 1012, Massachusetts House Bill 4255, and New Hampshire House Bill 1693 would each regulate several different psychedelics in one stroke. The California bill would cover psilocybin, MDMA, mescaline, and DMT, and require treatment to take place in special centers, with possession remaining illegal outside a special treatment center. The Massachusetts bill would offer a blanket regulation and taxation of psychedelics, and the New Hampshire bill would specifically regulate LSD, mescaline, and psilocybin.

Arizona House Bill 2274 only applies to MDMA and would allow firefighters and peace officers diagnosed with PTSD from line-of-duty incidents to receive MDMA-assisted therapy. The bill would require employer coverage of MDMA-assisted therapy. However, this bill would be contingent upon the approval of an MDMA investigational product as a prescription medication.

Several states have proposed the decriminalization, legalization, or regulation of psilocybin. Bills for this include:

  • Connecticut House Bill 5297
  • Hawaii Senate Bill 3019
  • Illinois Senate Bill 3695
  • Missouri House Bill 1830
  • New Jersey Senate Bill 2283

And finally, other states have proposed more investigational approaches, facilitating research initiatives. This includes:

  • Indiana Senate Bill 139 which would establish a therapeutic psilocybin research fund administered by the Indiana Department of Health
  • Maryland House Bill 548 which would establish a Task Force on Responsible Use of Natural Psychedelic Substances
  • Wisconsin Senate Bill 727 which would create a medicinal psilocybin treatment fund and pilot program to study the effects of medicinal psilocybin treatment on patients with PTSD at the University of Wisconsin-Madison

Presumptions, PTSD & Cancer Screening Become the “Norm” for Firefighters, other First Responder

Many states have proposed, enacted, or expanded PTSD and cancer presumptions among firefighters and other first responders.

First-Time and Expanded PTSD Presumptions

Expansions to PTSD presumptions include proposed Arizona House Bill 2492, enacted California Senate Bill 623, and proposed Virginia House Bill 68, which each respectively broadens the types of first responders entitled to PTSD coverage. Meanwhile, Rhode Island Senate Bill 2059 would adjust current PTSD presumptions to include traumatic events that occur when a first responder is off duty but still involved in the protection or rescue of human life.

In regard to creating first-time PTSD presumptions for first responders, Missouri Senate Bill 24 was signed into law, creating a presumption for mental-only PTSD, but not pre-existing PTSD, covering firefighters, police officers, EMTs, and 911 dispatchers. Meanwhile Maryland Senate Bill 1069 and Oklahoma Senate Bill 1457 were recently introduced and would create PTSD presumptions for first responders.

Cancer and Cardiovascular Conditions

Beyond PTSD, many states have issued or proposed presumptions for cancers, strokes, and heart conditions.

As part of the recently enacted state budget bill, Connecticut has approved a new workers’ comp presumption for firefighters with cancer diagnoses that are a result of their hazardous occupation, unless proven otherwise.

Maryland House Bill 1145 was also introduced, which would create a hypertension presumption for certain firefighters, fire-fighting instructors, rescue squad members, advance life support unit members, and members of the Office of the State Fire Marshall, if certain requirements are met.

New Jersey Assembly Bill 5909 has gone into effect, creating a workers’ comp presumption for emergency medical service (EMS) workers who suffer a stroke or heart attack if they happen shortly after they were on an emergency call.

Governor Mark Gordon signed Wyoming House Bill 66 into law, allowing firefighters to undergo annual cancer screenings under workers’ comp, presuming they are regularly exposed to cancer-causing agents during the scope of employment. Screenings would be allowed to continue up to 10 years after a firefighter retires.

State of States

California Bans Pre-Employment Marijuana Screening

Governor Gavin Newsom signed California Senate Bill 700 into law, banning pre-employment drug testing for THC. The bill is similar to legislation passed in New York in 2021 and excludes building and construction trades as well as those who are in positions which are federally funded, such as postal workers. Employers may not discriminate against a person in hiring, termination, or any term or condition of employment, based on the person’s use of cannabis off the job and away from the workplace. Employees are not permitted to possess, be impaired by, or to use, cannabis on the job. This law went into effect January 1st, 2024.

California Considering Single-Payer Healthcare System Again

California introduced Assembly Bill 2200 which would establish a framework of governance, benefits, and standards for a universal healthcare system. The most significant obstacle has been the cost to implement and maintain a system which would have no co-payments and require a significant tax burden to deliver on such a system. Under the bill, a new entity called CalCare would oversee the program, handle organization and administration, and develop proposals to integrate healthcare services from the workers’ comp system. Estimates from the legislature put the price tag for a single-payer system at over $500 billion annually, shifting costs from privately funded insurance and workers’ comp programs to a state-run program.

CWCI Examines Payment Trends Since the 2012 Workers' Comp Legislative Reforms

The California Workers’ Compensation Institute (CWCI) issued a third report on claim payment trends since 2012 reforms. With data from 2013 – 2022, the report tracks paid losses from 6 to 72 months from the date of injury. The study focuses on the results for indemnity claims as they account for 94% of paid loss payments. Reimbursement for treatment, drugs, durable medical equipment, medical-legal services, and medical cost containment were included in the medical payment data of the loss payments. Key findings include:

  • The average paid losses at 6 and 12 months of injury date declined in 2013 and 2014, but by AY 2015 loss payments began to trend up and continued to rise through 2020
  • Loss payment trends at 36-months through 72-months reflect mature claims that were heavily impacted by the 2012 reforms. The average losses for these initially trended downward from 2013 – 2016 but started to increase come 2017
  • As was the case with combined medical/indemnity losses, average paid medical losses briefly declined after SB 863 with lowest payments in 2015 before experiencing a steady increase through 2020
  • The average indemnity payments at 6 months increased 40.6% between AY 2013 and AY 2022, while the average indemnity paid at 12 months rose 27.7% within the same period
DWC Invites Stakeholders for Discussions on Gabapentin and Fee Schedule Revisions

The Colorado Division of Workers’ Compensation (DWC) is in the process of soliciting stakeholder input in a three-meeting series on medical payment and utilization rules. These meetings help to inform system changes which could be incorporated into the rulemaking process in the next calendar year. Topics currently under consideration include pharmacy-specific guidelines – including a new requirement for patients to fill prescription for gabapentin in a pharmacy setting – and new modifiers and clarifications on conversion factors and other billing rules for home health.

DWC Publishes Pharmacy Data in 2023 Results & Accomplishments Report

The Florida Division of Workers’ Compensation (DWC) published their 2023 Results & Accomplishments Report, highlighting key aspects of the Florida workers’ comp system. This report covers a range of insights, including data on pharmacy and physician dispensing trends:

  • In 2022, approximately $98 million was spent on pharmaceutical costs, a significant but steady decline from 2018, when costs totaled $127 million
  • The total paid for pharmaceutical services within a year of injury sharply decreased to $10 million in 2022 from $22 million in 2018
  • Since 2020, pharmacies had a steady decline in repackaged drugs, while the rate of physician dispensing has risen, reaching 132,724 in 2022, with an average payment of $414 per line item
  • Pharmacy payments for non-repackaged drugs have consistently dropped since 2018, reaching nearly $97 million in 2022. In contrast, payments to physicians increased from $21 million in 2018 to $30 million in 2022
  • Compound drug payments for both pharmacies and physicians experienced a decline in 2021 but rebounded in 2022
  • The total paid for dispensed drugs in 2022 was $185 million, varying slightly from $187 million in 2018
  • NSAIDs made up four of the top five drugs dispensed in 2022
Unique Access to MRI and Specialist Consultations Proposed for Spinal Injury Workers

House Bill 1944 was introduced and would allow injured workers with neck and low back injuries to obtain an MRI and consult with a specialist without a pre-established treatment plan if done within 60 days following an injury. A consultation with an orthopedic or neurological specialist will also be permitted during this period. The bill has received support from both the Hawaii Injured Workers Association and the Department of Labor and Industry (DLI). According to the DLI written testimony presented during a recent public hearing, this would “facilitate early diagnosis and proper, timely medical treatment for serious injuries to the cervical or lumbar spine of injured workers.” If enacted, the changes take effect on July 1, 2024.

Workers’ Comp Formulary and Medical Fee Schedule Initiatives Still Pending in 2024

House Bill 4087 would allow the Workers’ Compensation Commission (WCC), with consultation of the Workers’ Compensation Medical Fee Advisory Board, to adopt an evidence-based drug formulary. Meanwhile, House Bill 4079 would allow the WCC to create a new medical fee schedule. HB 4079 would set a 7-day supply limit, authorize the creation of a formulary, and approve the reimbursement for a one-time 7-day supply limit of a compound, unless it meets specific standards.

Physician Choice Update Proposed

House Bill 1246 would amend workers’ comp laws pertaining to physician choice, granting injured workers the right to designate their attending physician for the provision of services and goods required for the treatment of work-related injuries or occupational diseases. Current law designates the selection of an attending provider by the employer or insurance carrier. The bill requires notification to the employer and the insurance carrier about the employee’s chosen physician and the services and products received. The proposed effective date is July 1, 2024, and the bill’s scope extends to new injuries and injuries received prior to the effective date.

State-funded Mental Health Wellness Program Proposed

House Bill 1118 would establish a state-funded first responders mental health wellness program that provides up to 10 days of compensation and mental health services for first responders diagnosed with PTSD who do not qualify for workers’ comp. Indiana only provides PTSD coverage to first responders if a physical injury is present, while this bill only requires a qualifying traumatic incident – defined as witnessing a death or serious injury.

Medicare-Based Fee Schedule Proposed

House Bill 198 would establish a Medicare-based fee schedule for workers’ comp, setting fees at 150% of Medicare, or the actual charge for service, whichever is less. Under current law, state regulators set reimbursement rates for medical services and may update the schedule annually. Louisiana has not adjusted its’ medical fee schedule in more than a decade, and supporters of the bill have noted premium rates have consistently decreased over the same period.

Marijuana Penalty Bill Introduced

Senate Bill 935 would reduce or eliminate workers’ comp benefits for injured workers who are found to be using marijuana. Workers’ comp awards and death benefits would be reduced by 50% if the employee failed to obey employer rules related to the use of substances and the injury was sustained while under the influence of such substances. All benefits would be forfeited if the substances in question were found to be the proximate cause of death or injury.

Annual Report Illustrates Increase in Brand Opioid Utilization

The New Mexico Workers’ Compensation Administration (WCA) released their 2023 Annual Report, providing an overview of system trends, highlighting opioid and brand name prescription utilization. System data illustrates that New Mexico is not reducing opioid levels per prescription as quickly as their neighboring states or the country. The WCA raises concerns about a potential correlation between the payment rates for opioid units and the volume of prescriptions, alongside a notable shift in prescribing practices from generic drugs to brand-name alternatives. When measured against both its geographic region and the national average, New Mexico:

  • Pays more per prescription and experiences higher numbers of prescriptions per claim. This change grew sharply in 2021 due to an increase in the cost per opioid prescription compared to a decrease in cost across the rest of the country
  • Experienced a rise in opioid prescription levels in 2021, as well as an increase in costs paid for opioids, and the share of opioids among prescriptions
  • Saw Oxycontin® account for 7.3% of pharmaceutical payments and 1.5% share of prescriptions, while Hydrocodone Bitartrate-Acetaminophen accounts for 2% of payment shares and 6.9% share of prescriptions
  • Had 38% higher Morphine Milligram Equivalents (MME) in the region, and it is increasing
DFS Publishes New Set of PBM Proposed Rules

The New York State Department of Financial Services (DFS) is revising regulations governing Pharmacy Benefit Managers after withdrawing previous rules due to industry concerns last October. The updated proposal, developed through extensive engagement with stakeholders, excludes workers’ compensation plans from most provisions, retaining only the reporting and licensing requirements under existing Part 454.

Sign Language Committee Addressing Licensing Concerns

Oregon’s Rules Advisory Committee for the Oregon Board of Sign Language Interpreters met recently to discuss recommendations for permanent licensing rules required by House Bill 2696. The Board initially implemented temporary rules with an expiration date of June 7, 2024. Permanent rules will establish minimum qualifications, supervision requirements, specialty licensing criteria, and define license types for various settings. Concerns include application and licensing fees, holding multiple licenses, the additional costs for certifications, and the impact to out-of-state interpreters. Challenges with supervisory roles were discussed due to limited interest and skills among interpreters. While licensing is seen as a benefit, many felt critical factors were overlooked in the development of the new law. The committee will soon publish their final rule recommendation for public comment.

Court Nixes Red Book for AWP, Orders Bureau to Find Replacement

A Pennsylvania appeals court determined that Red Book® pricing used by the Bureau of Workers’ Compensation (BWC) for resolving pharmacy fee disputes is inconsistent with the interpretation of the term “average wholesale price” (AWP). Pennsylvania currently limits pharmaceutical reimbursement to no more than 110% of AWP. In Federated Insurance Company v. Summit Pharmacy, a court decision published in early January 2024, the petitioner argued that Red Book does not provide an average price based on how the values are derived and claimed that the BWC overstepped its statutory authority by using it. The court ruled that using Red Book as the average price to settle payment disputes is not valid and ordered BWC to identify a new nationally recognized publication to resolve their disputes. While the BWC is considering alternative benchmarks, there have been several legal filings which must be considered prior to any further action taken at the BWC on this topic.

DWC Seeks Stakeholder Input on Future Rulemaking Projects

On February 13th, the Texas Division of Workers’ Compensation (DWC) issued a notice inviting stakeholders to input on upcoming rulemaking projects. In the absence of a legislative session, the DWC will focus on revising rules and regulations. The notice encourages interested participants to fill out an online form to suggest new rules or revisions to existing ones. There is no specified deadline for submitting comments.

DWC Closes Loophole on Medical Billing Complaints

The DWC is reviewing its rules for filing complaints to prevent health care providers and their agents from misusing the complaints process to collect fees instead of following the proper medical fee dispute resolution (MFDR) process. Currently, providers can dispute fees within a year through the MFDR process, but some have tried to use the complaints process after missing the deadline. To close this loophole, the DWC intends to ensure that providers cannot file complaints about fees if more than a year has passed since the date of service. The DWC held a public hearing on April 16th and plans to use stakeholder commentary to inform any regulatory changes in the coming months.

Research Group Releases Health Care Cost and Utilization Report

The Texas Workers' Compensation Research and Evaluation Group released a report on health care costs and utilization trends within the Texas workers' comp system between 2012 and 2022. In addition to major cost and utilization statistics, the report provides patterns across claim type, health care provider type, maturity, facility type and drug type. Key findings include:

  • Total health care costs decreased 30% ($1.15 billion to $812 million)
  • Total claims decreased 20% (319,000 to 256,000)
  • Pharmacy service costs declined 71% ($136 million in 2012 to $39 million in 2022)
  • Claims receiving pharmacy services dropped 54% (150,000 to 69,000) with average costs decreasing 38% ($908 to $563) per claim
  • Professional service costs, which include physician and therapy services, DME and ASC, decreased 26% ($657 million to $483 million)
  • Hospital/Institutional service costs decreased 20% ($355 million to $285 million)

These trends likely result from decreased claim volume, the implementation of evidence-based treatment guidelines, the pharmacy formulary, and greater use of certified health care networks.

DWC to Complete Opioid Plan-Based Audit

Texas announced a plan-based audit on gabapentin and pregabalin when prescribed with opioids. The audit plan was announced in November 2023 and results are expected later this year. The audit is to ensure prescribers are providing treatment according to the current edition of the Official Disability Guidelines (ODG). Evidence-based medicine supports the ODG in that the combination of gabapentin or pregabalin and opioids is not recommended.


Changes in Physician Service Utilization

The National Council on Compensation Insurance (NCCI) published Physician Service Utilization – A Multistate Review Guide, describing changes in utilization of physician services from 2012 to 2022 across 36 states. The average utilization per claim increased modestly over the past decade while physician service utilization differed across states depending on certain factors. Highlights from the report include:

Physician medical expenditures totaled 39% of workers’ comp medical spend in 2022

Physician payments per claim varied across states with an average of $1,800 in costs

Utilization per claim differs across states, most likely due to treatment guidelines, fee schedules and network penetration

Utilization variations reflect state differences in injury mix, likelihood of major surgery, and service intensity

In many states, physical therapy drives physician service intensity and is a primary factor for variations, especially claims without surgery

Differences in injury mix and likelihood of major surgery play a role, while their impact is comparatively smaller, although significant in some states


Vertical Integration Leads to Higher Comp Costs

The Workers Compensation Research Institute (WCRI) published Impact of Vertical Integration in Workers’ Compensation, analyzing the effects of vertical integration in the medical market. This integration, where physicians provide care at hospital-owned sites or larger health systems, led to increased claim costs and prolonged recovery times for injured workers. The study covers care in 34 states from 2012 to 2018, focusing on key medical specialties treating a significant portion of injured workers. Researchers found:

Medical costs per claim increased 7.3% at 6 months' maturity, including a 15.2% increase in costs for lower-back injuries

Physician payments per claim varied across states with an average of $1,800 in costs

Utilization per claim differs across states, most likely due to treatment guidelines, fee schedules and network penetration

Utilization variations reflect state differences in injury mix, likelihood of major surgery, and service intensity

In many states, physical therapy drives physician service intensity and a primary factor for variations, especially claims without surgery

Differences in injury mix and likelihood of major surgery play a role, while their impact is comparatively smaller, although significant in some states


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.