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ADVISORY 2002-14

SUBJECT: Proposed Amendments to §134.502 concerning Pharmaceutical Services

At the August 29th public meeting, the Texas Workers' Compensation Commission (Commission) proposed amendments to Commission Rule 134.502 concerning Pharmaceutical Services. The proposed amendments remove the requirement that an insurance carrier request a Statement of Medical Necessity (SMN) from the prescribing doctor before denying reimbursement for prescription or over the counter medications. In addition to other proposed amendments, the Commission also proposed amending the requirement that the carrier to send a copy of the Explanation of Benefits (EOB) to the injured employee (employee), the pharmacy, and the prescribing doctor.

The Commission expected the requirement contained in subsection (e) to benefit system participants by improving the overall process for reimbursement of medications. However, five months of experience under the new rule showed that there were unintended consequences resulting from the SMN requirement. At least one carrier began requesting the SMNs on the vast majority of their pharmacy bills because the carrier had not yet reviewed the bill and made the determination. Although this practice lead system participants to believe that the carrier was challenging the medical necessity of the medication, the carrier ultimately denied only a relatively small percentage of the bills for which the SMNs were requested. This practice cost system participants time and postage related to the requests and the SMNs that were being provided.

The Commission felt that the consequences resulting from the requirement to request the SMN warranted the proposed rulemaking action. Based upon the rule amendments proposed by the Commissioners today, the Commission will not take enforcement action against insurance carriers for failing to request a SMN prior to denying a bill based upon reasonableness or medical necessity. The "grace period" on enforcement regarding the request of a SMN prior to denial by the carrier is effective only until further notice from the Commission, which will be given prior to the end of the "grace period".

The proposed amendment of subsection (h) would also formalize the provisions of Advisory 2002-06 regarding the persons to whom a carrier must send the EOB if a pharmacy bill is reduced, rather than denied. The rule currently requires the carrier to send a copy of the EOB to the employee, the pharmacist, and prescribing doctor whenever the carrier "reduces or denies" a pharmacy bill. Commission Rule 133.304 of this title (relating to Medical Payments and Denials) requires that an insurance carrier send a copy of the EOB to the sender of the bill at the time the carrier makes or denies payment on a bill; therefore, the pharmacy will always receive the EOB. It is very important to send the EOB to all three parties when the bill is denied, but not when the carrier is reducing the bill. Therefore, the Commission is proposing to delete the requirement to send the EOB to the prescribing doctor or the employee when reducing the bill (note that a "reduction to $0 is a denial, which requires filing with all three parties"). The Commission previously identified this problem and issued Advisory 2002-06, delaying implementation of part of this requirement. As stated in that advisory, the Commission will not take enforcement action against an insurance carrier for failing to provide the TWCC-62 to the employee and the prescribing doctor when a bill is reduced in accordance with Rule 133.503 Reimbursement Methodology. The requirement for the insurance carrier to send the EOB to the pharmacist will be enforced with respect to reductions and denials, as will the requirement to send the EOB to the employee and prescribing doctor on denials in accordance with Rule 134.502(h). The "grace period" on enforcement regarding notice of a reduction is effective only until further notice from the Commission, which will be given prior to the end of the "grace period".

Signed this 29th day of August, 2002

Richard F. Reynolds, Executive Director

Distribution: TWCC Staff
Medical Professional Associations
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