Over the past 12 years, drug plan spending has gone up more than 300 percent as a result of higher drug prices and ballooning prescription drug use. Your drug plan might be as much as 25 percent of your benefits costs and rising.
So how do you get a handle on drug costs?
Smart planning. It can reduce your long-term costs by 15 percent to 30 percent without reducing your employees’ benefits. Here are four practical solutions.
The tried and somewhat true
Obvious solutions include raising your plan’s deductible or co-pay, or establishing a three-tiered program that encourages the use of generic and formulary drugs (those on a preapproved list) over pricier, approval-required prescriptions.
This might lower your premiums in the short term because you’re sharing more of the costs with your employees and decreasing usage. Unfortunately, long-term trends are still against you.
Purchase cards separately
There are companies that specialize in drug card programs alone and don’t handle medical plans. The options are often better and premiums are lower than with multidisciplinary plans.
Did your current broker shop around for a separate drug program when shopping for your medical? It could save you up to 10 percent.
Employer, insure thyself
The big advantage of a self-funded program is that your broker can supply the reports you need to understand actual prescription drug utilization, not just who’s using generic vs. brand drugs, but detailed reports that can give you an understanding of the diagnostics and usage patterns of your employees. That knowledge can help you reduce costs by as much as 15 percent.
To avoid HIPAA violations, your broker should generate these reports, relieving you of the legal responsibilities that come with your employees’ health records.
Add more tiers of coverage
You probably already have the classic three-tiered program of generic/formulary/approval-required drugs. But what would a fourth tier look like?
It would be one in which the lowest deductible or co-pay would go to a finite number of disease-prevention drugs, addressing asthma, cardiac problems and four or five other categories.
Why these? Because 85 percent of your medical costs come from the 10 percent to 15 percent of your employees who take high-cost maintenance drugs and have lifestyles that create big claims, whether for emergency room visits or hospital stays.
It’s a simple concept — increase the use of drugs that control expensive diseases that, in turn, affect your premiums. Control the cost of those drugs and increase their use and compliance, and you’ll reduce future costs from employees’ poor health. It’s a logical approach, but four-tiered programs are rarely implemented.
Some will tell you that this runs contrary to conventional cost-control thinking. Typically, you’d be advised to raise your co-pay $10 or $20, or charge a deductible of, say, $100 up front for all maintenance drugs, which might account for a 10 percent to 20 percent reduction on your renewal.
However, the savvy broker knows that detailed studies indicate that when you reach certain thresholds of deductibles for almost all employee incomes, there’s a reduced utilization effect. People simply stop taking their prescribed medication because they don’t want to pay or can’t afford that small outlay for themselves and their family. So, as you increase your deductibles or co-insurance on co-pays to create short-term premium savings, this can actually increase your medical costs 5 percent to 15 percent.
Adding a fourth tier to your prescription plan may seem avant-garde, but it could be the key to cost-effective and affordable health care.
Suzanne Bruce is a vice president at Corporate Synergies Group Inc., a full-service employee benefits brokerage and consulting firm in the Philadelphia and New York region. She has been a benefits consultant for more than a decade, with expertise in managing mid-sized to large multisite, self-funded medical programs, as well as the design of prescription drug, dental and vision plans. Ellen Brosso is a vice president at Corporate Synergies. She specializes in short- and long-term strategic planning for her clients. To reach Bruce or Brosso, or for more information on what benefits service brokers offer, call Corporate Synergies at (877) 426-7779 or visit www.corpsyn.com.
