Impact of OTC programs on health plan utilization, costs

Every year, avoidable hospital emergency room visits cost the health care system as much as $4.4 billion. With 72 percent of these visits being attributed to insured patients, health plans are often left carrying the financial burden. Plans with employees who make ample use of the health care available to them may end up covering a higher percentage of these visits than others.

Though these numbers may seem formidable, they represent an opportunity for health plans to reduce costs by giving employees even more options when it comes to managing their health. Namely, giving employees access to alternative forms of care, such as over-the-counter (OTC) or supplemental benefits.

Smart Business spoke with Kala Ryan, Solution Sales Executive at FirstLine Benefits, about OTC programs, as well as employer benefit programs that can reduce costs and streamline accessibility to OTC medications.

What are OTC programs?

OTC programs are a supplemental benefit that makes it easier for employees to use OTC care before turning to more costly options, up to and including emergency room visits. Some of these programs give employees access to products and medicines via phone, online, and catalog orders, while others allow them to use pre-loaded debit cards at local pharmacies and retailers.

The cost of the products is included with the employee’s plan, which means there is no cost to them to choose OTC products. An OTC benefit can even provide some employees access to items they might not otherwise afford.

What is the measurable impact an OTC benefits program can have on its members?

Consider the impact one OTC program had on a 20,000-person plan, analyzing health care utilization rates across a Medicare and dual eligible, or D-SNP, population. Based on one year of data comparing employees who have an OTC benefit layered onto their plan to those who do not, the OTC benefit had a positive impact across the board — including employees staying on the plan and cost savings for the plan. Employees who used their OTC benefit saw reductions across five key indicators: Emergency room visits, hospital admission, avoidable inpatient admission, hospital readmissions, and employee satisfaction.

Cross-referencing this data with the cost of the medical claims associated with each of these visits and admissions, the OTC program saved employers an estimated $10.5 million for their 20,000-employee plan over the course of one year. The study also showed plans with the OTC benefit see retention rates of 80 percent or greater, a number that represents not only how satisfied employees are, but also a decrease in acquisition costs for the health plan as new employees join. Strong retention translates to loyalty. When an employer offers an OTC program, employees like using OTC, and appreciate that the organization offers the benefit. When there is better retention, employees are happy and employers can spend less on getting new employees to enroll.

Why should employers consider an OTC benefits program?

In 2020, 71 percent of health plans were offering OTC benefits, and the number of employers offering OTC benefits directly to their workforce was growing at a rapid rate. And IRI, the data analytics and market research firm, has found that U.S. households, on average, spend some $442 per year on OTC products. These convenient, readily available products are often a first response to many minor ailments, according to the Consumer Health Products Association (CHPA), and provide relief of symptoms for some 60 million people who, if OTC options weren’t available, would not seek treatment. The CHPA also finds that OTC medicines offer $34 billion in potential productivity benefits to U.S. employers from avoided doctor’s office visits and time away from work for medical appointments.

By right-sizing health care utilization across their employee population with one of these programs, employers can reduce their health plan costs while improving loyalty and retention within their plan. ●

INSIGHTS Insurance is brought to you by FirstLine Benefits

Kala Ryan

Solution Sales Executive
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Learn about enhancing your health plan with OTC options.