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Carving out the pharmacy benefit from the medical portion of a health plan provides valuable cost-control data for midsize employers, regardless of whether they are interested in self-insuring, consultants say.
For employers that want to become self-insured, a stand-alone pharmacy benefit plan is the smartest preparatory step, consultants say.
“Midsize fully insured employers get minimal data from their insurer,” said Stephanie Ward, vp-account manager for Corporate Synergies Group L.L.C. in Mount Laurel, N.J.
But if an employer contracts with a pharmacy benefit manager, a wealth of data is provided. “It gives you a window into what's going on,” Ms. Ward said.
Another advantage is that “prescription drug claims are more real time. They are available more quickly to plan sponsors,” said Lisa Zeitel, senior vp and national pharmacy practice leader for Aon Hewitt Inc. in Lincolnshire, Ill.
“You're getting data you've never seen before.” said Ken Olson, president of Horton Benefit Solutions in Orland Park, Ill.
Jill Watson, a consultant with Gallagher Benefit Services in Houston, agrees. If the pharmacy benefit is part of the medical benefit, “there's no transparency for the employer. You are at the whim of the insurer.”
“The advantage of being self-funded comes from the advantage of the data and what you can do with it,” Ms. Watson said.
Pharmacy benefit data is a barometer of the health of the lives an employer covers. “One office visit can yield a multitude of prescriptions,” said Ms. Ward. “The health plan data is not the early warning system you need.”
Employers with 200 to 2,000 covered lives “can look at trends in the group,” such as number of prescriptions per patient, Mr. Olson said.
“With that data, there's a big uptick in the ability to write customized wellness plans,” Mr. Olson said. “Create a baseline and look at the trends and how they change when you create a different wellness plan.” For example, if many plan members are on cholesterol- or blood pressure-lowering drugs, wellness efforts can focus on those conditions.
“You never want to design a wellness program that doesn't solve a problem,” Ms. Ward said.
With pharmacy data that PBMs offer, “you can identify the cost drivers and identify the actions to take,” said Aon Hewitt's Ms. Zeitel. For example, she said, the data show whether utilization, price or the drug mix is escalating costs. Share that data with your insurer, and look for PBM or health plan clinical programs to help lower costs, Ms. Zeitel said.
Other helpful pharmacy benefit information to glean includes how well specialty biologic drugs are managed, said Larry Boress, president and CEO of the Midwest Business Group on Health in Chicago. That category of drugs, for diseases such as multiple sclerosis or hepatitis, can cost $1,600 to $5,000 each time a prescription is filled, he said.
“It's also valuable to know where people are filling prescriptions,” Mr. Boress said. Reducing the size of the pharmacy network also may reduce costs.
While employers can reap advantages by carving out the pharmacy benefit, some insurers are making it more difficult to do so.
While there are many advantages to a PBM carve-out, employers must weigh whether there are any disadvantages to separating the pharmacy program from the medical insurer's disease management program. In Mr. Olson's opinion, the downside is minimal. Employers can ask their PBMs whether they can connect with the medical insurer's disease management program. Additionally, Mr. Olson said, employers must make sure the medical insurer is willing to discount their premium by the percentage that reflected pharmacy costs, so that it is financially feasible to carve out the PBM.
Ralph Catillo, an account executive with Gallagher Benefit Services Inc. in Mount Laurel, N.J., said midsize employers that want to carve out their pharmacy benefit must identify insurers that will allow that.
“The savings used to be great,” as much as 10% to 12% if the drug plan was carved out, Mr. Catillo said. “Now the gap has been closed.” In fact, some insurers are imposing a fee for carving out the pharmacy benefit, he said.
Before signing a contract, find out who the PBM's vendors are, what the PBM does with rebates, its reporting capabilities, and wellness and outreach programs it offers, Mr. Catillo said. PBM reports will show which drugs have equivalent generics, which are available through mail order and which are coming off patent.
Plan on taking “a long-term look” at your financial results, Mr. Catillo advised. “The savings might not be great in the first year, but you have to be willing to do it to get control of benefits.”
One Gallagher client initially carved out the PBM piece. After two years of analyzing PBM data and implementing changes, the client was comfortable self-insuring the medical plan as well, Mr. Catillo said. Now wellness programs are provided through an insurer. Nurses are brought on-site twice monthly to allow employees to check their cholesterol and blood sugar or seek advice, which can keep employees healthier while contributing to the cost savings realized from self-insuring.
Mr. Catillo said he's also seen plan design changes, such as mandatory generics; up-front deductibles; and step therapy, where a patient starts on a generic or lowest-cost drug and only moves to a more expensive medication if the original is ineffective, result in cost decreases of 10% to 12%.
“It's great information to (encourage) consumer-driven behavior,” Gallagher's Ms. Watson said.
The point for employers that want to self-insure their entire health benefit program is to give themselves one to three years to use this data to implement wellness initiatives, financial incentives and other design changes that will get the population as healthy as possible and to instill positive habits, such as medication compliance.
Employers should attempt to move to self-funding health insurance “at a time when the first year is going to be a good year,” said Horton's Mr. Olson.
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