Services Employers Scramble to Find Relief on Prescription Costs

Kansas City, Kan.— According to the Kaiser Family Foundation, Americans filled more than 3.7 billion prescriptions in 2010. Because the rate at which individuals developing chronic health conditions continues to increase, the expected decline in drug costs comes as little comfort to services industry employers who are largely footing the bill, as an overwhelming majority still offer prescription coverage to employees as a part of their medical plan. These increasing costs translate to higher premiums for employers and employees, as well as increasing co-pays.

“In the services industry, prescription drug co-pays have been trending upwards over the last few years, although on most plan types non-formulary co-pays have seen the largest increases,” said Amy Kaminski, director of marketing for Compdata Surveys. “On PPO plans for example, formulary co-pays have increased 7.1 percent since 2009, while non-formulary co-pays have gone up by 14.9 percent.”

Formulary drugs are medications included on a list of preferred medications issued by the insurer. Drugs not on this list are referred to as non-formulary and generally incur higher co-pays and may require pre-authorization from the insurer before coverage is granted.

The use of value based insurance design (VBID) has made headlines lately as a means to control prescription costs. Using VBID, services and treatments are priced based on the overall value to an individual’s health, so the greater the value the lower the cost. As a result, co-pays on medications for chronic conditions, such as high blood pressure or diabetes, may be reduced or eliminated completely. The assumption being that reduced out-of-pocket costs will encourage employees to continue taking needed medications, keeping them healthy and reducing long-term medical costs to the employer.

The use of high deductible health plans (HDHP) is also rapidly increasing as a means to control costs. In 2009, 18.3 percent of services employers offered HDHPs, compared to 29 percent in 2012. Because HDHPs carry a higher deductible, the premium costs are generally reduced. Eighty-eight percent of services employer sponsored HDHPs include prescription coverage, with 59.5 percent of those reporting a co-pay requirement. The average formulary co-pay under an HDHP is $33, with non-formulary co-pays averaging $54. Generic drug co-pays on these plans are the least expensive at $11.

About the Survey
Compensation Data 2012 Services provides a comprehensive summary of pay data, benefits information and pay practices with an effective date of January 1, 2012. More than 100 industry-specific job titles and 400 benchmark titles were surveyed ranging from entry-level to top executives, with data collected from more than 5,100 services employers across the country.

Compdata Surveys has been providing comprehensive data at affordable prices to organizations from coast to coast since 1988 and is the nation’s leading compensation and benefits survey data provider. Thousands of organizations provide data in each of our eight industry specific surveys each year, ensuring the reliability of our results. For more information about the compensation and benefits surveys, contact Michelle Willis at (800) 300-9570.