Employers Adjust to Health Care Reform Legislation through Prescription Plan Design that Shifts More Cost to Employees
Indianapolis, Indiana – [March 5, 2014] – The number of employers offering four-tier drug plans increased 11.5% from 2012 to 2013, with 27.9% of employers now using this pharmacy plan design element, according to United Benefit Advisors’ (UBA) 2013 Health Plan Survey, the nation’s largest benchmarking survey of plan design and cost.
The fourth tier pays for bio-tech or the highest cost drugs. This plan design enables employers to pass on the cost of the most expensive drugs to employees by segmenting these drugs into another category with significantly higher copays.
Median pharmacy retail copays for fourth-tier drugs increased by 25% from $80 in 2012 to $100 in 2013, and many are charging between 10% and 30% of the cost of tier four drugs.
“We are seeing more and more employers, small and large, raising copays substantially on fourth-tier drugs,” said Carol Taylor, an employee benefit advisor with D & S Agency, a UBA Partner Firm. “With some of these drugs ranging from $1,200 to $20,000 per month (the cost of some cancer drugs), it is very costly for the plans, which in turn affects their premium rates. We’ve seen this for quite some time with self-funded plans, but we expect it will become more popular among small and large employers with group health insurance.”
The tier-four median copay for small employers (less than 100 employees) was $52, on average, between $45-$60 for mid-size employers (100-499), and between $80-$100 for large employers (500+).
“There are a number of factors that would cause larger groups to have higher copays for brand/specialty prescription drugs,” says Rob Calise, UBA Board Chairman. “Small group markets are pooled by ratings areas, but larger groups are rated more independently. They have much more incentive, then, to raise copays, especially for items that will cause rate increases. In 2015, as employers are forced to come into compliance with health care reform, this might shift some since the prescription copays/deductibles, etc. must all track to the out-of-pocket maximum.”
The number of prescription plans subject to a major medical deductible increased by 3.5%, while the presence of a copay and/or coinsurance after the major medical deductible also increased by 5%, from 68% to 73% in 2013.
“It used to be that all drugs were applied to the deductible, then coinsurance on major medical,” says Taylor. “Now, quite a few carriers, particularly on HDHPs [high-deductible health plans], require deductible, then copays. We’re also seeing small group and mid-market employers place generic brands before the deductible, but brand names after.
The ultimate goal of shifting more cost to employees is to drive behavior — to create better health care consumers. It is very possible we could see copays disappear completely, with everything falling under the major medical deductible.”
Download a copy of the special UBA Pharmacy Report at http://bit.ly/1cA6PMW, or the 2013 UBA Health Plan Survey Executive Summary at http://bit.ly/1cA6PMW. Customized benchmarking reports are available from a UBA Partner Firm.
About the UBA Health Plan Survey
Data in the 2013 UBA Health Plan Survey are based on responses from 10,551 employers sponsoring 16,928 health plans nationwide. Results are applicable to the small to midsize companies that comprise approximately 98% of the nation’s five million-plus employers, as well as to larger employers, providing benchmarking data on a more detailed level than any other survey.
About United Benefit Advisors
United Benefit Advisors is the nation’s leading independent employee benefits advisory organization with more than 200 offices throughout the United States, Canada and the United Kingdom. As trusted and knowledgeable advisors, UBA Partners collaborate with more than 2,200 fellow professionals to deliver expertise, thought leadership and best-in-class solutions that positively impact employers and make a real difference in the lives of their employees and families. Employers, advisors and industry-related organizations interested in obtaining powerful results from the shared wisdom of our Partners should visit UBA online at www.UBAbenefits.com.
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