Prescription plans typically account for 20-25 percent of an employer’s annual health insurance claims cost. Who is monitoring the potential for savings associated with prescription costs?
On the surface, having medical and pharmacy benefits integrated in an insurance plan seems logical. In the ‘carve-in’ model, the health plan or medical insurance carrier often subcontracts the pharmacy benefit management function, charging an administrative fee to handle all of the terms and conditions of the contract.
While the convenience of this option may be advantageous for small groups, it may not be addressing potential gaps in savings analysis and utilization control.
The alternative is to ‘carve-out’ the pharmacy benefits and contract directly with a Pharmacy Benefit Manager (PBM). By taking an active role in managing their pharmacy arrangement, employers may experience savings of 10-15%, along with lowering their ongoing trend rate.
Nationally, the percentage of employers with 500 or more employees “carving out” prescription plans increased by 38 percent in 2017, according to the Mercer National Survey of Employer-Sponsored Health Plans.
A carve-out strategy has many advantages for employers:
1. Transparency: Carving out the pharmacy benefit may allow visibility into the true cost of the prescription drugs, since PBMs have the capability of entering into transparent arrangements.
2. Lower Drug Costs: The employer may be able to negotiate better drug pricing, discounts, rebates, administrative fees, and other financial details and incentives.
3. Better Contract Control: Carve-out models allow for the flexibility to customize a pharmacy plan specific to an employer’s needs to impact overall cost and manage risk.
4. “Deep-Dive” Data: In carve-out situations, plan sponsors have direct contact with the PBM and are able to receive standard as well as custom reports on claim elements.
This enables better trend management, more accurate forecasting and predictive modeling for more informed decision-making.
5. Specialty Pharmacy Expertise: The growing quantity of specialty drugs entering the market and the increasing number of people with multiple chronic diseases makes it
even more difficult for payers to mitigate both rising spend and risk. As specialty medications continue to rise in utilization as well as cost, the PBM sits at the center of it all, seeing all pharmacy claims transactions.
MMA gives employers a fully transparent look into their current pharmacy contract through a deep-dive pharmacy audit to uncover areas of overspending and vulnerability. In 2018, MMA expects its nationwide client savings to reach over $100,000,000.
To learn more about prescription benefit carve-outs, please contact Daniel Letscher, MBA, Senior Account Manager for the Cleveland Market of Marsh & McLennan Agency, formerly Benefits Resource Group. Marsh & McLennan partners with privately held businesses, individuals and public companies that seek solutions that go beyond traditional employee benefits services to help them better manage their bottom line. You may contact Daniel by phone at 216-520-5000 or by email at Daniel.firstname.lastname@example.org.
Disclaimer: This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.