What is the biggest issue self-funded employers have with their prescription benefit plan? Your first answer might be cost but that really isn’t the problem medication benefits. Sure, we’d all like to get meds for free. Even accessing them for less would be nice. However, after hundreds of claims reviews showing significant cost savings opportunities of 20% or more on drug spend, we still watch employers struggle to evaluate options, discern truths and implement change in their pharma benefits. Why? One might argue that it is resistance to change, a lack of good advisory services, competing priorities or maybe even indifference. These things may be true in part across some situations but if cost was really the problem, wouldn’t employers jump at savings opportunities?
No, cost isn’t the primary problem. After all, employers are spending money on medications as a way to help employees get or stay healthy and ultimately increase productivity. Employers expect to spend something and get some kind of result. An employer’s drug spend is a benefit to a group of people in which they have a vested interest and the intention is that it actually benefits them in the best way it possibly can.
The Problem
So, what is the self funded employer’s drug problem? Consider how an employer typically manages the pharmacy benefit. Once the decision is made to self-fund, employers are presented with options for overall health benefits for employees. For purposes of this discussion, there are two key elements of a self-funded health benefit: medical benefits and prescription benefits. The medical side of the benefit typically comprises about 75%-80% of the employer’s total healthcare spend and the pharmacy side of the benefit sits in the 25%-30% range.
From there, a broker or advisor pulls together cost and claims data to design an overall plan for the employer. Within the plan are recommendations for sharing costs with employees and selections for key pieces of plan fulfillment: third party administrators, medical networks, perhaps an onsite or near-site clinic and myriad other options. The medical plan may or may not be administered by the same company administering the prescription plan. The employer evaluates options, recommendations and assumptions while moving toward a decision based on information presented. Contracts are signed, the plan is implemented and then life rolls on. (Read the full post at nwpharma.com.)
Phillip Berry is Founder and CEO of Northwind Pharmaceuticals, a high growth provider of pharmacy services to self-funded employers. A graduate of Butler University, he has served on the board of advisors for the College of Business and is an active Butler alum. An ardent blogger on healthcare and business topics, Phil has authored two books, Stones Across the River and Every Day is Gameday, each a collection of essays on business, leadership and personal growth.
