Medical costs, and drug costs in particular, represent the fastest-growing line item on every company's budget. Specifically, out-of-control prescription drug costs can have detrimental effects on a company's bottom line. When co-pays are increased too much, the most expensive, disease-prone employees may reduce their drug intake, leading to more medical claims and higher premiums.
Of all privately insured working-age people with chronic disease, 15.2 percent reported not taking their drugs because of the co-pay in 2003. The importance of controlling drug costs has never been more urgent. Here are some innovative tactics for controlling drug costs that you may be unaware of.
Encourage drug compliance. Employers can control costs by encouraging employees to take their prescribed medications, an important aspect of wellness training and preventive care. When employees who are on important maintenance drugs don't take them, it can lead to your biggest medical claims -- and a 5 percent to 15 percent increase in your premiums.
So how do you get the people who need drugs most to take them? Work off the report submitted by your consultant and reduce what your employees pay for the drugs that control the diseases that most affect your premiums. In the short term, shifting costs from a group with a large number of drug claims may increase the cost of your drug plan. But by lowering the threshold (i.e. the deductible), you'll find that many affected employees will start buying and using their prescriptions, and become healthier, which will lower your aggregate health care expenses in the long-term.
Discourage prescription leftovers. Leftover pills cost your employees their health. On some occasions, after the 30-, 60- or 90-day period of a prescription concludes, there are still pills left in the bottle -- because the employee isn't taking them as prescribed -- and the "scrip" isn't renewed by the patient in the expected timeframe. Moreover, the unused drugs become dated and ineffective over time, making your investment in the prescription a poor one.
In this case, a utilization report prepared by your benefits consultant can lead to "human intervention." This might be an in-person call or a notice of concern to the employee that he or she appears to be out of compliance with their regimen, which could lead to medical complications -- not to mention their possible removal from full participation in the plan.
Reward employee loyalty. Tie preventive care and compliance to employee turnover. Have your benefits broker conduct a survey that cross-references employee drug utilization and compliance with employee turnover. If the results indicate that your regular users of maintenance drugs tend to be short-term, make the higher tiers of your plan -- the ones with increased levels of coverage -- more readily available to employees after more time on the job; say on their 6-month or 1-year anniversary.
This way, you're not investing heavily in some employees' health just so they can leave once they're feeling better.
Recognize lifestyle differences.
Use your health management screening process to control costs. Sound obvious? Not if your benefits consultant hasn't shown you how lifestyle differences among your employees can affect your drug plan infrastructure. Do you charge your employees who smoke more than those who don't? You should. More and more companies, municipalities, even states have established this precedent, charging nonsmokers less for participation in drug and medical plans than those who inhale. Alcohol and controlled substance abuse, if part of a medical history, may also constitute special circumstances.
Suzanne Bruce is a vice president at Corporate Synergies Group Inc., a full-service employee benefits brokerage and consulting firm in the Philadelphia and New York region. Bruce has been a benefits consultant for more than a decade with expertise in managing self-funded medical programs, as well as the design of prescription drug, dental and vision plans.
Ellen Brosso is a vice president at Corporate Synergies. She specializes in short- and long-term strategic planning for her clients. To reach Bruce or Brosso, or for more information on what benefits service brokers offer, go to www.corpsyn.com or call Corporate Synergies at (877) 4-CORPSYN (877-426-7779).
So how do you get a handle on drug costs?
Smart planning. It can reduce your long-term costs by 15 percent to 30 percent without reducing your employees' benefits. Here are four practical solutions.
The tried and somewhat true
Obvious solutions include raising your plan's deductible or co-pay, or establishing a three-tiered program that encourages the use of generic and formulary drugs (those on a preapproved list) over pricier, approval-required prescriptions.
This might lower your premiums in the short term because you're sharing more of the costs with your employees and decreasing usage. Unfortunately, long-term trends are still against you.
Purchase cards separately
There are companies that specialize in drug card programs alone and don't handle medical plans. The options are often better and premiums are lower than with multidisciplinary plans.
Did your current broker shop around for a separate drug program when shopping for your medical? It could save you up to 10 percent.
Employer, insure thyself
The big advantage of a self-funded program is that your broker can supply the reports you need to understand actual prescription drug utilization, not just who's using generic vs. brand drugs, but detailed reports that can give you an understanding of the diagnostics and usage patterns of your employees. That knowledge can help you reduce costs by as much as 15 percent.
To avoid HIPAA violations, your broker should generate these reports, relieving you of the legal responsibilities that come with your employees' health records.
Add more tiers of coverage
You probably already have the classic three-tiered program of generic/formulary/approval-required drugs. But what would a fourth tier look like?
It would be one in which the lowest deductible or co-pay would go to a finite number of disease-prevention drugs, addressing asthma, cardiac problems and four or five other categories.
Why these? Because 85 percent of your medical costs come from the 10 percent to 15 percent of your employees who take high-cost maintenance drugs and have lifestyles that create big claims, whether for emergency room visits or hospital stays.
It's a simple concept -- increase the use of drugs that control expensive diseases that, in turn, affect your premiums. Control the cost of those drugs and increase their use and compliance, and you'll reduce future costs from employees' poor health. It's a logical approach, but four-tiered programs are rarely implemented.
Some will tell you that this runs contrary to conventional cost-control thinking. Typically, you'd be advised to raise your co-pay $10 or $20, or charge a deductible of, say, $100 up front for all maintenance drugs, which might account for a 10 percent to 20 percent reduction on your renewal.
However, the savvy broker knows that detailed studies indicate that when you reach certain thresholds of deductibles for almost all employee incomes, there's a reduced utilization effect. People simply stop taking their prescribed medication because they don't want to pay or can't afford that small outlay for themselves and their family. So, as you increase your deductibles or co-insurance on co-pays to create short-term premium savings, this can actually increase your medical costs 5 percent to 15 percent.
Adding a fourth tier to your prescription plan may seem avant-garde, but it could be the key to cost-effective and affordable health care.
Suzanne Bruce is a vice president at Corporate Synergies Group Inc., a full-service employee benefits brokerage and consulting firm in the Philadelphia and New York region. She has been a benefits consultant for more than a decade, with expertise in managing mid-sized to large multisite, self-funded medical programs, as well as the design of prescription drug, dental and vision plans. Ellen Brosso is a vice president at Corporate Synergies. She specializes in short- and long-term strategic planning for her clients. To reach Bruce or Brosso, or for more information on what benefits service brokers offer, call Corporate Synergies at (877) 426-7779 or visit www.corpsyn.com.