There’s no mistaking the importance of benefits when it comes to one of the human resources team’s best weapons for winning and keeping employees.
It’s the offerings and perks like student loan repayment programs or flexible work hours or a work-from-home option that grab headlines. But ultimately, what people really want, need, and expect is good healthcare insurance that also takes care of their prescription drug costs. Today, in fact, pharmacy benefits are high-profile, get high usage, and are highly valued. But maintaining them is an intensifying challenge to employers.
That’s due to the flood of high-priced specialty drugs entering the market. In the process, pharma benefits are accounting for more and more of health plans’ total allocations, reaching 16.5% in 2016 from 12.8% in 2012. Retail prescription spending is expected to outpace other types of healthcare spending, rising 6.3% annually through 2026.
The number of these “miracle” drugs that can cure diseases or prolong lives has exploded by 1200% since the mid-1990s. Price-tags have been in line with the promises: The 2019 introduction of Zolgenzma, which treats children with deadly spinal muscular atrophy, broke records at $2.125 million. The treatment for Hepatitis C, 99% effective, costs $100,000 per course of treatment. Others can run $4,500 to $50,000 (or more) a month over a lifetime.
Your plan may never get a claim for Haegarda (for Hereditary Angioedema) or Harvoni (for Hepatitis C). But what happens when it does, when paying one claim – never mind two or three – could do serious damage to your healthcare budget?
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Dealing with that issue has left employers, particularly those with self-funded plans, in the difficult position of balancing compassion with their broader fiscal and legal responsibilities as they ask: “Do we have to cover these medications?”
It’s a fair question to think about, but know that amending your plan to head off such issues shouldn’t be reached without first evaluating potential solutions for high-cost claims as well as the regulatory implications of excluding a drug or drug class or even all specialty drugs. (And do enlist experts for the job.) Here’s a guide.
- Keep it in-house. Your health plan and Pharmacy Benefit Management (PBM) services are your first stop. (But count on your outside pharmacy and benefits advisors to run interference.) Improved coordination between the in-house specialty pharmacy and the pharmaceutical manufacturers’ assistance programs, with discounted prices or free products for low-income individuals, is key and can substantially reduce high-cost claims. Keeping the prescription, the care delivery, patient history, and claim coordination in house is best for everyone.
- Bolt-on or carve-outs. “Innovator” startups aim to capture the funds in manufacturers’ assistance programs for patients who can’t afford the therapies or are ineligible due to a PBM claim denial or employer coverage exclusion. They are the new intermediaries but are inherently risky. Their long-term viability is still in question, and since larger PBMs do not agree to work with them, specialty drug discount guarantees and minimum rebate guarantees could be forfeited. Savings analyses provided by these companies may overlook or understate such cost offsets and charge a significant % of savings fee. Plus, as startups, they may have inconsistent staffing and support, making it key to evaluate data exchange protocols and patient privacy protections.
Compliance considerations for drug exclusions
- Inclusion in any of the Affordable Care Act (ACA) preventive care lists. Your plan is required under the Affordable Care Act (ACA) to cover screenings, procedures, and drugs falling under the applicable preventive classifications.
- Falling under an essential health benefit (EHB) category, as described by the ACA. EHBs are set in each state using a “State Benchmark Plan,” which reflects the terms of group medical coverage in that state. Self-funded and large group employers are not required to cover all the items or services (including individual drugs) that a State Benchmark Plan covers. However, if they choose to cover the drug, they can’t impose annual or lifetime dollar limit. This is a complex consideration requiring a compliance attorney’s guidance.
- Issues of discrimination. If you cherry-pick your plan and, for example, provide medical and surgical benefits along with benefits for mental health and substance abuse, but exclude coverage for depression, this could lead to issues with the EEOC and under the Mental Health Parity and Addiction Equity Act rules. Benefits must apply to a broad group of employees and to multiple, dissimilar conditions and, at the same time, exclude both individuals with or without a disability.
- Potential HIPAA issues. Exclusions like this, should they respond to a claim already being incurred, may raise questions that Protected Health Information (PHI) had been used in the decision-making process. Under HIPAA, PHI can’t be used or disclosed for employment-related actions or decisions or in connection with other benefits or employee benefit plan of the employer.
Pharmaceutical costs are only getting more expensive, and those benefits are only getting more important to your employees today and in the future. Striking a balance between compassion and pragmatism in covering what may be outsized claims is going to be your challenge. Step carefully and enlist the right partners to ensure everyone’s interests are met.