Balancing between compassion and responsibility in covering high-cost drug claims
A single high-cost claim can bust an employer's well-planned budget, leading them to question how much they really have to cover.
The cost of pharmaceuticals is forcing employers into a balancing act that’s increasingly hard to maintain these days, making them straddle the line between compassion and their fiscal and legal responsibilities as high-cost drug claims continue to mount.
The pressure on drug costs has only intensified in recent years with specialty drugs that save or extend lives but carry breathtakingly high price tags. Think Zolgenzma, which treats children with deadly spinal muscular atrophy–at a cool $2.125 million. These drugs add to the burden of overall prices that are expected to rise 6.3 percent annually over the next decade. Even before the specialty drug phenomena, prescription costs have taken up a fast-growing and outsized portion of total premiums, reaching 16.5 percent by 2016 from 12.8 percent in 2012.
Related: ‘Super spenders’ accrued $2.1 billion in specialty drugs costs last year
But high-cost drug claims are especially painful for employers with self-funded plans. A single such claim can bust a well-planned budget, leading an increasing number to ask a question that’s neither unfair nor uncommon: “Do we have to cover these medications?”
If you’re among them and thinking of amending your plan accordingly, enlist an expert to help you weigh alternative solutions along with compliance implications. Here’s what you need to know:
Potential solutions to high therapy and pharmaceutical claims costs
The in-house course. It may take help from outside pharmacy and benefits advisors, but these costs can be reduced within the framework of your health plan and Pharmacy Benefit Management (PBM) services.
What’s required is improved coordination between the in-house specialty pharmacy and the pharmaceutical manufacturers’ assistance programs. These offer discounts or free products for qualified individuals; tapping into them can reduce high-cost claims by as much as 100 percent. Keeping the prescription, care delivery, patient history and claim coordination, within the established PBM solution and stop-loss accounting is best for the patient and the plan.
Carve-outs of carve-outs. Such “innovator” solutions can work but they are inherently risky. They are new intermediaries in facilitating enrollment in the alternate funding options including manufacturers’ assistance programs, meeting a dire need of patients and plans. But take care with them. In addition to concerns about their long-term viability, specialty network discount guarantees and minimum rebate guarantees could be forfeited if larger PBMs do agree to work with them. Such offsets may be under-valued in their savings analyses. Plus, startups can suffer growing pains, exhibited by inconsistent staffing and support, making a detailed evaluation of data exchange protocols and patient privacy protections essential.
Don’t run afoul of regulations
Compliance issues should also guide your decision on whether a drug or drug class or even all specialty drugs should be excluded from your plan. Chief concerns:
- Inclusion in any of the Affordable Care Act (ACA) preventive care lists. The ACA requires plans to cover certain 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. The basis for using the EHB designation for determining whether or not to exclude a drug/drug class is complex, and shouldn’t be undertaken without a compliance attorney’s guidance.
- Issues of discrimination. Be wary of cherry-picking your plan. Say you provide medical and surgical benefits and benefits for mental health and substance abuse, but exclude coverage for depression, this could lead to issues with the Equal Employment Opportunity Commission (EEOC) and under the Mental Health Parity and Addiction Equity Act rules. A benefit has to apply to a broad group of employees and apply to multiple, dissimilar conditions, and at the same time not exclude individuals with or without a disability.
- Potential HIPAA issues, particularly if the exclusion is reactionary. An exclusion responding to a claim already being incurred could raise questions that Protected Health Information (PHI) had been used in the decision-making process. HIPAA provides that 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.
For employers, it’s all about balance today, and maintaining it when it comes to benefits and the miracles of modern medicine is only going to get more difficult. You will have to step carefully, with the help of the right expert partners, to continue to meet everyone’s best interests.
Barbara Hawes is the national pharmacy practice Leader for HUB International. She is an accomplished industry leader with over 25 years of experience in the Pharmaceutical/Employee Benefit Consulting business. Cory Jorbin is the chief compliance officer for Hub International’s West Region Employee Benefits team. Cory consults with employers of all sizes to design, implement and ensure the compliance of employee benefit plans with the Affordable Care Act, ERISA, Internal Revenue Code, HIPAA, COBRA, FMLA, ADA and related matters.
Read more: