In this A.M Best video, Milliman consultant Brian Anderson discusses strategies for managing pharmaceutical drug costs. Among the strategies he talks about are limited pharmacy networks, consumerism through copay assistance programs, and price shopping.
Employers and other plan sponsors have the option of carving in or carving out their pharmacy benefit programs from their medical benefits. There are a number of important factors that should be considered when deciding whether or not to carve out pharmacy benefits. This article identifies the advantages and disadvantages of both options and raises important questions to consider when contemplating a move to carve-out.
When the pharmacy carve-in approach is used, the employer contracts directly with the medical health plan vendor for medical and pharmacy benefits. The vendor will either administer the program in-house or contract with a pharmacy benefits manager (PBM) vendor to process pharmacy claims and administer the pharmacy program. Because the employer contracts directly with the medical health plan vendor, there is no direct relationship with the PBM.
A pharmacy carve-in is typically used under the fully insured model. In 2015, the Pharmacy Benefit Management Institute (PBMI) reported 23% of smaller employers (less than 5,000 lives) and 7% of larger employers (greater than 5,000 lives) were fully insured. Under the fully insured model, the employer pays a premium to the insurer and the insurer assumes the risk of the total claims amount rather than the employer.
When the pharmacy carve-out approached is used, employers contract directly with a PBM vendor to administer their pharmacy benefits program.
A pharmacy carve-out is typically used under the self-insured model. In 2015, PBMI reported 77% of smaller employers and 93% of larger employers were self-insured. Under the self-insured model, the employer assumes the risk and benefits from managing costs. Pharmacy stop-loss insurance may be purchased to mitigate the risk of total claims amounts going over a certain threshold. A pharmacy carve-out can also be used with the fully insured model, although this is less common.
Employers and other plan sponsors have the option of carving in or carving out their pharmacy benefit program from their medical benefits. In this paper, Milliman’s Brian Anderson and Angela Reed highlight the advantages and disadvantages of both options and raise important questions to consider when contemplating a move to carve out.
Plan sponsors who routinely review the selection and contracting process they use to hire a pharmacy benefits manager (PBM) can cut costs. An experienced consultant can help by customizing the process to meet the plan sponsor’s needs and provide critical assistance throughout the process. Milliman’s Brian Anderson and Alex Johnson offer some perspective in the article “Staying competitive in the pharmacy benefits manager selection process.” The authors also provide an overview of PBM contract negotiations and market checks.
Here’s an excerpt:
When selecting a PBM, a plan sponsor should follow a well-structured RFP process. It is imperative that the process involves individuals with extensive experience and knowledge in reviewing, implementing, managing, and auditing PBM arrangements. Their experience will play an important role in achieving the best available PBM arrangement for the plan sponsor, including optimal financial terms and concise contractual language.
Most plan sponsors partner with a pharmacy benefits consultant to guide them through the process and help them achieve the best results. It is vital to develop a proven, objective, and tailored grading process to evaluate the PBM vendor responses and make valid financial and administrative comparisons across vendors. An experienced consultant or advisor can help in this regard.
The steps required in the PBM vendor selection process include:
• Preparing the RFP
• Distributing the RFP to prospective PBMs
• Conducting a bidders’ conference call
• Analyzing financial bids and grading responses
• Summarizing analysis and choosing finalists
• Finalizing PBM selection
• Drafting the contract
Milliman consultant Brian Anderson will copresent at the AIS Health Virtual Conference, “Proven pharmacy benefit strategies for a rapidly changing marketplace,” on September 16. His presentation, “Exclusions and other emerging formulary management strategies,” examines tactics employed within the prescription drug marketplace and provides perspective on strategies that can be effective under particular circumstances. Anderson will be presenting alongside Joshua Freddell, senior director of Enterprise Product Innovation at CVS Health.
The conference will focus on pharmaceutical drug spending and highlight steps the nation’s leading pharmacy benefit managers are taking to control it. For more information on the virtual conference, click here.
Employers looking to manage the cost of their healthcare plans should think about the value of conducting a claims audit. In this Employee Benefits News article (subscription required), Milliman consultants Brian Anderson and David Cusick consider how routine audits can detect flaws in a plan’s design, leading to better claims handling procedures and reductions in plan costs.
Here is an excerpt:
If feasible, it is a good idea to have claims audited every one or two years. At least as important, however, is the implementation audit. An implementation audit takes place shortly after a plan has been set up. A good time frame is 90 days after beginning work with a new vendor or any substantially new contract. Implementation audits are akin to taking off the training wheels. They help ensure that a plan has been set up correctly and that the plan sponsor is getting all of the benefits it contracted for during the implementation process. They happen after enough time has passed to gain a body of experience data but still soon enough to head off a major course change requiring extensive retroactive corrections.
Expect an audit to take three to six months. After that the recovery effort begins, in twofold fashion: recovering any money that the plan may have overpaid, and the equally important work of correcting errors in the system that were identified in the audit. Plan sponsors may engage an overpayment recovery vendor, or choose to handle it in-house.
The benefits of proactive auditing for the plan sponsor should be evident: to verify the integrity of vendor contracts and to meet fiduciary responsibilities. As with anything, there is no guarantee an audit will pay for itself every time. But it is not unusual for an audit to have findings about 3% to 5% of paid claims costs, with recoveries of about 1% to 2%. Today, for many reasons, claims audits are more effective than ever. They can be relied on to uncover something in the working of a plan that can be improved, isolated issues as well as systemic and redundant errors, contractual compliance questions, or basic data entry problems.