Commentary: Twelve years ago, the representative of a third-party administrator sat in my office. As our conversation unfolded, he looked at me in disbelief and objected, “Zack, are you kidding me? No one in their right mind would ever put prescription drug benefits underneath the self-funded medical plan’s stop-loss insurance! What a waste of money!”
In those youthful days, I tended to argue more and replied, “We are beginning to regularly see claimants with annual prescription drug claims of $15,000 or more. If an employer has an individual stop loss of $40,000 and wants to cap its risk at $40,000 per claimant, it would logically place prescription drug benefits underneath the stop loss.”
Twelve years later, even certain high-cholesterol medications are running close to $15,000 per year in cost (for example, Praluent and Repatha). And, it’s now not uncommon to see members on specialty medications exceed $100,000 in annual spend individually. Several market pressures – including innovation, price inflation, drug life-cycle management, increased new-to-market pricing and clinical-guideline changes – are all factoring into this. Two examples are:
- Yervoy/Opdivo combo – $250,000/year (cancer – four-month survival increase)
- Harvoni – $94,000/treatment (hepatitis C – one-time therapy)
Despite the continued escalation in specialty medication costs, many employers sponsoring self-funded health plans have not yet placed prescription drugs underneath the plan’s stop-loss insurance. Why is that?
Are you familiar with the parable of the frog and the boiling water? It goes something like this: If you drop a frog into a pot of boiling water, he’ll jump right out. However, if you place a frog in a pot of cool water and turn on the heat, he’ll happily hang out in the pot long past 212 degrees Fahrenheit. Perhaps our health plans are like the frog, and the rising cost of specialty medications is like the heat.
Look at it this way: If your health plan was presently fully insured and you were moving to a self-funded structure for 2016 with an individual stop loss of $60,000, would you even think twice about including the above specialty drugs within the stop-loss insurance?
In our travels this year, we’ve witnessed:
- A mid-size employer that was forced to modify its entire 2015 business plan when a claimant incurred a cumulative $90,000 specialty prescription drug early in the contract year.
- Major insurers routinely not quoting prescription drugs underneath the stop loss.
- The continued migration from fully insured to self-funding by small to mid-size employers as they seek refuge from the Affordable Care Act’s new premium taxations and “fair health insurance premium” rules.
If your self-funded health plan’s individual stop loss is $200,000 or less, do you agree that it’s time to end the debate on whether or not prescription drug benefits should be covered under the individual stop loss?If your individual stop loss is higher than $200,000, we’ll concede that highly risk-tolerant organizations could still, depending on the underlying break-even mathematics, make a facts- based argument for leaving the prescription drugs uninsured.
- Read your current stop-loss agreement or contract and determine if prescription drugs are covered under the stop loss. If they are not, consider amending your contract now versus waiting until the renewal. Your stop-loss vendor should permit this mid-year change.
- Before purchasing stop-loss insurance, double-check that prescription drugs are covered. If this provision is not stated prominently on page 1, check the assumptions page. Even if your benefit consultant’s RFP requests this provision, vendors will often unintentionally (let’s hope) leave the prescription drug benefit uninsured.
Zack Pace is a senior vice president, benefits consulting at CBIZ, Inc. He can be reached at ZPace@cbiz.com. Follow him on LinkedIn and Twitter at @zpace_benefits. Michael Zucarelli, PharmD, is the national pharmacy practice leader at CBIZ, Inc. He can be reached at firstname.lastname@example.org.