Protecting your drug plan from rising costs
A major concern for employers looking to control their costs is a health and dental benefits. One of the fastest rising health care costs for employers is drug plans. With the advances in medicine, there seem to be new drugs every other month. Employers have to make the tough decision of balancing cost control with the wellbeing of their employees. Here are four strategies for plan sponsors to consider.
Mandatory generic substitution
Mandatory generic substitution is similar to generic substitution: the plan sponsor will cover the cost of the generic drug equivalent; the plan will only cover brand name drugs if your doctor prescribes it. Mandatory generic substitution takes it a step further: the plan will only cover generic drugs, even if a doctor of your employee prescribes a brand name drug. This can lead to big cost savings for plan sponsors: the average cost of generic drugs is 25 percent less costly than the brand name equivalent.
You probably already know what a deductible is – it’s the expense amount an employee must incur before he or she can be reimbursed for a drug expense covered by your drug plan. While most drug plans have a deductible, there are different variations of the standard deductible you may want to consider.
Under a calendar year deductible, an employee’s deductible is based on drug expenses incurred between January 1st and December 31st. The second type of deductible is the per prescription deductible. Under the per prescription deductible, the deductible limit is based on the number of prescription drugs an employee purchases.
A lot of employers make the mistake of assuming their deductible is set in stone, when in fact it’s fairly common to increase the deductible on a yearly basis. Employers can make a request to their insurance provider to update the insurance contract as required. Employers often change their deductibles to reflect rising drug costs and inflation.
A large number of employers are leaving money on the table by not introducing a percentage of co-insurance. A percentage co-insurance is a good way to share costs with employees. Although a co-insurance won’t cost the average employee very much, it can lead to big savings across the board.
The typical drug plan has a coinsurance between 80 percent and 100 percent. A percentage co-insurance as an effective way to control costs because it raises the awareness of employees about drug prices. Employees will be more likely and willing to shop around for the lowest price and look for generic substitutes, which is a money back in the pocket of the plan sponsor.
Coordination of benefits
Not to be confused with co-insurance, coordination of benefits is when an employee is covered by your drug plan and also has coverage under his or her spouse’s plan. The coordination of benefits ensures the employee isn’t paid twice for claims.
While the coordination of benefits isn’t anything new, cost savings can arise from eligibility. When a new employee enrolls in your benefits plan, it’s important to ask if their spouse has access to his or her own drug plan. By taking this simple question, the cost savings can add up over time.