Value-Based Care News

Employers Focus on High-Cost Claims, Drug Spending into 2020

Employers will seek to address high-cost claims by looking into new cost control methods, minimizing the effects of rebates, and changing their health plans or PBMs.

employers, high-cost claims, drug pricing, prescription drugs, pbms, health plans, rebates

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By Kelsey Waddill

- Thirty-nine percent of employers will be focusing more strategically on high-cost claims by 2020, according to a study by the National Business Group on Health (NBGH).

The NBGH study drew responses from 147 large employers, who represent over 15.6 million employees and their dependents. Of these, 54 percent were Fortune 500 companies and 39 of them were Fortune 100.

These major employers’ heavy attention to high-cost claims denotes a persistent anxiety about expensive treatments that can seriously impact a company’s healthcare funds.

“Employers are very concerned about how to finance the high cost of new million-dollar drug therapies.  Some of these therapies will cost more than what an employee will earn in a lifetime,” said Brian Marcotte, president and CEO of NBGH.

The study revealed three emerging trends that demonstrate employers’ responses to changes in health plans and the pharmaceutical industry.

READ MORE: Employers Should Offer More Financial Health Support, Study Shows

Foremost, employers are looking to test certain cost control methods, especially for exceptionally high-cost drug therapies.

For 85 percent of employers, pharmacy pricing was their predominant concern going into 2020. One high-cost drug can consume a significant portion of the company’s healthcare budget.

As a result of the intense financial pressure, employers are opening up to new methods of cost control. Whereas in 2019 and even moving into 2020 employers are reticent to step outside of their standard approaches, looking into 2021 and 2022 they anticipate trying new methods.

Some employers expressed interest in trying indication- and outcomes-based pricing, delaying the inclusion of new drugs at the launch date until they prove effective, and purchasing stop-loss insurance to offset the risk for a particular drug after a set price.

For specialty drugs, employers primarily plan to use four methods to keep costs down, including prior authorizations, medical benefits, site of care management, and limiting the patient’s initial supply.

READ MORE: Workers Face High Premiums for Employer-Sponsored Health Plans

Employers are also highly concerned with drug manufacturers’ coupons and patient assistance programs. Manufacturer coupons and patient assistance programs often incentivize employees to select high-cost treatments over lower-cost alternatives, which will lead to many employers to utilize copay accumulator and copay maximizer programs.

Compared to 2018, 31 percent more large employers have adopted or plan to adopt copay accumulator programs, with 34 percent of employers already using them in 2019 and an additional four percent planning to add a program in 2020.

Copay accumulator programs employees from applying copay cards or drug manufacturers’ coupons to cover a deductible or out-of-pocket cost, thereby diminishing the employer’s financial responsibility.

Another 11 percent of employers are responding with a copay maximizer program which helps employees get the most out of their member and employer savings.

The changes in drug rebates programs are affecting the way that employers view their role in pharmacy benefit management.

READ MORE: Employers Working to Drive Down Rising Health Insurance Costs

While 60 percent of employers are responding to the developments in drug manufacturer rebates by focusing on point-of-sale rebate programs, two-thirds of the study’s participants hoped for a model that uses the drugs’ net price with no rebates, in order to disincentivize high-cost drug utilization.

Employers also plan to address high drug spend by looking at the PBM industry, specifically PBM and health plan consolidation.

PBM-health plan consolidations were projected to increase, and 56 percent of employers doubtful that these consolidations would prove to be lower cost and higher quality.

By 2019, 16 percent of the participating, large employers had issued requests-for-proposals as a result of health plan-PBM consolidation. In 2021 and 2022, 30 percent of employers may be shifting their health plan or PBM based on consolidations.

The study does not indicate to which plans or PBMs the employers are planning to shifting. However, with about 46 percent of the largest employers in the nation potentially going out to bid by 2022 due to the mergers, it is clear that the consolidations are influencing major changes in employer-sponsored insurance.

In addition to noting major concerns such as high-cost treatments, the study noted other key findings.

First, an increasing number of employers regard their health investments as imperative to increasing the company’s overall performance.

And while employers are skeptical about a public option, they are divided over extending the Medicare age limit to include a younger population, for example to beneficiaries 55 and older.

Advanced primary care is also a focal point for large employers’ healthcare strategies, with 34 percent introducing a primary care site at or near their workplaces and 24 percent planning to create accountable care organizations and health provider networks in 2020.

Employers are likewise looking to health technology, with over half of the employers surveyed stating that virtual solutions would have a significant impact on the future of healthcare. Among them, 13 percent believed it will transform healthcare.

Furthermore, more large employers are allowing employees to choose between a consumer-directed health plan (CDHP) and another employer-sponsored health plan.

Five primary factors are motivating this shift:

  • Predictable healthcare costs
  • Greater sensitivity to chronically ill employees and their needs
  • Divestitures
  • The choice represents a marketplace and exchange solution
  • Alarm over the excise tax or Cadillac Tax has decreased

Finally, large employers are open to government intervention in reducing the price of high-cost drugs. In particular, they support government negotiation for drug prices above a set amount and financed by the government.

As employers continue to have a heightened awareness of how integral their healthcare strategies can be to their company’s success, payers can help connect them with the tools they need to tackle high-cost therapies, provide virtual solutions, and boost their workforce’s productivity.