July 18, 2011

According to a 4th quarter 2010 report published by the non-partisan Kaiser Family Foundation and Health Research & Educational Trust, more than 75% of covered workers are in plans with three or more cost-sharing tiers for prescription drugs. The latest Kaiser survey was conducted between January and May of 2010 and included 3,143 randomly selected, non-federal public and private firms with three or more employees. The results of this pharmacy study are compelling and worth review by employers and plan sponsors. The highlights of the 2010 survey are as follows:

• A large majority of covered workers (89%) in 2010 have a tiered cost-sharing formula for prescription drugs. Cost-sharing tiers are generally associated with a health plan placing drugs on a formulary or preferred list, which classifies drugs as generic, preferred, or non-preferred. Over the past years, an increasing number of plans have created a fourth tier of drug cost-sharing, which may be used for lifestyle drugs or expensive biologics.
  
  
• 78% of covered workers are enrolled in plans with three, four, or more tiers of cost-sharing for prescription drugs, the same percentage as the previous year.
  
  
• High deductible health plans with a savings option (HDHP/SOs) have different cost-sharing patterns for prescription drugs than other plan types. Only 53% of covered workers in HDHP/SOs are in a plan with three or more tiers of cost sharing for prescription drugs. Thirty percent are in plans that pay 100% of prescription costs once the plan deductible is met.
  
  
• Among workers covered by plans with three or more tiers of cost-sharing for prescription drugs, a large majority face copayments rather than co-insurance. The percentages differ slightly across drug types because some plans have copayments for some drug tiers and co-insurance for other drug tiers.
  
  
• For covered workers in plans with three, four, or more tiers of cost sharing for prescription drugs, the average drug copayments for first-tier drugs ($11) was consistent with the amount reported the previous year ($10). The average copayments reported for second-tier drugs ($28), and third-tier drugs ($49) were slightly higher than the amounts reported in 2009.
  
  
• For covered workers in plans with three, four, or more tiers of cost-sharing for prescription drugs who face co-insurance rather than copayments, co-insurance levels average 17% for first-tier drugs, 25% for second-tier drugs, and 38% for third-tier drugs, which are similar to the percentages reported the previous year.
  
  
• 13% of covered workers are in a plan that has four or more tiers of cost sharing for prescription drugs. For covered workers in plans with four cost-sharing tiers, 46% face a co-payment for fourth-tier drugs and 24% face co-insurance.
  
  
• The average copayment for a fourth-tier drug is $89 and the average co-insurance is 36%. These amounts are not statistically different from the amounts reported in 2009.
  
  
• 11% of covered workers are in a plan that has two tiers for prescription drug cost-sharing. Similar to workers in plans with alternative cost-sharing tiers, copayments are more common than co-insurance for workers in plans with two tiers. The average co-payment for the second tier is $28. The average co-insurance rate for the second tier is $27; there was insufficient data to report the co-insurance rate for the first tier.
  
  
• 5% of covered workers are covered by plans in which cost sharing is the same regardless of the type of drug chosen. Among these covered workers, 51% have copayments and 39% have co-insurance. Unlike the other plan types, covered workers in HDHP/SOs with the same cost sharing regardless of the type of drug were more likely to face co-insurance rather than copayments (84% vs. 12%) for prescriptions.
  
  
• For those workers with the same cost sharing regardless of the type of drug, the average copayment is $13 and the average co-insurance is 24%.

Pharmacy plans continue to represent a larger portion of benefit plan costs – for many upwards to 18% to 20% of overall benefit costs. Unlike other types of benefit plans, there are a variety of plan design and utilization management techniques that can be effectively used to balance costs and flatten the trend curve. The emerging results as outlined above speak to some of these features. To obtain a full copy of the Kaiser Report, visit http://ehbs.kff.org/pdf/2010/8085-Section_9.pdf

If you have questions regarding best practices for pharmacy plan management, contact your Conner Strong & Buckelew account representative.