The end of November marks 10 years of existence for Cubic Health. While the pace of change in the employee benefits industry is greater today than a decade ago, even more interesting are the evolving partnership opportunities for plan sponsors to result in greater value for the money invested into their benefits plans. It’s the opportunity to reduce existing inefficiencies that will allow for recurring reinvestment into areas that will drive greater returns for a given plan and its members.
I sense the next decade in the benefits industry will focus to a much greater degree on mutually beneficial partnerships founded on the realization that true success will be achieved only if plans are sustainable. There is growing realization that this industry is not a zero-sum game, where a given win for one stakeholder group means an equal loss for another. There is ample opportunity for win-win-win scenarios that will be driven by meaningful and growing partnerships.
To that end, the move to consider preferred provider networks (PPNs) with pharmacy groups has been one of the dominant growth trends in 2013. In many ways, it makes perfect sense: how many companies put their computer paper or office coffee needs out to tender, and instead of dealing with multiple suppliers, deal with a small handful of key suppliers known to deliver quality and value? What makes PPNs more challenging in the drug plan world, however, are the number of moving parts and the complexities that aren’t always evident on the surface.
One of the complexities that, to date, has not received its due attention is the issue with co-ordination of benefits (COB). This is an area that has seen remarkable change in recent years as an indirect consequence of drug pricing reforms and other elements that have impacted profitability for retail pharmacy. Now, more than ever, COB must remain a key focus in an effort to eliminate unnecessary waste in plans and allow for reinvestment into more meaningful benefits offerings.
The following are all examples of claims from 2013. Each comparison is for claims from the same pharmacy, including one transaction with no COB (i.e., submission to only one private plan) and the second transaction where there were two private plans involved, and COB between the two plans. The totals represent the total amount paid by the member and the plan (in the case where there is only one private plan and no COB) or the amount paid by the member and the two private plans combined where there is COB.
Example 1: Same medication for bipolar disorder, claims from same pharmacy, 30 tablets per claim:
- One private plan – total paid between plan and member: $128.77
- Two private plans with COB – total paid by both plans and member: $139.20
- Claim cost 8% more in this case when COB was involved
Example 2: Same prescription nasal spray, claims from same pharmacy, one unit dispensed per claim:
- One private plan – total paid by plan and member: $46.12
- Two private plans – total paid by both plans and member: $49.37
- Claim cost 7% more in this case when COB was involved
Example 3: Same acne medication, both from same pharmacy, one tube dispensed in each case:
- One private plan – total paid by plan and member: $58.90
- Two private plans – total paid by both plans and member: $92.99
- Claim cost 58% more in this case when COB was involved
Example 4: Antihistamine, both from same pharmacy, 30 tablets in each case:
- One private plan – total paid by plan and member: $36.86
- Two private plans – total paid by both plans and member: $46.64
- Claim cost 27% more in this case when COB was involved
I look at any waste in the plan as an unfortunate opportunity cost, resources that could be used to cover off myriad other plan cost commitments and investment opportunities such as the following:
- funding plan administration fees (would fees even be an issue for sponsors if unnecessary plan spending was eliminated?);
- offsetting rising stop-loss insurance premiums to cover an increasing utilization of innovative, specialty therapies;
- mitigating the need to cost-shift an increasing proportion of plan costs to plan members;
- investing in targeted health and wellness initiatives (in this case, wouldn’t those additional drug costs not be better spent on medication management services?);
- protecting the sustainability of the plan and the ability to fund necessary health benefits and innovations to keep members productive, engaged and healthy; and
- offsetting organic claims growth through an aging of the plan population and an increase in the utilization of medications to treat age-related chronic conditions.
As dialogue in the benefits management space continues to focus on waste and inefficiency, the area of inefficient COB may be another area to consider in an overall drug plan management strategy. Hopefully, the expansion of key partnerships for the greater benefit of all industry participants and plan members will help to achieve those goals.