How CADA’s plan design changes affected drug plan sustainability

Even for a complex benefits plan, it’s possible to make changes that have a notable impact on drug sustainability, according to one plan sponsor.

The Canadian Automobile Dealers Association group plan, which is provided to 70,000 employees and their dependants, is a highly customized offering that had historically faced challenges around managing its drug spend, said Karen O’Connell, its director of governance and plan management. 

Speaking at Benefits Canada‘s 2018 Face to Face Drug Plan Management Forum in Toronto on Dec. 5, she explained how the plan is sold to the CADA’s employer members through a national network of advisors, but each dealership can choose a plan design that suits its needs and has its own renewal rate. As well, each employer is given its own set of rates based on its demographics, claims experience and risk profile.

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“With close to 1,000 policies and multiple divisions under each policy, we have thousands of permutations and combinations in plan design,” said O’Connell.

Although most changes in plan design have originated with the advisor and dealer, O’Connell said the plan made a few changes at the top level several years ago. They were aimed at adding a layer of future protection, including imposing a $2-million lifetime maximum on prescription drugs and a $15 dispensing fee cap. It also adopted some best practices in drug plan management to address high-cost specialty drugs.

But the plan still found spending was on the rise. Between 2015-16, it climbed by eight per cent after many years of low inflation, noted O’Connell. In particular, she said, high-cost drugs as a percentage of total spend was growing at an alarming rate.

In order to get a better understanding of what was really going on, the CADA undertook a major analytical review of its drug plan in early 2017. “We needed a better grasp on the impact that allowing full plan design customization was having on our results.”

Some factors were obviously having an effect on the plan, said O’Connell. For example, most dealerships had an open formulary and not all dealers had implemented generic substitution.

Read: Arbitrator strikes down company’s imposition of mandatory generics

Although the review found the plan’s generic fill rate was increasing and benefit coordination was on the rise, it also revealed that the spend on diabetes had grown, with the cost to treat the disease increasing by 17 per cent over two years, accounting for 10 per cent of total drug spend.

A trial drug program was also having the unintended effect of increasing dispensing fees, said O’Connell. “The data revealed opportunities for greater efficiency in the way dollars were spent under the plan.”

Following the review, the CADA plan set out to find solutions that would reflect best practices in claims management while recognizing employees have a part to play in making the most of their drug coverage. In September 2017, it began implementing a suite of changes.

This included requiring groups to move to mandatory generic substitution. The plan also chose to eliminate the trial drug program that had inadvertently increased its dispensing fee spend. It also put in a dispensing fee cap for maintenance medications to encourage a 100-day supply, and instituted step therapy for diabetes medications. Therapeutic class pricing was also applied to three classes of medications.

Read: Important questions to consider before making changes to a benefits plan

“We also moved to a managed formulary that covered 80 per cent of all the drugs available for sale,” said O’Connell. “The formulary is based on reimbursing the most cost-effective treatment alternatives by therapeutic compatibility.” To ease the transition, prescriptions started before the date of the change were grandfathered.

After determining the necessary changes, the plan reached out to its stakeholder community, including advisors and dealer-trustees. While initial reactions were mixed, O’Connell said all parties understood the need to take control of managing costs and build in cost containment features that will have a lasting impact.

Although the plan braced for major pushback from plan members, this didn’t materialize, noted O’Connell. The claims administrator also experienced twice the number of calls in the first three months, but volumes returned to normal after six months.

In terms of impact, O’Connell said the plan’s average per capita drug spend dropped 11 per cent outside of Quebec in the first eight months of 2018. “It is possible to move the needle and make drug plan changes that impact sustainability.” 

Read more stories from the Face to Face Drug Plan Management Forum