Traditional approaches to drug plans need to be revisited, but the industry needs to move toward a properly designed flexible benefits program that fosters better understanding among members, according to Morneau Shepell’s recent News & Views.
While rate of drug cost increases has been slowing recently, the company says new drugs coming on the market in the near future will drive up costs at an “intimidating” rate.
This will further exacerbate an imbalance common among health benefits plans. Already, between 10% and 15% of members are incurring more than 80% of plan costs. Costs will also rise as boomers age and, ironically, as generations X and Y make up more of the workforce.
“When we study information more closely, we see that the younger generations may actually be less healthy than generations that have gone before them,” the authors of the report note. “Obesity, cholesterol, high blood pressure, asthma, allergies and diabetes are more frequently diagnosed in the younger generations than ever before.”
Traditional “one-size-fits-all” plan designs are incapable of handling growing costs or diversity of needs, but, at the same time, flexible benefits programs are only part of the solution.
Any solution would need to ensure that those who demand less of their plan are not unfairly shouldering the cost of those who rely more heavily on the plan. Traditionally, singles and couples have subsidized plan usage by families, while the healthy subsidize the unhealthy.
The authors point out that most traditional three-option plans see roughly 70% of members enrolling in the middle option, while 10% to 15% enrol in the higher-end option.
A better design for flexible plans would include incentives for improved individual health, which would foster reduced use of the plan.
“Benefits programs will need to take lessons learned from the ‘true’ insurance world and the hard lessons learned about financial management and credit from the latest economic downturn and weave them into both plan designs and how we all use benefits programs.”