Rules are established to ensure the rights and protect the welfare of people. However, in the healthcare industry, the rules don’t always work the way they were intended. Discrepancies, hidden costs and misleadings are common in many areas of healthcare, perhaps most noticeably in pharmaceuticals.
We need to start seeing past the smoke and mirrors and uncover the truth about the costs paid by carriers, our employees and our business.
Carriers prefer to keep the system opaque, this is especially true when we look at pharmacy spend, where pharmacy benefit managers can establish rates that benefit the provider, and not your business and people. Leaving you unaware of the true costs.
Spread pricing, administrative fees, rebates from drug manufacturers, and other revenues have the potential to drive profits for carriers while being hidden to employers and users. These hidden profits can become more apparent when you separate, or carve out, your pharmacy from the carrier.
Here’s how.
Comparison quotes for pharmacy carve out vs using a carriers pharmacy services can look something like this:
Pharmacy included:
- $71.88 pepm (per-employee-per-month)for medical and prescription services.
- A $47.65 pepm prescription rebate is issued
- Total amount charged, as an admin fee, per employee is $24.23 pepm.
Pharmacy carved out:
- $73.88 pepm for medical services
- $0 prescription rebate.
- Total amount charged, as an admin fee, per employee is $73.88 pepm.
Another example shows a large carrier subscription quoted for $52.13 pepm, with a $47.13 pepm rebate, creating a $5 pepm admin fee. When we take out the prescription drug component and bring it to another party the quote becomes $60.04, no rebates.
Same group. Same Data. Same Plan.
Why would the plan cost more when the carrier is technically doing less? The answer is simple — they want you to use their pharmacy benefit manager because they can profit more. In fact some carriers also offer carve-in programs to their brokers, which means the broker can get a big bonus when they sign a client with their pharmacy.
Sometimes that bonus means they receive up to $100 per employee.
Enhanced by industry opacity, this current profitability method for carriers is suspicious, unfair and surprisingly legal. Carriers are able to use incentives to encourage brokers and companies are being penalized for not using their pharmacy program.
Where does that leave you?
If you are large enough, self-funded, and have all of your data, you can do an analysis and determine what the real prices are.
There are groups that can reprice 12 months of past pharmacy claims to estimate what your savings would be based on their solutions. Most times the savings from a more efficient pharmacy spend offsets the increases in admin premium (and normally creates significant savings).
Until you look at your plans data, you can’t know if you’re making the smartest decisions for your business and your people. That data analysis allows you to make an educated choice, not a choice based on your carrier’s marketing tactics or a broker’s backend incentives that you may or may not be aware of.
Let the data show you what the correct solution is.
With this data you can remove the smoke and mirrors and reduce the opacity of the healthcare industry. You can get a clearer picture about your plans’ real costs and your carrier’s real profits.
