Top 3 Things You’ll Learn
- The state of specialty medication spending today
- What it means to be self-funded
- How self-funded employers can control their specialty drug risk
When deciding the fundamentals of a benefit structure, plan sponsors may wrestle with the decision to be fully insured or self-insured. A rich benefits package can attract and retain top-performing employees, but the benefit must also be affordable and sustainable for the business. As specialty medication use rises, plan sponsors face new factors that can increase plan costs, and controlling the cost of specialty drugs is a top priority for most employers.
Specialty medications treat chronic or complex conditions in smaller patient populations, require special handling or administration, and can come with six-figure price tags. As these drugs gain popularity, more and more plan sponsors will see these drugs impact their plans. These treatments typically hit the pharmacy benefit, but they can also impact medical insurance coverage. According to the 2022 State of Specialty Spend and Trend Report, 5.9% of the population uses at least one specialty drug.
What’s the difference between self- and fully insured plans?
A fully insured employer has an insurer managing the plan, and risk is spread out over a large pool of covered members. The insurer makes most decisions about providers, networks, and most plan design elements. The employer is only responsible for fixed monthly premiums, but the insurer decides what that price tag is for the plan sponsor and when it changes.
Becoming self-funded means the employer is the fiduciary of the benefit they offer their workers and is responsible for the actual cost of their members’ claims. They oversee and control the quality and cost-efficiency of the insurance coverage they offer to employees. Self-insured arrangements have more control and visibility than fully funded plans, and they can make data-informed adjustments as needed. Additionally, self-insured plans can choose to carve out pharmacy benefits. This gives employers even more options to control plan costs.
Fully insured clients see a markup when it comes to the large price tag of specialty medications, which can have a big impact on overall plan cost. The Affordable Care Act’s 80/20 rule requires insurance companies to spend 80% of premiums on healthcare costs, and allows 20% to go to other costs such as administration or marketing. This means fully insured plans could pay up to 20% more than a self-funded sponsor. Those extra costs can add up with these high-dollar medications.
If you’re considering self-funded but fear the potential for high-cost claims from specialty medications, a properly managed pharmacy benefit — one that features layers of protection including favorable contract terms, clinical oversight, patient assistance solutions, and stop-loss insurance coverage — actually can cost less than a fully funded plan, thanks to improved pricing and transparency for plan sponsors.
Is it time to make the switch?
Without visibility into the pharmacy claims data, employers choosing fully insured plans can’t identify inappropriate utilization, what types of claims are driving their pharmacy costs, or opportunities for savings. In contrast, self-insured employers can implement clinical oversight programs, bolster their coverage with stop-loss or supplemental stop-loss coverage, and make key choices about their plan’s design.
Before becoming self-funded, plan sponsors should work with their benefits advisor to analyze their current members’ health and drug utilization, the company’s benefit philosophy, and financial needs. Working with an independent pharmacy expert can help employers see how a change would impact their members and their bottom line.