Health plan carriers often point to the pharmacy benefit as a leading cause of healthcare inflation. However, with an insured benefit the carrier has no incentive to take advantage of programs that can help hold this cost down. The same overhead is built into the premium to manage the prescription drug benefit as all other segments including physician, hospital, and lab while they pay a PBM far less to manage this segment. This inappropriately drives up the cost of providing a pharmacy benefit to employees for the employer while helping the carrier’s bottom line.
The carrier’s practice of inflating premiums across all segments (physician, hospital, and lab) inappropriately drives up the cost of providing a pharmacy benefit to employees. Araya helps employer groups save money by carving the prescription drug benefit out of the health plan and managing it as a stand-alone. Savings are achieved through lower overhead to manage the program and reduced reserve requirements.
Savings vary based on the group rating, experience versus community. In addition to lowering costs, self-insuring the pharmacy benefit allows greater flexibility in plan design and closer monitoring of utilization; both become valuable tools as employers balance reducing costs and maintaining the quality of the benefit.
Carriers are often reluctant to allow the employer to vary the benefit design because it may require additional filing. In the case of community-rated groups, they are reluctant to provide utilization data because they want to maintain the integrity of the population and avoid adverse selection.
Flexibility in benefit design allows the employer to make moderate tweaks to the benefit. Having access to utilization allows the employer to forecast the impact of those tweaks and track the effectiveness.
