Cracking Health Costs
Tom Emerich and Al Lewis
Chapter 2: Does Your Broker Have Your Back?
So what is the action step for all of this? First, your embedded long-time consultants aren’t adding any value and are charging you a lot of money. So instead of negotiating yet another contract with them, we recommend auctioning off your business. Announce your total requirements and ask for one fee. Expect your spending on consultants or previously hidden brokerage fees to fall by close to half – even if you keep the same consulting firm. Your consultants will likely stop doing unnecessary 15-page work plans, 100-page RFPs, overly detailed but completely invalid outcomes analysis, and – my favorite – site tours of vendors on your nickel. But you probably shouldn’t end up with the same consultant if the bids are close. If your research into this market-place showed us anything, it’s that some nimble and flexible middle-market firms are far more capable of doing this job than the old-line houses.
Chapter 3: It’s Time for the Wellness Industry to Admit to Doping
Part 1: Vendored Wellness Programs Do Not, Will Not, and Never Have Reduced Your Health Spending, Period
The bottom line? There is an utter lack of metrics and, really, an utter lack of thought. We’re now more at a herd mentality.
Yes, I really shouldn’t be making such inflammatory statements. The good news is, I don’t have to. That’s a direct quote from a major wellness supporter, the manager of benefits at the Society for Human Resource Management. Apparently, he didn’t get the memo that candor and wellness don’t mix.
Part 2: The Actual Value of Wellness
You can’t purchase a culture of wellness with individual incentives. Your company must invest in its workplace. As such, there are at least three undeniable ways to profitably deploy a wellness program. One is tactical, one strategic, and one morale-building. Naturally, none has anything to do with any aspect of the vendored get-well-quick programs.
We’ll begin with an easy tactic. Suppose you want to raise your annual deductible or contribution or anything else that increases employee share of spending. Let’s say that you’d specifically like to raise the monthly contribution from $100 to $110 … announcethat you are raising the monthly contribution to $130. However, in the same announcement, let employees know that their contribution will stay the same – at $100 – if they do something that has wellness value.
- The increase is optional. If people really want to keep their monthly contribution at $100, they can.
- You’ve created an incentive without paying for one.
- You’ve let your employees know that patrolling their health is an important enough goal that you will subsidize it.
- You’ve taken a step toward the ultimate goal below, which is making your organization more attractive for people who are interested in their health.
- And there is always the chance, however slim, that this “something of wellness value” will prevent a medical event
This tactic means wellness is really just a cover for a financial decision to raise the employee share of health spending. But there is also a strategic pony in the tactical wellness pile: creating a culture of wellness probably does improve the bottom line. Not by paying a vendor to hire coaches, paying your employees to promise to eat more broccoli, or by trying to turn your obese smokers into triathletes – but by making your organization more attractive to healthy people in the first place.
The same people who administer the health benefit run all of human resources, as well. And the human resources department, more than any other, sets the tone for a wellness culture.
The other place you’d like to intervene is in the cafeteria, where you can subsidize healthier choices and maybe even “tax” unhealthier ones. … Beware, though, that if allthe food is too healthful, people will eat elsewhere, probably at a fast-food place. … A good meal planner can solve for that, and hence the words “subsidize” and “tax” in the previous paragraphs. The idea is not to dictate but rather to encourage smart dietary choices.
[You want to show] your employees you care about them. Many initiatives foster that feeling, and wellness is one of them – but only if you do it in a high-profile, visible way. Paying your employees to complete an anonymous form and have blood drawn is not one of those ways.
Chapter 4: This is Your Health Benefit on Drugs
I: Striking Back at the PBM Empire
- Because the majority of PBM contractors prohibit pharmacies from talking to employers, the PBMs can increase their “spread” without disclosing their piece of your pie
- Average Wholesale Price (AWP) discount for generic drugs doesn’t matter
- Corollary: PBMs can tell you that their pricing is “transparent” or “pass-through,” but it may not be
- Mail-order programs frequently cost more
- A $0.00 PBM administration fee may not be a good deal
- The rebate is the ultimate nonopaque component of pricing and is increasingly a distraction
II: Specialty Medications: The Bad News and the Bad News … and the Bad News and the Bad News
First, the bad news. It won’t be long before 1 to 2 percent of your employees account for half you drug spend, as biologically engineered specialty medications will soon comprise most of the 50 top medications based on total cost. … This will only get worse. Over half the medications currently in the R&D pipeline are specialty medications.
To begin with, don’t let your employees regularly get these medications from the corner drug store – insist on use of a specialty pharmacy. … Of course, they also make more money the more drugs get purchased, so you still have to keep an eye on them. … The specialty pharmacy requirement can cause extreme frustration when employees visit the local retail pharmacy to obtain their medication. It is therefore best to allow at least one fill and possibly one refill of the medication at the retail pharmacy as this avoids frustrating delays in treatment.
At this point you won’t be surprised to hear this, but your PBMs are ripping you off. This time it’s because there is not a bright-line distinction between regular and specialty drugs, particularly as specialty drugs, which historically have required injection or even refrigeration, increasing become available in oral form. … Your consultants, of course, are blissfully unaware of this.
So what can you do? Well, in addition to insisting on a specialty pharmacy and recontracting to tighten definitions of “specialty,” not much. If you are a university
III: Regular Prescription Drugs
Tiers have worked so well that we are going to propose that you next apply them according to categoryof drug, not just whether the drug happens to be preferred or generic within that category:
- Lifestyle Enhancing– All, or most of the cost for these medications, would be assumed by the employee. [Viagra, Chantix, Retin-A]
- Convenience– Medications that produce outcomes not directly associated with the preservation of life or the normal functioning of body systems essential to life or medications with less costly treatment alternatives should have high co-pays. [Nexium, Clarinex, Provera]
- Life Preserving – This is the largest grouping, including medications for treatment of conditions such as infections, pain, seizures, depression and cancer. Low co-pays would apply here.
- Business Preserving– Medications to treat controllable chronic health conditions resulting in the highest levels of lost work time and long-term disability. Includes hypertension, high cholesterol, diabetes and asthma. These medications – especially the generic ones – should have invisibly low co-pays.
Look hard at these categories. If you think about it, the first – and even the second – categories really have no business being subsidized at all; they are merely consumer goods too hazardous to sell off a shelf. (This is what flexible spending accounts are for. Employees can pay for these indulgences themselves with pretax dollars.) If you do subsidize them, it’s for recruitment/retention reasons.
There are a number of asterisks along the way. … even though prescription contraceptive methods might be considered as Category 2, they must now be covered at 100 percent under federal law. In addition, the inability to think clearly or reproduce were recently deemed disabilities, and, thus, care must now be taken to assure that coverage of adult attention deficit disorder treatments and fertility enhancers is equal to that of the majority of other medications. … occasions such as these will require prior authorization or appeals to determine the appropriate cost share.
It really doesn’t matter how many times you produce lists of medications in the various categories. Employees are not going to pay attention to them. You can save a great deal of time and frustration by electronically posting the lists and focusing instead on clearly communicating the concepts.