Carving Out Prescription Drug Coverage is Costly for Employers
Amy Barczy
| 3 min read
Amy Barczy is a former brand journalist who authored content at Blue Cross Blue Shield of Michigan. Prior to her time at Blue Cross from 2019-2024, she was a statewide news reporter for MLive.com. She has a decade of storytelling experience in local news media markets including Lansing, Grand Rapids, Holland, Ann Arbor and Port Huron.
Nearly every worker covered by employer-sponsored health insurance also has prescription drug coverage, according to the most recent Employer Health Benefits Survey from the Kaiser Family Foundation. But how employers choose to provide that prescription drug coverage to their employees can make a significant difference in the total cost of the benefits.
Risks of ‘carving out’ pharmacy benefits
Some employers choose to separate their medical and pharmacy benefits into standalone offerings through different vendors. This is called “carving out” prescription drug coverage from the medical package. However, using separate entities to manage medical benefits and pharmacy benefits can be problematic. Members are caught between two different vendors – and the result could be more expensive for both members and employers providing the coverage. Here are some of the risks to carving out pharmacy benefits:
- Employers may find themselves paying more in hidden fees to vendors, adjusting drug discount rates, losing rebate revenue and increasing costs of care if members’ drug therapies are disrupted.
- Members must complete additional steps to receive potentially life-saving therapies, which could result in delayed care, having to switch medications or no care at all. This could hurt their health and ultimately increase medical costs as their health condition progresses.
- Human resources staff may shoulder an additional burden of answering employee questions, as many employer groups have reported having different vendors for medical and pharmacy benefits is confusing and tedious for members from a customer service standpoint.
The insurer Highmark Inc. recently conducted several studies on the subject. Their results found employer groups that carved out prescription benefits had higher medical costs than those with integrated benefits. The employer groups with integrated benefits also had shorter hospitalization stays and reduced emergency department visits.
Integration: right care at the right time
Integrating pharmacy and medical benefits under one health plan allows for communication and collaboration to ensure the right care at the right time for members. Blue Cross Blue Shield of Michigan and Blue Care Network offer an integrated benefits solution that combines a dedicated pharmacy team with a robust medical plan.
As specialty drugs are costly, Blue Cross and BCN offer several programs to optimize specialty drug spending across pharmacy and medical benefits. We recommend programs that fit each employer group, according to their needs. This includes an integrated group of doctors and pharmacists that evaluate treatment options across both benefits to direct policies that ensure the lowest net cost. Thanks to our dedicated team of pharmacists, Blue Cross and BCN can ensure members have access to the medications they need. We are constantly evaluating the drug development pipeline and monitoring the market to ensure members are getting the best value out of their benefits. Our drug lists, or formularies, address clinical quality, cost-effectiveness and consumer affordability by focusing on lowest net cost, as opposed to maximizing rebates. More from MIBluesPerspectives:
- Everything You Need to Know About Drugs Covered by Insurance
- How Your Insurance Company Can Help You Save Money on Prescriptions
- Announcing Blue Cross Personalized Medicine Program Aimed at Customizing Member Treatments
Photo credit: Getty Images
