Paul Sanchez
Self-insured medical plans can be a great way to save money on healthcare costs, especially on prescription drugs. While large group plans and self-insured plans are not required to cover the Affordable Care Act's (ACA) essential health benefits, the majority of them do provide prescription drug coverage. Self-insured plans offer flexibility, allowing you to choose a transparent Pharmacy Benefits Manager (PBM) who passes on savings to you and your plan members. Additionally, PBMs can negotiate better pricing, discounts, or rebates for expensive medications, and guide you toward more affordable alternatives. This can result in significant savings for employer-sponsored healthcare plans. However, it's important to note that self-insured programs may face higher costs during years with large claims, and the availability of rebates ultimately depends on the specific plan and PBM selected.
| Characteristics | Values |
|---|---|
| Cost savings | Self-insured plans can save up to 10% per year |
| Flexibility | Self-insured plans are more flexible, allowing for customization and specialization |
| Cost variability | Self-insured plans can purchase stop-loss insurance to reduce cost variability and risk |
| Prescription rebates | Self-insured plans can choose a transparent Pharmacy Benefits Manager (PBM) who passes on prescription rebates and cost savings |
| Prescription drug coverage | While not required, the majority of self-insured plans provide prescription drug coverage |
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What You'll Learn
- Self-funded insurance plans can lower costs for pharmacy prescriptions
- Self-insured plans are not required to cover the ACA's essential health benefits
- Self-insured plans can be more flexible, allowing for specialised vendors
- Self-insured plans can save money by avoiding the pooling charge of fully insured premiums
- Self-insured plans can save on prescription costs by partnering with a PBM (Pharmacy Benefits Manager)
Self-funded insurance plans can lower costs for pharmacy prescriptions
As the cost of healthcare continues to rise, businesses are increasingly turning to self-funded insurance plans to lower costs for pharmacy prescriptions. This type of plan allows an employer to take on the cost of benefit claims while the insurance company manages the payments. By partnering with a transparent or pass-through Pharmacy Benefits Manager (PBM), self-funded plans can reduce costs for pharmacy prescriptions.
PBMs are intermediaries between insurance providers and pharmaceutical companies, negotiating costs, ensuring access to medications, and reducing pharmacy spend. In a self-funded plan, employers can select their own PBM, allowing them to choose one that passes on savings to the employer and plan members. Transparent PBMs have open fee structures and clear contracts, providing transparency in terms of where the money is going. Pass-through PBMs, on the other hand, are compensated through administrative fees and pass on 100% of the savings from manufacturer coupons and rebate programs directly to the employer.
Under fully insured plans, traditional PBMs are known for imposing excessive charges and employing the "ingredient cost spread" tactic, where undisclosed additional costs are added to medication prices. For example, an employer might pay $200 for 30 Adderall pills when the PBM's actual cost is only $150. Drug manufacturers may offer rebates on high-cost medications, but traditional PBMs often keep these rebates instead of passing on the savings to the employer. This incentivizes them to promote more expensive drugs and a greater volume of prescriptions, which may not be in the best interests of the patient.
By choosing their own PBM, self-funded plans can avoid these issues and benefit from cost savings, improved medication access, and better management of prescription drug benefits. Additionally, self-funded plans offer increased transparency, allowing employers to understand how the PBM is paid and hold them accountable to their contract. This enables employers to curb high drug spending and identify opportunities to better cover certain drugs. For example, one study found that switching to generic and less expensive but clinically equivalent drugs saved self-insured employers between 9% and 15% on annual prescription drug spending.
Overall, self-funded insurance plans can lower costs for pharmacy prescriptions by partnering with transparent or pass-through PBMs, avoiding excessive charges, and taking advantage of increased transparency to make more cost-effective decisions.
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Self-insured plans are not required to cover the ACA's essential health benefits
Self-insured plans are not required to cover the Affordable Care Act's (ACA) essential health benefits. The ACA outlines ten essential health benefits, including hospitalization, maternity and mental health care, and outpatient services. However, self-insured plans, including large group plans, are not mandated to provide these benefits to their members.
The distinction between self-insured and fully insured plans is important when discussing prescription rebates. In a fully insured plan, the insurance company manages the pharmacy benefit and negotiates rebates with drug manufacturers. On the other hand, self-insured plans allow employers or plan sponsors to choose their Pharmacy Benefits Manager (PBM), who then negotiates rebates and drug prices on their behalf.
By partnering with a PBM, self-insured plans can benefit from cost savings and improved medication access. PBMs use their purchasing power to negotiate better pricing, discounts, or rebates for high-cost specialty medications. They also guide plan sponsors in substituting expensive brand-name drugs with more affordable alternatives, ensuring affordable and effective pharmaceutical solutions.
It is worth noting that while self-insured plans are not required to offer all essential health benefits, they cannot impose lifetime or annual dollar limits on any essential health benefits included in their policies. This means that if a self-insured plan chooses to provide certain essential health benefits, they must do so without restricting the dollar amount of those benefits over time or per year.
The requirements for self-insured plans can vary based on factors such as the size of the employer, the number of employees, and state regulations. For example, smaller companies with fewer than 50 employees might not be required to provide health insurance to their employees at all. However, larger employers may face penalties if their plans do not cover the essential health benefits, as mandated by the ACA.
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Self-insured plans can be more flexible, allowing for specialised vendors
Self-insured plans offer several advantages over traditional, fully-insured plans. One of the key benefits is the flexibility they provide, allowing employers to design plans that meet the specific needs of their workforce. This flexibility extends to allowing for specialised vendors, such as Pharmacy Benefits Managers (PBMs), who can help lower costs and improve medication access.
With self-insured plans, employers can choose a transparent or pass-through PBM that passes on savings to the employer and plan members. PBMs can use their purchasing power to negotiate better pricing, discounts, or rebates for high-cost specialty medications. They can also provide guidance on substituting expensive brand-name drugs with more affordable alternatives, ensuring affordable and effective pharmaceutical solutions while maximising savings.
In contrast, under fully insured plans, PBMs are infamous for imposing excessive charges and employing tactics such as the "ingredient cost spread", where undisclosed additional costs are added to medication prices. This payment model incentivises PBMs to promote higher-cost drugs and a greater volume of prescriptions, which may not prioritise the best interests of the patient.
By choosing their own PBM, employers with self-insured plans can strategically impact their prescription drug benefits and better manage healthcare costs. This flexibility allows them to customise health coverage and create plans that align perfectly with their employees' needs, whether it's providing specialised mental health services or improved prescription coverage.
Additionally, self-insured plans offer financial control, data transparency, and stop-loss insurance against high-cost claims. They can provide substantial savings compared to fully insured plans, as employers can reduce risk by using a group captive. With up to 85% in variable vs fixed costs, self-insured plans give employers the flexibility to meet healthcare challenges and better manage healthcare costs.
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Self-insured plans can save money by avoiding the pooling charge of fully insured premiums
Self-insured plans can be a great way for companies to save money. While self-insured plans carry more financial risk and administrative burden, they can provide significant cost savings. One way they do this is by avoiding the "pooling charge" of fully insured premiums.
Fully insured premiums include a “pooling charge” that insurance companies use to pay claims over a certain threshold. This charge is not present in self-insured programs, which can result in substantial savings for companies. Instead, in a self-insured program, companies can purchase stop-loss insurance at the same deductible amount as their "pooling point" in a fully insured program, thus taking on no additional risk. Any claims larger than that amount would be covered by the insurance, reducing cost variability and risk.
Additionally, self-insured plans offer other cost-saving benefits. For example, companies only pay for the healthcare services their employees use, avoiding the extra costs associated with unused benefits in traditional plans. Self-insured plans also provide financial control, data transparency, and flexible plan designs. Companies can save 2-3% by avoiding state taxes on self-insured plans (although they do pay taxes on stop-loss insurance). They can also save 3-8% by eliminating carrier margins.
On average, companies that self-fund save 8-10% in the long term. This can be a significant cost savings for companies, especially when compared to the high costs of healthcare. By lowering the base health plan cost, companies can also reduce the impact of rising healthcare costs, which are increasing by 7-8% per year.
In summary, self-insured plans can save money by avoiding the pooling charge of fully insured premiums and by offering other cost-saving benefits. This approach can be especially beneficial for small and mid-sized companies concerned about cost containment in healthcare.
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Self-insured plans can save on prescription costs by partnering with a PBM (Pharmacy Benefits Manager)
Self-insured plans can save on prescription costs by partnering with a Pharmacy Benefits Manager (PBM). PBMs are the secret weapon for lowering the cost of employee health plans. They work with prescription drug manufacturers, pharmacies, and wholesalers to help members access the medication they need at the best price.
PBMs can help self-insured plans in several ways. Firstly, they use their purchasing power to negotiate better pricing, discounts, or rebates for specialty medications. They also guide members on substituting expensive brand-name drugs with more affordable alternatives that deliver similar medical outcomes. This results in cost savings, improved medication access, and better management of prescription drug benefits.
There are two types of PBMs that self-insured plans can partner with: transparent PBMs and pass-through PBMs. Transparent PBMs have open fee structures and clear contracts, providing transparency in terms of where the money is going. Pass-through PBMs, on the other hand, are compensated through administrative fees and pass on 100% of the savings from manufacturer coupons and rebate programs directly to the employer.
By choosing the right PBM, self-insured plans can cover the best pharmaceuticals available at a low, reasonable cost. This can translate to huge savings for employer-sponsored healthcare plans and improved medication options for employees. Additionally, when pharmacy benefits are integrated with medical benefits, costs are better controlled, and members can get their prescriptions at the best available price.
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Frequently asked questions
Self-insured medical plans are plans where the employer or organisation pays for the medical costs of their employees directly instead of paying premiums to an insurance company.
Self-insured plans are not required to cover the Affordable Care Act's (ACA) essential health benefits other than preventive care. However, most self-insured plans do provide prescription drug coverage. Self-insured plans can also lower costs for pharmacy prescriptions, which can translate to huge savings for employer-sponsored healthcare plans.
Self-insured plans can lower costs by partnering with a transparent Pharmacy Benefits Manager (PBM) who passes savings on to the employer and plan members. PBMs can also negotiate better pricing, discounts, or rebates for high-cost specialty medications.
If your insurance company won't pay for your prescription, you have the right to appeal the decision and have it reviewed by an independent third party. Additionally, if you are facing a large deductible, you may want to consider paying for certain drugs out of your own pocket, especially if the deductible year is coming to a close.
