As a result of the Affordable Care Act imposing cost increases on fully insured health plans, more employers, particularly large ones, are self-funding their pharmacy benefits.
That’s according to United Benefits Advisors’ 2014 Health Plan Survey, which includes 9,950 employers.
Survey data show that the prevalence of self-funded pharmacy plans climbed to 10.9% last year, representing an increase of almost a third over the past five years.
But among employers with 1,000 or more workers, a solid two-thirds majority (66.1%) self-funded their pharmacy costs last year.
Some regional differences in the data are stark. For example, 99% of California plans are fully insured, with only the state’s largest employers offering self-funded plans. In the country’s North Central region, on the other hand, 17.7% of employers have self-funded plans.
“North-central employers are more likely to self-fund due to the favorable climate for doing so – a less competitive workforce, higher-than-average concern for costs, and a greater amount of manufacturing and agricultural businesses,” says a spokesperson for TrueNorth Companies/MedOne, a UBA partner firm.
Not surprisingly, the increase in self-funded pharmacy plans coincides with an increase in stop-loss coverage. UBA’s survey finds that 95.3% of self-funded pharmacy plans had specific stop-loss coverage last year, up from 89.3% five years earlier.
Similarly, the data show that 76.7% of self-funded pharmacy plans had aggregate stop-loss coverage in 2014, compared with 70.3% five years earlier.
Last year’s average specific stop-loss level was $140,235, an increase of 13.8% (from $123,188).
“With the no annual and lifetime maximum clauses that have come into play, the increased cost of specialty medications, and no pre-authorization, employers/payers have had no choice but to protect themselves by using specific and aggregate loss coverage with the pharmacy included,” says the TrueNorth Companies/MedOne spokesperson.
Adds Mark Kmety, senior managing director and co-practice leader at Mesirow Financial, another UBA partner firm. “With the rapid emergence of so many high-cost drugs, you can’t continue to provide a prescription drug benefit without stop-loss coverage or not be aware of the risks without this protection.”