Alecia Beth Moore made an insightful comment during a recent interview.  You may know Alecia better by her stage name Pink, the pop music star.  Alecia recently gave birth to her first child and like most new parents is very protective of her first born. Asked if she would like her child to become a pop star she stated very succinctly, "I just want her to be talented because the world is cruel too those whom lack talent."     I'll take this one step further and say those who lack information and/or knowledge are at the mercy of the world.  This is true in all walks of life and the pharmacy benefit management industry is no exception.  In the past few days several events have occurred where a lack of knowledge would have deemed me as a patsy.   On Wednesday September 26, 2012 I picked up a rental vehicle from the Cleveland airport.  The original reservation called for a mid-size automobile.  Since I was driving approximately 100 miles to our warehouse, I wanted to keep gasoline costs reasonably low.  Hence the request for a small automobile.  Those of you whom travel quite a bit I'm sure appreciate the Hertz Gold and Avis Preferred services.  As I approached the space where my vehicle was parked I noticed that it was not a Chevy Cruze but instead a SUV!    My first thought was, "wow a complimentary upgrade."  Then it dawned upon me that no one is renting these vehicles due to the high cost of gasoline.  A few years ago I couldn't get a free upgrade even if I got on my knees and begged for it.  Now Avis is giving away free SUV upgrades. I, with a smug, walked to the customer service counter and kindly requested a compact or mid-size automobile.  This saved our company $100 in unnecessary travel cost during the four day rental.    This past Sunday, September 30, 2012, I spent with friends at a local bar watching the football games.  All went as planned including my having to pay for the tab.  Because most of my friends are single women, this isn't a big deal.  All that changed when the bartender handed me the bill.  I knew he was a shady character from the outset and like many people in a business transaction will dupe you if the door is left open. I had been watching the bartender all evening and noticed he was pouring drinks for customers different from what they originally ordered.  I'm assuming his logic was they've been drinking all day so no one will notice the difference between Smirnoff and Grey Goose.  So, I'll charge you for the Grey Goose and pocket the difference. Nonetheless, my bill was a lot higher than it should have been and included a tip! I told him exactly what I owed -and why- saving myself $75 in the process.  Lastly, I purchased an 8 x 4 cork board from TigerDirect.com for $145.00.  I was able to find this product…

As prescription drug costs continue to increase, plan sponsors are looking for ways to cut said costs such as reducing spouse and dependent coverage.  While total health care is predicted to rise 5.3%, to $11,507 per employee in 2012, the increase is slowing. More recently, employers have been increasing employee premiums, although this tactic can only be pushed so until diminishing returns begins to rear its ugly head [decreased employee retention]. Also, if healthy employees opt out of coverage self-insured employers might lose money.  That is why most companies keep premium increases in line with their cost increase. Among other changes to improve prescription drug costs employers should consider these options for 2013 and beyond: The adoption of account-based health plans, which include health savings accounts and health reimbursement accounts.  The higher deductibles in these plans shifts more of the cost to employees.  In many cases, the only costs are attributed solely to prescription drugs. Some companies, 38%, will reduce spouse and dependent coverage, while 29% will use spousal waivers or surcharges. As employees have to pay more to cover family members it may be more economical for the husband to be under one plan and the wife under another. Limit company reimbursements for prescription drugs to only generic and specialty medications.  While brand medications help successfully treat many diseases, their generic counterparts prove to be therapeutically equivalent where efficacy is the primary concern. Some might say generics don't work and in this case my suggestion is too try another. A different manufacturer's product will do the job in many cases. Offer telemedicine consultations next year.  It is cheaper to contact a doctor by phone, e-mail and Skype rather than go to an office.  And an employee doesn't have to leave the workplace.  It's most often used for acute ailments such as flu and allergies.  It is not considered as a substitute to a doctor's visit.  When a prescription is required the doctor may simply forward an e-script to the employee's pharmacy of choice. Eliminate prescription drug coverage all together and instead pay for access to some sort of discount program or online pharmacy. Web sites like PrescriptionGiant.com may negotiate significant savings over chain drug stores and discount cards.  Employers could potentially eliminate huge mark-ups, administrative fees and other hidden costs that tend to be significant.  Obviously, PPACA guidelines will have to be considered in this scenario. Most employers we surveyed, 90%, are committed to offering health care benefits.  They know it's needed to attract and retain the best employees.  Still that leaves 10% whom are not committed.  If just one multi-national corporation stops offering health benefits then that will trigger other employers to follow suit even though most "say" they are committed to offering it.

You've seen them in junk mail, doctor offices and grocery stores.  Prescription drug discount cards are ubiquitous and said to offer up to 75% savings on prescription drugs at retail pharmacies.  Is this really true?  Of course not.  In fact, prescription drug discount cards are one of the most misleading facets of the consumer drug industry. Prescription drug discount cards are targeted for two sets of people:  uninsured and under-insured patients. Typically, no personal information is required as the cards are prepared in advance with all the necessary information.  For the purpose of this post, I consider participants of a HSA or other CDHC (consumer-directed health care) plan as under-insured. It's not too difficult for drug discount card companies to gain access to large pharmacy networks of 55,000 or more.  Furthermore, many of these drug discount card companies don't have much infrastructure at all.  In some cases, they are run from a home office giving one the impression they're a huge company with hundreds of employees and equal buying power.  Nothing could be further from the truth. Here is how the prescription drug discount card works.  One simply picks up a card at their doctor's office, grocery store or dry cleaners - there is no registration required.  If a particular card requires registration undoubtedly the information is used for marketing purposes and not to activate the supposed discount guarantee.  At the time of a new or refill prescription, the card is taken to the pharmacy and presented to the pharmacist for any applicable discount.  The pharmacist or pharmacy technician will then enter the BIN, Group and Member ID numbers. Now the bait and switch begins.  The discounts promised by the cards are in many cases accurate. But, the starting point (original cost) is misleading.  The discount is based upon AWP or average wholesale price.  AWP is not the cost of the drug for the patient, pharmacy or manufacturer.  It is an arbitrary price used, in my opinion, to mislead the public and other non-informed purchasers of prescription drugs. For example, the AWP for Metformin 500 mg x 90 is $125.00, but the actual cost to the pharmacy is only $6.50.  Your discount card offers 50% off ($62.50) Metformin and you think wow I saved $62.50 ($125 - $62.50)! Unbeknownst to you is Joe's Corner Pharmacy, without a card, would've agreed to a negotiated price of $12.50.  That difference or $50 is essentially a shared profit between the card issuer and network manager.  You've effectively been hustled. In the past, it was hard work; sweat and tears which gave people a big advantage.  Today, it is knowledge.  Those who have it win and those who don't get duped.  Think of the AWP as MSRP or manufacturer's suggested retail price.  Would you ever pay MSRP for a new automobile?  Strive to be well-informed about all your health care purchasing decisions and you'll avoid being a patsy.

This week I was faced with an interesting dilemma. One that I've advised many clients recently, but it takes a different dynamic when it affects you personally.  I pride myself on the do as I do, not as I say philosophy. During the past year, I've been in the market for a new pharmacy management software system. My research has concluded thus two options remain; Mckesson Enterprise or QS/1. The Mckesson software package offers all the bells and whistles plus the ability to easily scale as our business continues to grow. That a company with over $50 billion in annual revenue offers such a product is not surprising. In addition to the standard features expected in a pharmacy management system, Mckesson Enterprise also has integrated credit card processing, electronic PDMP reporting, and workflow management.  Unfortunately, it also comes with a mandatory cost of $7,000 for on-site training and purchase of one PC workstation. The QS/1 system is installed with every feature required:  SaaS or web-based, PDMP reporting, DUR, and claims submission. Yet, there is no additional expense for training or purchase of a PC workstation.  The QS/1 account manager recommended on-site training (at an additional cost), but I inquired about remote training and my request was happily granted.  Furthermore, the monthly maintenance fee was almost 50% less than that of the Mckesson product saving us another $4,000/year! Why does Mckesson not offer remote training?  More important, why would a company pay significantly more for a product it can attain elsewhere at a much more inexpensive price point? Consider the Benefit Pyramid below. Mckesson has a great deal of brand awareness and equity.  Mckesson's clients will often times pay a premium for this brand recognition. Consequently, Mckesson is able to charge clients a huge premium for two very distinct reasons:  the Benefit Pyramid and Cognitive Modification. Managers are burdened with so much work that they often times make poor decisions only to avoid having more work added to their to do list.  Managers fall in the Pain Avoidance and Preservation stages of the benefit pyramid.  They are not as concerned about profitability as say an owner or CEO. As a result, bad purchase decisions are often made which lead to drastically overpaying for products and services.  A person with direct financial interests will balk and many times walk away.  Hence, my decision to go in a different direction. Companies of all sizes are paying far too much for PBM services; much of it attributed to managers wanting to avoid more work as opposed to looking out for the company's financial performance.  On the other hand a CEO or owner is concerned first about financial performance thus his/her position at the top of the benefit pyramid. A CEO or Lieutenant should always be directly involved, from beginning to end, in the decision to select a pharmacy benefit manager. I almost made the decision to purchase Mckesson's product even though it was more costly.  I created, in my mind, all sorts of reasons why…

Medicare Part D is the prescription drug program that has been in effect since the Medicare Prescription Drug, Improvement, and Modernization Act became law in 2003. Annually, employers offering any type of prescription drug benefit must notify Medicare eligible participants whether their coverage is creditable or not. Additionally, employers must make certain disclosures to the CMS within 60 days of the start of the plan year. Determining who must receive the notice is a challenge for employers. It is more complicated than simply looking at birth dates. Individuals also become Medicare entitled through disability, having End-Stage Renal Disease or being a qualified railroad retirement beneficiary.  Required recipients include not only Medicare enrolled employees and retirees, but also COBRA beneficiaries, their spouses and dependents. Thus, in order to avoid overlooking any participants who may be eligible for Part D, prudent employers should send the notice to all participants rather than engage in a time-intensive fact-finding exercise to determine the appropriate distribution list. These notices must be provided at the following times: • Before the start of each year’s election period (October 15) • Before an individual first enrolls in the employer’s plan • If plan coverage goes from creditable to non-creditable, or vice versa • Upon the individual’s request • Before an individual’s personal Medicare initial enrollment period For assistance with this obligation, please contact your Benefit Manager.

A recent NFIB Research Foundation article illustrated the Employer Mandate, also known as PPACA’s employer shared responsibility provisions.  Businesses with 50 or more full-time employees or full-time equivalents (FTEs) face potential employer mandate penalties beginning in 2014. If a business does not provide insurance and if at least one employee receives federal insurance subsidies in the exchange, the business will pay $2,000 per employee (minus the first 30).  Example: a business with 50 employees, two of whom are subsidized, would pay $40,000 in penalty (50 employees – 30 = 20 x $2000). If a business does provide insurance, and if at least one employee receives insurance subsidies, the business will pay $3,000 per subsidized employee OR $2,000 per employee (minus the first 30)  – whichever is less.  So a providing business with two subsidized employees would be fined $6,000. With 14 or more subsidized employees (above the tipping point for the formula), the penalty for a 50-employee firm would be $40,000. To qualify for subsidies, an employee must meet two criteria.  First, his or her household income must be less than 400% of the federal poverty level ($89,400 for a family of four in 2011).  Second, the employee’s portion of the insurance premium must exceed 9.5% of household income. The mandate makes it extremely expensive to cross the 50-employee threshold.  For example, a mid-sized restaurant that goes from 49 to 50 employees could face a $40,000 per year penalty. Businesses will spend resources determining how many employees they have with respect to the employer mandate.  They will face time-consuming, arbitrary administrative burdens associated with employees seeking insurance subsidies in the new insurance exchanges. Businesses subject to the employer mandate will receive periodic government reports on subsidized employees that inadvertently reveal personal financial data on employees’ spouses and families.  This raises discomforting privacy concerns and exposure to liability for employers. For some firms, the employer mandate will result in large fines when circumstances change in their employees’ households.  For example, an employee’s spouse losing a job could trigger thousands of dollars in annual employer penalties.  Employers will not be entitled to know the details of what triggered their penalties  – unless they challenge the employee’s honesty before a government agency.  The employer mandate will increase costs, and businesses will pass them along to the consumers. COBRA Notifications to Medical Providers The hospital calls to verify benefits for an employee that terminated six weeks ago.  You heard that he had been severely injured in an auto accident the previous night.  He hasn’t elected COBRA; you know he doesn’t have the money to pay for it anyway.  You advise the hospital admitting clerk that unfortunately the employee is not covered by your benefit plan.  Who will pay for his claims? Probably your company (not your insurance company) will cover the cost of claims for the terminated employee.  Final IRS COBRA regulations require you to disclose information about COBRA status during the election period or premium payment period.  Proper disclosure to a health care provider would allow them to make or facilitate payment of the COBRA premiums so coverage would be in effect to pay the claims.  Because you failed to make the required information available to them, more…

Because you follow my blog, my position on traditional PBMs should be clear. They're rent-seekers and should not be given blank checks, which essentially is what most plan sponsors do.  Read the following article by Bruce Shutan. Occasionally, I like to post a peer's work to further illustrate my point(s).  Each party has an agenda, however it's up to you to decide which side of the fence you're going to join. ********************************************************************************* A battle is brewing to influence public opinion over the drivers of rising prescription drug benefit costs, cost-containment strategies and the path to meaningful health care reforms. On one side of this spirited debate to win the hearts and minds of HR and benefit practitioners, among other key stakeholders, is the National Community Pharmacists Association (NCPA) in Alexandria, Va., which claims that pharmacy benefit managers drive up health insurance costs and restrict patient choice. Just across the Potomac River in Washington, D.C., is the Pharmaceutical Care Management Association (PCMA), which vehemently defends its PBM membership. A recent salvo fired by NCPA includes a humorous video, “The Third Wheel,” and website (www.whorunsmydrugplan.com), which cast PBMs as culprits – with the former portraying them as a prescription middleman impediment to patient relations with doctors and pharmacists. NCPA describes spread pricing, rebate pumping and mail order as “cost-inflating PBM practices.” The campaign is a response to PCMA’s “That’s What PBMs Do” advertising from earlier in the year, according to a spokesman for that group. “Too many plan sponsors, policymakers and patients remain unaware of how large pharmacy benefit managers affect their prescription drug benefit and their health care premiums,” NCPA CEO B. Douglas Hoey said in a recent statement. “For too long,” he continued, “the PBM industry has benefited from a lack of oversight and regulation, which has eroded the value of the prescription drug benefit to consumers. We have seen prescription drug costs rise, insurance premiums and patient co-payments increase, higher PBM profits and diminished patient choice – while reimbursement to pharmacy small business owners for providing prescription drug services continues to decline. It’s fair to ask: Where’s the money going?” The NCPA credits its more than 23,000 independent community pharmacies for dispensing lower-cost generic drugs and countering a $290 billion problem of non-adherence with prescribed medications. The community pharmacy model also is described as superior to PBM-owned mail-order pharmacies. Charles Coté, the PCMA’s assistant vice president of strategic communications, counters that “independent drugstores are trying to maximize their own reimbursements” – noting that PBMs are hired by large and small employers, unions, Medicare Part D, the Federal Employees Health Benefits Program and state government employee plans to drive down prescription costs. He says PBMs will save consumers and payers nearly $2 trillion in prescription drug costs over the next decade and took exception to the NCPA’s portrayal of his group’s members. “Employers want even greater use of proven PBM tools to save money and reject the drugstore lobby’s agenda that would force them to pay more for prescription drugs,” according…

In June, the Supreme Court ruled 5-4 that the PPACA signed into law on March 21, 2010, is by and large constitutional. What does that mean to you as an employer? The change in course of healthcare delivery will proceed as planned when the law was passed. There will be subtle and not-so-subtle changes to which we must adapt. As for action that must be taken by employers, there isn’t much. Most of the changes are occurring behind the scenes at the insurance company and insurance provider level. Summary of Benefits and Coverage (SBC) documents will need to be distributed to your employees and large employers (250+ employees) will have to track and report benefit costs to the IRS. The biggest event will be on January 1, 2014, when the much talked about insurance exchanges are to be effective. Some employers are anxiously anticipating some relief from the health care burden once the exchanges are effective, while others are not so sure. It is clear now that most states will not have a reliable exchange in place by 2014. Theoretically, the federal government will step in and provide an exchange in any state that misses the deadline. Employers plan on “off loading” their health care coverage to the state exchange by paying a penalty and giving employees cash to buy their own coverage much like employers dropped their old pension plans in favor of the “defined contribution” 401K programs. It is all about controlling costs. Federal tax subsidies are available in the state exchange (a family of four qualifies for the subsidy if their income is less than $88,000). Employers simply can’t overlook this windfall. The problem will be that no subsidy will be granted if employees enroll in a private or federal exchange. In other words…. No state exchange, No federal subsidy. This may leave the employers holding the bag longer than expected. Off loading benefits may not happen as quickly as 2014. Is this good or bad…it depends on who you ask.

Consumer-driven health care plans (CDHP) typically have two components. First, they have an underlying traditional health plan that includes significant deductibles and/or coinsurance. Second, they have some type of individual health account that is used to offset the deductibles and/or coinsurance and that provides some type of tax advantage to the covered individuals. The structure of the underlying health plan and the amount of control granted to the individual over the account distinguish one type of CDHP from another. Employers typically use one or both types of consumer driven health plans. These are health savings accounts (HSA) and health reimbursement arrangements (HRA). Health Savings Accounts (HSA) A HSA is an individual account that can be funded with employer and/or employee money, from which individuals can be reimbursed tax-free for qualified medical care. Otherwise, the money accumulates with tax-free interest until retirement, when an individual can continue to withdraw funds for medical care tax-free or withdraw funds for any purpose and pay normal income taxes. Individuals own their HSAs. Individuals with a High Deductible Health Plan (HDHP) can open HSAs and make tax-free contributions in 2013 of up to $3,250 for individuals and $6,450 for families. HDHPs are defined in 2013 as plans with deductibles of at least $1,250 for individual and $2,500 for family coverage. A HSA can be established for an individual who is covered by a HDHP that includes annual out-of-pocket limits of no more than: $6,250 for individual; $12,500 (for family); is not covered by another plan, except for certain permitted insurance; is not eligible to be claimed as a dependent on another person’s tax return; and is not enrolled in Medicare benefits. Proponents of HSAs say that these accounts will reduce a participant’s overall health care costs without adversely affecting the participant’s health. HSAs also create a tax incentive to save for future health care expenses and decrease dependency on health insurance. They could offer a way to help employees accumulate funds over time to pay for retiree medical coverage. The overall intent is to shift some small health care spending decisions to the cost conscious individual consumer. Health Reimbursement Arrangements (HRA) Employer-funded HRAs can allow annual unlimited rollover of unused balances and may be tax-free to employees provided they meet certain requirements. HRAs typically are used with HDHPs, in which part or all of the deductible can be reimbursed through the HRA. HRAs are available to current employees and retirees, their spouses and dependents, spouses and dependents of deceased employees, and COBRA qualified beneficiaries, but not to the self-employed. HRAs are not taxable to employees and cover only medical expenses as defined by the plan provisions. They must comply with the nondiscrimination requirements of a self-funded health care plan and are subject to COBRA continuation coverage requirements. Employers own the HRAs and can determine whether and how the money may be used (rolled over) in subsequent years. Click here for a side-by-side comparison:  HSA vs. HRA

Thanks to SCOTUS (Supreme Court of the United States), the country now has a new law pledging national health care reform.  Widely praised or condemned depending on party lines, there is no doubt that the Patient Protection and Affordable Care Act  means big changes for health care providers, insurers, drug manufacturers, the uninsured, employees, small businesses and large employers. In other words -- everyone. Trying to make sense of all 2,400 pages of the bill can be daunting. This is particularly true for employers, who will likely need to begin to respond by auditing their workplace and revising their policy changes. So, what does an employer need to know about complying with the law? The health care bill requires nearly all Americans to obtain health insurance. The law expects that most workers will get that coverage through their employers and has created a system of subsidies and penalties to make this possible. If you’re an employer, the size of your workforce is significant, as the law has different requirements depending on the number of employees that your business employs. The major aspects of the health care bill as it relates to business are described below: What is a “small business”? Under the Act, a small business is not specifically defined, but a number of sections of the law apply only to entities with fewer than 25 employees (for more detail see below.)  However, under some sections of the law, the effective company size is 50 or 100 employees. What are “insurance exchanges"? Beginning in 2014, health insurance will be available to individuals and small businesses through state-run “exchanges.” These will require insurance companies to compete for business in the marketplace. The objective is to make it it easier for individuals and small businesses to obtain health insurance at a lower price. The exchange program for small businesses, known as the Small Business Health Options Program (SHOP), will allow small businesses to pool together to increase their purchasing power. This will allow these businesses to offer health insurance to their employees at rates similar to those available to large corporations. SHOP is available to small businesses with up to 100 employees, although states have the option to limit participation to businesses with 50 employees or less until 2016. If a business participating in SHOP grows to over 100 employees, it may continue to take advantage of the program. Beginning in 2017, states may opt to allow businesses with more than 100 employees to participate in SHOP as well. The exchange program is also important because larger employers may be penalized if some of their employees opt to obtain insurance through an exchange and not through the company’s insurance plan (for more detail see below.) Are employers required to provide health insurance to their employees? All businesses, regardless of industry, with fewer than 50 employees are exempt from having to provide health insurance. However, as explained above, such smaller employers may opt to offer health insurance at a reasonable cost by participating in a SHOP exchange. Larger businesses are subject to a number…