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Report Details 3 Trends Driving Employers’ Health Care Costs

by Inoventive Solutions
March 26, 2024

Pharmacy spending, high-cost claimants and newly developed anti-obesity drugs are expected to shape health benefits and affect the cost of care and health insurance for employers, according to a new report.

The “2024 Employee Health Trends” report by Springbuk, an online health intelligence platform, reflects concerns among employers and insurers about runaway drug costs due to increasingly expensive medications and new diabetes and anti-obesity drugs.

Also, the report looks at the effects of high-cost health plan enrollees, those who are high health care users either due to a chronic condition, cancer or an accident or illness that requires ongoing care.

One such employee enrolled in one of your group health insurance plans can result in massive costs that overshadow those of the rest of your workforce if you are a small or mid-sized employer.

High-cost claimants

According to Springbuk’s research:

  • One out of every 1,000 health plan enrollees is likely to account for total paid claims of $340,000.
  • Five out of every 1,000 members are likely to have total paid claims of over $140,000.
  • About one in five members in each high-cost category was in the same category in the previous year.

Common high-cost claim conditions include:

  • Various cancers
  • Multiple sclerosis
  • Heart disease
  • Cystic fibrosis
  • Sepsis
  • Joint degeneration
  • Chronic renal failure
  • Psoriasis
  • Adult rheumatoid arthritis
  • Inflammatory bowel disease.

Springbuk’s report recommends the following:

  • Understand the population at greatest risk of becoming high-cost claimants based on conditions, history of being a high-cost claimant and demographic information.
  • To reduce surgical costs, the health plan can push for expert/second opinions, partner with a center of excellence, engage in payment-bundling arrangements, and pursue risk reduction.
  • Employ risk-reduction programs like weight-loss programs to lower the risk of surgery for degenerative arthritis.
  • Use preauthorization, step therapy and incentives to promote the use of biosimilars to reduce the costs of specialty drugs.
  • Use price transparency tools to determine which facilities are less costly, but make sure to consider the quality of care.

Pharmacy spending

Between 2020 and 2023, the average per member per month pharmacy spend increased 38% from $86 to $119. Two of the biggest contributors to the rapidly rising drug spending are specialty drugs and brand-name medications used in the treatment of chronic conditions.

According to the report, the top 10 conditions contributing to health plan drug spending are:

  • Diabetes
  • Psoriasis
  • Inflammatory bowel disease
  • Adult rheumatoid arthritis
  • Asthma
  • Multiple sclerosis
  • Obesity
  • Other inflammation of the skin
  • Migraine headache
  • Attention deficit disorder.

Since the majority of drug spending is related to chronic conditions, strategies focused on their main causes can help rein in spending. These include:

  • Healthy diet and lifestyle coaching,
  • Weight-loss courses and counseling,
  • Free gym memberships and other programs that emphasize the importance of exercise, and
  • Smoking cessation services.

Other recommendations:

  • Target brand-name drugs and specialty drugs in your cost-containment strategies.
  • Take steps to ensure members taking specialty and high-cost brand-name drugs are using generic formulations and biosimilars where available, provided the net cost is lower.
  • Understand the PBM contract.
  • Consider whether engaging with a clinical program partner that focuses on pharmacy savings opportunities would be cost-effective.
  • Medications or bariatric surgery may be considered for members who are not able to achieve or sustain weight loss.

One thing to consider about these medications is that they are helping your employees control their conditions and preventing complications or progression of the illness, thereby reducing other health care costs.

Obesity

More than 41% of Americans are considered clinically obese, defined as having a body mass index of 30 or more. Obesity is linked to a number of health conditions, which are all costly to treat, including diabetes, gastrointestinal disorders, heart disease, cancer and musculoskeletal disorders.

Enter highly expensive GLP-1 drugs, originally designed to treat diabetes, with one of their main side effects being that those who take them eat less and shed weight. As a result, demand for these pharmaceuticals has boomed, but not all health plans cover them.

Overall plan outlays for treating obesity jumped 40% in 2023 from the year prior, driven largely by an eye-popping 138% explosion in drug spending.

You can take steps to reduce these outlays for treating obesity by using step therapy, which entails first starting a program that is focused on diet, exercise and behavioral modifications. If those efforts fail, traditional weight-loss medications may be considered before moving to GLP-1 drugs or bariatric surgery.

Consider partnering with a clinical program that addresses obesity.

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J&J Sued Over Contracting with PBM that Overcharged Health Plan, Enrollees

by Inoventive Solutions
March 19, 2024

A new area of potential liability for employers was recently opened when a class-action suit was filed against Johnson & Johnson, accusing it of mismanaging its pharmacy benefit manager plan, resulting in the health plan and its enrollees overspending millions of dollars on medications.

Health plans contract with PBMs to tamp down pharmaceutical costs, but reports have shown that they often send enrollees to pharmacies they own and which overcharge for medications sometimes by thousands of percent.

PBMs have been drawing increasing flak from states attorneys general as well as Congress and state houses, where multiple measures that would rein them in are in play.

If the lawsuit is successful, it could leave both self-insured and insured employers exposed to lawsuits by disgruntled employees who are forking out significantly more than they should.

The case

The class action, filed Feb. 5 in the US District Court for the District of New Jersey, accuses J&J of breaching its fiduciary duty under ERISA when it mismanaged its employee health plan by paying its PBM, Express Scripts Inc., inflated prices for generic specialty drugs that are widely available at a much lower cost.

The employees suing J&J cite a number of examples of how the company’s plan overpaid for prescription drugs. One of the most egregious examples cited in the lawsuit was an instance when the plan paid more than $10,000 for a 90-pill generic drug to treat multiple sclerosis, which can be purchased without insurance on different retail and online pharmacies for $28 and $77.  

“The burden for that massive overpayment falls on Johnson and Johnson’s ERISA plans, which pay most of the agreed amount from plan assets, and on beneficiaries of the plans, who generally pay out-of-pocket for a portion of that inflated price,” the plaintiffs wrote.

“No prudent fiduciary would agree to make its plan and beneficiaries pay a price that is two-hundred-and-fifty times higher than the price available to any individual who just walks into a pharmacy and pays out-of-pocket,” they added.

It further accuses J&J of agreeing to terms under which plan beneficiaries were financially incentivized to obtain their prescriptions from the PBM’s own mail-order pharmacy, even though that pharmacy’s prices are routinely higher than the prices at other pharmacies.

The case accuses the company of:

  • Failing to regularly put PBM services out to bid.
  • Failing to negotiate favorable terms with PBMs and continually supervise PBM’s actions to ensure that the plan is reducing costs and maximizing outcomes for beneficiaries.
  • Failing to periodically attempt to renegotiate PBM contracts.
  • Failure to independently assess the PBM’s formulary placement of each prescription drug and closely supervise PBM’s formulary management to ensure the plan is paying only reasonable amounts for each prescription drug.
  • Improperly steering plan participants towards their PBM’s mail-order pharmacy, even though that pharmacy’s prices were routinely higher than what retail pharmacies charge for the same drugs.

The fallout

Legal observers say employers that offer their employees group health insurance that includes one of the nation’s large PBMs, could be targeted.

The driving argument would be that employers have been warned through news reports of how PBMs have been accused of not being transparent about their negotiated prices, and how they often pocket rebates that could be used to lower the plan’s and enrollees’ outlays.

Most at risk are employers that are in self-insured or level-funded plans. It’s not clear yet how much liability insured employers may have, but they too could be accused of choosing health plans for their employees that contracted with PBMs that allegedly overcharge for medications.

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Benefits in a Multi-generational Workplace

by Inoventive Solutions
March 12, 2024

With multiple generations working side-by-side in this economy, the needs of your staff in terms of employee benefits will vary greatly depending on their age.

You may have baby boomers who are nearing retirement and have health issues, working with staff in their 30s who are newly married and have had their first kids. And those who are just entering the workforce have a different mindset about work and life than the generations before them.

Because of this, employers have to be crafty in how they set up their benefits packages so that they address these various needs.

But don’t fret, getting something that everyone likes into your package is not too expensive, particularly if you are offering voluntary benefits to which you may or may not contribute as an employer.

Think about the multi-generational workforce:

Baby boomers – These oldest workers are preparing to retire and they likely have long-standing relationships with their doctors.

Generation X – These workers, who are trailing the baby boomers into retirement, are often either raising families or on the verge of becoming empty-nesters. They may have more health care needs and different financial priorities than their older colleagues.

Millennials and Generation Z – These workers may not be so concerned about the strength of their health plans and may have other priorities, like paying off student loans and starting to make plans for retirement savings.

Working out a benefits strategy

If you have a multi-generational workforce, you may want to consider sitting down and talking to us about a benefits strategy that keeps costs as low as possible while being useful to employees. This is crucial for any company that is competing for talent with other employers in a tight job market.

While we will assume that you are already providing your workers with the main employee benefit – health insurance – we will look at some voluntary benefits that you should consider for your staff:

Baby boomers — Baby boomers look heavily to retirement savings plans and incentives, health savings plans, and voluntary insurance (like long-term care and critical illness coverage) to protect them in the event of a serious illness or accident. 

You may also want to consider additional paid time off for doctor’s appointments, as many of these workers may have regular checkups for medical conditions they have (64% of baby boomers have at least one chronic condition, like heart disease or diabetes).

Generation X — This is the time of life when people often get divorced and their kids start going to college. Additionally, this generation arguably suffered more than any other during the financial crisis that hit in 2008. You can offer voluntary benefits such as legal and financial planning services to help these workers.

Millennials and Generation Z — Some employee benefits specialists suggest offering these youngest workers programs to help them save for their first home or additional time off to bond with their child after birth.

Also, financially friendly benefits options, such as voluntary insurance and wellness initiatives, are two to think about including in an overall benefits package.

Voluntary insurance, which helps cover the costs that major medical policies were never intended to cover, and wellness benefits, including company-sponsored sports teams or gym membership reimbursements, are both appealing to millennials and can often be implemented with little to no cost to you.

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