Employers Hit With More Cost Sharing for Expensive Drugs

Twenty-eight percent of employees now offer four-tier drug plans compared to only 12% that had these plans in 2012, according to a survey by United Benefit Advisors. With a four-tier plan design, employers can put the most expensive drugs in a category with significantly higher copays — thus passing along the costs to employees.  The fourth tier pays for biotech or the highest cost drugs. Median pharmacy retail copays for fourth-tier drugs increased 25% from $80 in 2012 to $100 in 2013, and many are charging 10% to 30% of the cost of tier four drugs.

Carol Taylor, an employee benefit advisor with a UBA partner Firm said, “We are seeing more and more employers, small and large, raising copays substantially on fourth-tier drugs. With some of these drugs, the cost ranges from $1,200 to $20,000 per month (the cost of some cancer drugs). It is very costly for the plans, which in turn affects their premium rates. We’ve seen this for quite some time with self-funded plans, but we expect it will become more popular among small and large employers with group health insurance.”

The average tier-four median copay was $52 for small employers (less than 100 employees), from $45 to $60 for mid-size employers (100-499), and $80 to $100 for large employers (500+).

Larger groups are rated more independently, so they have a much bigger incentive to raise copays, especially for items that will cause rate increases. This might shift some as employers are forced to come into compliance with health care reform in 2015 since the prescription copays/deductibles, etc. must all track to the out-of-pocket maximum, said Rob Calise, UBA Board chairman noted that, he said.

Seventy-three percent of prescription plans had a copay and/or coinsurance after the major medical deductible compared to 68% in 2012. “It used to be that all drugs were applied to the deductible, then coinsurance on major medical. Now, quite a few carriers require deductible and then copays, particularly on high-deductible health plans. We’re also seeing small group and mid-market employers place generic brands before the deductible, but brand names after. The ultimate goal of shifting more cost to employees is to drive behavior to create better health care consumers. It is very possible we could see copays disappear completely, with everything falling under the major medical deductible,” he added. For more information, visit www.UBAbenefits.com.

Last Updated 08/10/2022

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