For most employers, prescription spend.. drug costsā¦ are steadily increasing. In fact, pharmacy costs account for almost 25% of most employersā health care budget every year.
The Pharmacy Benefit Manager (PBM), is a company that manages your prescriptions, including allowable medications on your formulary, what you pay for them, what the manufacturer paid for them, and where the rebates go.
There are two direct middlemen: drug wholesalers and PBMs. And two indirect middlemen: PBM consultants and insurance companies.
A drug wholesaler is a wholesaler who gets medications from the manufacturer and wholesales it out to PBMs or perhaps to an employer directly.
Insurance companies or employers (typically through a TPA) will hire PBMs to manage the prescription part of the medical plan. Pharmacies are the recipient; they’re the ones being paid for prescriptions. And, pharmacy benefit rebate aggregators āmanageā all the rebates.
Notice how I havenāt yet mentioned the drug manufacturer? A drug manufacturer will generally sell to a wholesale or channel company and the wholesale will work with the aggregator or the PBM, and they’re all deciding what the pharmacy gets paid for the prescription. And then, you might add a PBM consultant who will help you manage your costs, negotiate rebates, and ensure you’re receiving all your rebates. You only need a PBM consultant if you do not have a direct fiduciary contract with the PBM.
All this is really doing is inflating the price of the drug. Not to mention, the insurance companies are making money by collecting the rebates. If you are a self-funded employer, review your ASO contract to determine what kind of rebate credit you’re getting. It could be high enough that you are not even paying an admin fee because they’re keeping all your drug rebates. If an insurance company is a for-profit entity and they’re giving you a credit to offset your administrative fee so large that your administrative fee is now zero, do you think you’re getting 100% of those rebates back?
If you want to control your pharmacy costs, do this:
Have a direct relationship with your PBM ā YOU, as the employer, sign the contract and make sure you to stipulate that all third party revenue us returned to you.
What is Direct Primary Care?
Direct primary care is an arrangement that either an individual or, for our purposes, an employer can create with a physician. The payment is a fixed monthly cost and includes all the services that the physician can provide for most patients, typically about 80% of their care, including annual wellness visits, visits for the flu, a cold, an ankle sprain, bone reset, or basic imaging to name a few. Lab work is typically handled in the office for cost plus a small mark up. For basic imaging, the doctor will have the necessary equipment in their office or they will have an arrangement with another provider to offer a very reasonable cash price or their cost plus a nominal markup.
Most DPC physicians are generally available 24 hours a day. If they’re not on call, they have another physician who helps them when they need to be away. Visits, telephone calls, after hours calls, texts, and emails are usually performed at no charge. Plus, if you need to go into the office, some physicians include that in their price or some will charge a small co-payment of maybe $10-15. This is an incredibly effective way to plan your spending and get access to a whole suite of services.
What Can Primary Care Physicians Do?
If I have a migraine and go to the emergency room, I will have to pay who knows how much (typically north of $500) for the visit, plus $600 for the prescription; even the generic version costs upwards of $250-$300. Whereas, a primary care physician can see you for a copay cost, and help you find a cost effective and medically useful medicationā¦ not necessarily the $600 medication and most likely has access to wholesale medication prices and will generally charge a co-pay of $10, or nothing at all.
I have some anecdotal information that says that if a direct primary care physician has a wholesale contract with a PBM, then the generic medication will cost about $12. So, if you have an employee with a chronic migraine condition, then their annual fee for the direct primary care can cost significantly less than a single emergency room visit.
What Treatments Will a Primary Care Physician or Direct Primary Care Physician Not Do?
Primary Care Physicians won’t perform surgery, cancer treatments, or set complex bone breaks. If you have a serious illness they may refer you to somebody else. In my city, we also have āDirect Specialist Careā physicians, such as endocrinologists, who operate on a cash pay basis. In other words, they charge a fair price for the patientās visit and don’t bill insurance. There is an oral surgeon in San Antonio who operates on all cash pay and doesn’t take any insurance. His fees are highly competitive and he has consistently high ratings. And we have a free-standing emergency room that will enter into a direct contract with an employer and costs the employee nothing. These are all tools you can use to systemize your costs and customize the experience for your employees.
What Does Direct Primary Care Cost?
Direct primary care physicians will generally charge a per member, per month rate. On the low end, it might be $50, and the high end would be about $100 per month. If you are an employer and you are referring a significant number of employees to the direct primary care physician, it would be closer to $50 per month. There will also be reduced additional fees for spouses, and an even greater reduction for children.
The specialty providers charge a ācash priceā and will tell you up front how much each service costs.
Can I Still Keep My Health Insurance?
If you employer more than 50 employees (FTEs), you must offer health ACA compatible health insurance. You can keep an ACA compliant plan as well as offer DPC.
If you’re fully insured with large insurance company, move to the plan with the highest deductible and the highest out-of-pocket cost. Additionally, you can work with a couple of direct primary care physicians in your area and pay the direct primary care physician fee. Most of the care will be delivered in the direct primary care office or over the phone. And, if there is a more serious condition, such as surgery, cancer diagnosis, or back surgery, then that can be performed through traditional health insurance.
The more cost effective solution is to work with an independent third-party administrator and move to a partially self-funded arrangement where the direct primary care component is built into the plan. That way, you can pay the fixed costs for the direct primary care physician, and pay the insurance costs for the emergency visits and hospital services. You get the best of both worlds, and you should see a significant drop in your claim costs in the first year. Those costs will generally remain quite consistent over time and you won’t be subject to trend or arbitrary increases.
If you want to level the playing field and improve the user experience for you and your employees, click the link below so we can schedule some time to discuss your options. My name is Allison De Paoli and I started Altiqe Consulting to help employers add control and predictability back into their benefits spending and to get out of the healthcare spend craziness and back to running their businesses, while ensuring their employees have the best care at the most affordable cost.