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POSTED BY ADMIN ON JUL 22, 2016 IN COMPLIANCE ALERTS, COMPLIANCE NEWS, HR BENEFIT ADVISORS BLOG, INDUSTRY NEWS, THE BLOG, UBA NEWS, UBA SURVEYs
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The Latest UBA Survey data shows employers are flocking to two strategies to control rising prescription drug costs: moving to blended copay/coinsurance models vs. copay only, and adding tiers to the prescription drug plans. Almost half (48.9%) of prescription drug plans utilize three tiers (generic, formulary brand, and non-formulary brand), 4.3% retain a two-tier plan, and 44.1% offer four tiers or more. The number of employers offering drug plans with four tiers or more increased 34% from 2014 to 2015. The fourth tier (and additional tiers) pays for biotech drugs, which are the most expensive. By segmenting these drugs into another category with significantly higher copays, employers are able to pass along a little more of the cost of these drugs to employees. Over the last two years, the number of plans with four or more tiers grew 58.1%, making this a rapidly growing strategy to control costs.
Employers with 1 to 99 employees have been driving the trend to adopt prescription drug plans with four or more tiers. In three years, plans with four or more tiers increased approximately 60% among these groups, making this the top cost-containment strategy for small employers, who make up the backbone of America.
Even the largest employers (1,000+ employees), 81% of which historically have offered plans with two or three tiers, have seen a 12.9% decrease in these plans as they, too, migrate to plans with four or more tiers (albeit more slowly).
The construction, mining and retail industries have also been steadily leading the migration to plans with four or more tiers over the last three years, and in the latest UBA survey, 47.5%, 53.2% and 46.3% of their respective plans fall in this category. But this year, the utilities industry has made a more sudden switch, with 58.3% of those plans now consisting of four or more tiers, leapfrogging its perennial tier-climbing peers. This is a significant jump, considering nearly 20% of plans in the utilities industry were still two-tier plans just three years ago—far more two-tier plans than any other industry group at that time. However, this wasn’t a total surprise since, in the 2014 survey year, the industry had an above-average amount of three-tier plans (65.9% vs. an average of 57.1%).