The Power of Formulary – Part 3 of 5: Key to a Successful Group Benefits Plan Design

Jun 03, 2015

Part 1 of the series outlined how a formulary may be the best approach to drug and benefit plan sustainability. Part 2 summarized how the province of BC uses their formulary to manage ‘what’ they pay to achieve health outcomes. We also touched upon ‘when’ the BC drug plan (PharmaCare) will start to pay for each resident.

This blog will discuss how an employer group benefit plan can be designed to pay up to each BC resident’s drug deductible and then have PharmaCare pay the balance of drug costs. In essence, this transfers sponsor catastrophic drug risk which will be discussed in Part 4 of this series.

All insurers have created a process for BC plan members to ensure high drug claimers have registered for Fair PharmaCare. Insurance providers are financially motivated to drive the process and ensure registration. With everyone registered for Fair PharmaCare, the catastrophic risk associated with the group benefit plans can be limited to the specific deductible per person.

The claim thresholds vary among insurers to initiate the PharmaCare registration request process. When a claimant reaches an initial dollar drug claim threshold (eg. $1,000 within a calendar year), a letter is sent to the member asking for proof of Fair PharmaCare registration. The member is given a specific time frame and additional claiming limit to furnish proof. A second notice is sent when the time frame and/or secondary threshold is met (eg. $1,250 within a calendar year). This notice may suspend drug reimbursement for the claimant until registration proof is provided. This process ensures that all claimants have a deductible set that is well below the default $10,000 deductible.

Even with proven registration, the process doesn’t ensure that the employer drug plan only pays up to the claimant’s deductible since most plans in BC allow any drug to be claimed (open ended drug list). Statistically speaking, about 50% of drugs claimed will never count towards the deductible (See Part 2 of the blog series which states Health Canada has 9,449 drugs and the BC PharmaCare drug list has 4,899).

So, what is the key to ensuring that the public drug deductible system will intersect with the private employer plan and why is this important?

The answer lies in the employer drug plan list – it must be equivalent to the PharmaCare drug list. Only this plan design ensures that only PharmaCare listed drugs are reimbursed, thereby ensuring the BC deductible system will be in play.

Considering the average annual salary is approximately $48,000, the average PharmaCare deductible would be $1,900 per person or $3,800 per family. This is a significantly lower plan payout limit in comparison to an open ended employer drug plan. Such plans could be subjected to annual drug costs of $10,000 or more per person covered without the assurance that the deductible has been satisfied.

Stay tuned for part 4 of this series as it will continue the conversation on the formulary and how catastrophic risk transfer is just a small piece of the group benefit plan sustainability puzzle.

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