through the looking glass: creating meaningful plan design for the future
TRANSCRIPT
Through the Looking Glass: Creating Meaningful Plan Design for the FutureApril 15, 2015
Their Profile• Global professional services firm w/ 6,000
Employees in Canada (AB, ON & BC)• Steady growth/expansion over past 3 years,
hiring more of the same – demographic profile of claiming population unchanged (avg age = 42.5)
• Adjusted for YOY growth in claimants, utilization relatively unchanged in 2014: Plan spending: 0.3% *now $4.4M annually Paid claims: 1.1%
Case Study #1
Their Situation2012 • Plan design: PDD, flat 80% coinsurance• Already impacted by expensive specialty drug
claims: 23.1% of overall spending 90% or > $800K of specialty spending for
chronic conditions• Inefficiencies in product selection (4
categories) and in pharmacy refilling behaviour = $270K or 7% of overall spending
Case Study #1
Their Situation…cont’d…2013 • Plan spending for specialty drugs surpassed
plan spending for all generic claims combined (1.1% vs. 52.6% of claims, respectively)
Case Study #1
Their Situation…cont’d…2014 • Introduced incentivized, 2-tiered plan design
by coverage for preferred drugs in select classes to 100%
• Objectives:1)Win-win for plan & plan members2) “Soft” 1st step towards changing member
behaviour towards more cost-effective products
Case Study #1
Their Insights• Continued pressure from specialty claims:
Specialty spending by $350K or 39% annually since 2012 – rate of growth 3X plan overall
Now represent 28% of overall plan spending• Future financial risk profile = additional
$715K or 16.3% of current spending annually from chronic recurring claims within specialty and age-related chronic conditions
Case Study #1
Their Insights…cont’d…• Limitations with current/new design:
Drug classes targeted captured only 16% of all claims, 13.5% of overall spending in 2014
Negligible change in member behaviour:o % of “new starts” in affected classes with Tier
1 products unchanged in 2014o Active member conversion of Tier 2 Tier 1
drugs barely increased YOY (5.0% of claimants vs. 4.7% in 2013)
Maximum opportunity for savings with full conversion of Tier 2 claims = $188K
Case Study #1
Where are they now?• Recognize 1st attempt with tiered design not
enough to offset existing & future cost pressures, evaluating options for 2015 renewal:1) Keep existing design & coverage %, but
increase communications to members to help drive T2 T1
2) coverage % for Tier 2 products that have Tier 1 alternatives (e.g. from 80% to 50%) to incentive
3) Look at new plan altogether• Working with carrier partner to adopt
strategies to manage their specialty claims, claimants and costs
Case Study #1
• Generic prices declined from 63 – 70% of the cost of their original brand name product to 18 – 25% for most.
• Enormous wave of patent expirations has come to an end, so passive increases to generic utilization rates have tapered off.
• Specialty drug growth (both chronic & acute with new all-oral Hep C therapies), once shielded by generic offset, will not be hidden any more.
• Public plans facing same funding challenges will not be able to step-in as they have in recent years.
The Era of Passive Savings is Over
• 2014 was the Year of Inversion: Plans covering Canada’s workforce now spend more on specialty drugs than on all generics combined
The Era of Passive Savings is Over
Source: Cubic Health Canadian Drug Database, 2015
Their Profile• Local trade union, ~600 trade workers
covered, benefit plan overseen by Health Plan Trustees
• Even gender split overall, but EEs = 97% male
• Shifting demographic drove increase in average age from 50.5 52.8 in 2014; 58% of all claimants now over 45 years
• Adjusted for YOY drop in claimants, utilization jumped materially last year:
Plan spending: 19.7% *now over $1M annually
Paid claims: 9.0%
Case Study #2
Their Situation• Very generous plan coverage: 100% for most
(members paid only 1.1% of eligible costs in 2014)
• Significant in plan utilization last year driven by:1) Claims growth in age-related chronic conditions
Challenge: difficulty engaging male trades workers out on-the-job with health & wellness initiatives
2) Expensive specialty drug claims ¾ of overall YOY in plan spending Specialty spending 50% or $87K over 2013 80% of YOY in specialty driven by Cancer; 11
claims for Tasigna® > $53,400
Case Study #2
Their Insights• Future financial risk profile = additional
$143K or 13.9% of current spending annually from chronic recurring claims within specialty and ARCC
• Current plan design performing as well as it can: 60% generic penetration 65% of Maintenance Drug claims filled
optimally Existing design saving plan > $30K annually
• Opportunity for additional savings from just 3 provisions = $96,400 in 2014, enough to offset 2/3 of their entire future risk profile
Case Study #2
Where are they now?• Currently working through multi-faceted 3-
and 5-year strategic plan with advisor, including benefit plan design and different solutions/programs available through carrier partner
Case Study #2
Biggest issue = assumption that existing plan designs are already managing plan experience
What’s the problem?• Generic Substitution: only one-part of the story,
only deals with multi-source drugs• Flat reimbursement structures not viable in an era
of 5- to 8-fold difference in drug prices• Dispensing fee caps: do not address frequency• Prior Authorization: lowest common denominator
The Challenge with Traditional Design in 2015
What generic substitution doesn’t get at:
The Challenge with Traditional Design in 2015
1. Move away from flat reimbursement to protect your plan & its level of coverage over the long-term
2. Identify your plan’s risks: current levels of under-saturation and emerging disease state challenges
3. Isolate recurring waste, eliminate it with meaningful design and allocate those savings towards• Offsetting future specialty costs• Strategic health & wellness initiatives based on your needs
4. Share plan experience with key stakeholders & obtain buy in for win-win design
5. Communicate effectively, measure the results & tweak as required– active plan management is needed for success
What’s the Plan for 2015 & Beyond?
