Why Carve Out Your Pharmacy Benefits?
The first step is the process is to define the difference between a pharmacy “carve-out” and a pharmacy “carve-in”.
A Pharmacy Carve-Out
A pharmacy “carve-out” is when a plan sponsor chooses a Pharmacy Benefit Manager (PBM) to administer and manage prescription drug benefits that is separate from the PBM contracted with the health plan administering their medical claims. The carved-out Rx plan can be fully insured or self-funded.
After the recent S-1 filing for Extend Health’s IPO this seems like an appropriate time to comment on some of the drawbacks to the so called “Medicare Exchange” model (sometimes referred to as a “Medicare Coordinator” or “Medicare Marketplace”) of which Extend Health is the largest provider. AON Hewitt Navigators, a result of AON Hewitt’s acquisition of Senior Educators, is another major provider. The purpose of a Medicare Exchange, like Extend Health, is to help a large employer move from a group benefit plan for Medicate eligible retirees to individual insurance policies.
1. Carve out your pharmacy benefit from your health plan. Health Plans are not set up to control the cost of prescription drugs. They don’t aggressively negotiate the cost of drugs or effective cost containment strategies. If the pharmacy costs are not separated they can’t be monitored or controlled.
For those of you who don’t know about this program, the Early Retiree Reinsurance Program (ERRP) was established by section 1102 of the Affordable Care Act (ACA) enacted on March 23, 2010. Congress appropriated $5 billion for this program to be used by plan sponsors to reduce the cost of providing healthcare benefits to their early retirees, those retirees between the ages of 55 and 65.
Saw this article yesterday about the problems the with St. Paul public schools:
Clearly, Saint Paul Public Schools has a significant problem with other post-employment benefits (OPEB) obligations promised to its retirees. As the disclosure below from the 2010 annual report indicates, the District has only been able to pay for the pay-as-you-go amount for OPEB liabilities. While current benefits are being paid, no amounts are being set aside to fund previously accrued liabilities – which continue to compound at the rate of retiree health inflation. This is pretty typical of most municipal entities around the USA.
The presentations made to the Board of Education