How to Manage Your Formulary: The Employers Guide to RX Drug Coverage

/in , , ,

Prescription drug coverage is a key part of any employer-sponsored health plan, but rising costs and complex systems can make it challenging to manage. This guide will help you take control of your formulary, aligning it with your goals and budget while keeping employees satisfied.

What Is a Formulary?

A formulary is a list of prescription drugs covered by a health plan. It typically includes generic drugs, brand-name drugs, and specialty medications, categorized into tiers that determine how much employees pay out-of-pocket.

Understanding your formulary is the first step toward effective management. Formularies are typically structured as:

  • Tier 1: Low-cost generic drugs
  • Tier 2: Preferred brand-name drugs
  • Tier 3: Non-preferred brand-name drugs
  • Tier 4: Specialty drugs

Each tier comes with different costs for the employer and employee, impacting the overall affordability of your plan.

Why Effective Formulary Management Matters

Poorly managed prescription drug plans can result in:

  • Rising Costs: High utilization of expensive drugs can lead to unsustainable premiums.
  • Employee Dissatisfaction: Lack of access to necessary medications can cause frustration.
  • Compliance Risks: Mismanaging a formulary can lead to legal and regulatory issues.

Effective management ensures cost control, enhances employee satisfaction, and reduces administrative headaches.

Steps to Manage Your Formulary

1. Evaluate Your Current Plan

Start by analyzing your current prescription drug coverage. Look at utilization trends, costs, and employee feedback.

  • Key Questions to Ask:
    • Are employees satisfied with their prescription drug options?
    • Are high-cost specialty drugs driving up expenses?
    • Are there frequent requests for drugs not included in your formulary?

An annual review with your benefits consultant or pharmacy benefits manager (PBM) can uncover gaps and inefficiencies.

2. Partner with a PBM

Pharmacy Benefit Managers (PBMs) play a critical role in formulary management. They negotiate drug prices with manufacturers, decide which drugs are included in your formulary, and determine employee cost-sharing.

  • What to Look for in a PBM:
    • Transparent pricing structures
    • A robust network of pharmacies
    • Proactive cost-management strategies

A good PBM can help you strike a balance between affordability and access.

3. Prioritize Cost-Effective Medications

Generic drugs and biosimilars are often just as effective as their brand-name counterparts but at a fraction of the cost. Work with your PBM to encourage employees to choose cost-effective options.

  • Strategies to Promote Savings:
    • Highlight generic alternatives in employee education materials.
    • Implement step therapy programs, requiring employees to try lower-cost options first.
    • Offer tiered pricing to incentivize cost-saving choices.

4. Monitor Specialty Drug Costs

Specialty drugs treat complex conditions but often come with exorbitant price tags. According to industry reports, these medications account for a small percentage of prescriptions but a significant portion of drug spending.

  • Ways to Manage Specialty Drug Costs:
    • Require prior authorization to ensure appropriate use.
    • Partner with specialty pharmacies for better pricing.
    • Explore co-pay assistance programs offered by drug manufacturers.

Educating Employees on the Formulary

Clear communication is essential for effective formulary management. Employees need to understand their options and the rationale behind the plan’s structure.

What to Include in Employee Education:

  1. How the Formulary Works: Explain the tiers and out-of-pocket costs.
  2. How to Find Covered Medications: Share links to online formulary lists or apps.
  3. Cost-Saving Tips: Highlight the benefits of generics, mail-order pharmacies, and preventive drug programs.
  4. Contact Information: Provide clear instructions on how to get help with prescription questions.

Use newsletters, webinars, and one-on-one meetings to keep employees informed and engaged.

Leveraging Technology

Digital tools can simplify formulary management and improve the employee experience.

  • Mobile Apps: Many PBMs offer apps that allow employees to check drug coverage, compare prices, and find nearby pharmacies.
  • Telehealth: Virtual visits can help employees get prescriptions faster and often at a lower cost.
  • Analytics Tools: Use data dashboards to monitor trends and identify areas for improvement.

Addressing Common Challenges

1. Managing Plan Costs

Prescription drug prices are rising faster than inflation. To combat this, consider:

  • Utilization Reviews: Analyze whether high-cost drugs are being overprescribed.
  • Rebates: Work with your PBM to maximize manufacturer rebates.
  • Alternative Funding Programs: Explore options like international sourcing for non-critical medications.

2. Handling Employee Complaints

Employees may express frustration if a drug they need isn’t covered or is too expensive. Be prepared to address these concerns.

  • Offer Flexible Options: Allow employees to appeal for coverage of non-formulary drugs when medically necessary.
  • Communicate Changes Early: If you’re updating your formulary, give employees ample notice.

3. Staying Compliant

Regulations like the Affordable Care Act and the Consolidated Appropriations Act require transparency and fairness in drug coverage. Partner with legal experts or consultants to ensure compliance.

Formulary Management Best Practices

  1. Review Your Formulary Annually: Adjust coverage to account for new drugs, pricing changes, and employee needs.
  2. Incentivize Preventive Care: Cover preventive medications at no cost to reduce long-term health expenses.
  3. Focus on Employee Engagement: Solicit feedback and use it to refine your plan.

The Bottom Line

Managing your formulary doesn’t have to be overwhelming. By partnering with a trusted PBM, prioritizing cost-effective options, educating employees, and leveraging technology, you can create a prescription drug plan that balances cost, compliance, and care.

Remember, a well-managed formulary benefits everyone—employers control costs, employees access the medications they need, and your organization builds a reputation as a supportive and forward-thinking workplace.

For more insights on health benefits management, reach out to your benefits consultant or explore resources from your PBM. A proactive approach today can lead to a healthier, more cost-effective tomorrow.

Any questions? We have answers. Learn more about us and our services, here.

2025 Employers Guide to COBRA

/in , , , ,

As we move into 2025, it’s important for employers to know about the Consolidated Omnibus Budget Reconciliation Act (COBRA). This law gives employees and their families the chance to keep their health insurance after certain life events. This guide will explain what COBRA is, what employers need to do, and how to make the process easier for everyone.

What is COBRA?

COBRA is a federal law that lets employees keep their group health insurance for a limited time after specific events. It applies to businesses with 20 or more employees and covers group health plans from private companies and local or state governments.

COBRA is there for employees and their families after they go through a qualifying event, like:

  • Losing their job (unless they were fired for bad behavior)
  • Having their work hours cut
  • Getting divorced
  • The death of the employee
  • Losing dependent status (like a child turning 26)

Why is COBRA Important?

COBRA is really important because it helps people keep their health insurance during tough times. Losing your job or going through a big life change can be stressful, and having health insurance can help ease some of that worry. COBRA gives people the time they need to find new jobs or other insurance options.

What Do Employers Need to Do?

If you’re an employer, it’s crucial to understand your responsibilities under COBRA to stay compliant and avoid fines. Here are the main things you need to know:

1. Notify Employees of Their COBRA Rights

When an employee becomes eligible for COBRA, you must inform them. This means sending a notice within 14 days of a qualifying event. The notice should include:

  • Information about their right to continue health coverage
  • How long they can keep the coverage
  • How much it will cost them
  • Instructions on how to enroll in COBRA coverage

2. Provide Coverage Options

If an employee chooses COBRA, you need to offer the same health benefits they had when they were employed. This means they should still have access to medical, dental, and vision insurance if those were part of their original plan.

3. Handle COBRA Premium Payments

You can charge employees up to 102% of the premium for COBRA coverage. This includes the total cost of the coverage plus a 2% fee for administration. Make sure to communicate clearly about when payments are due and how employees can pay.

4. Keep Records

It’s essential to keep records of all COBRA notifications, elections, and payments. Good record-keeping helps with compliance and can be useful if there are any disputes later.

5. Understand Reporting Requirements

If your business is required to file Form 5500, you must report COBRA enrollment and compliance. This form gives the Department of Labor (DOL) information about your employee benefits plan, including COBRA.

How Long Does COBRA Coverage Last?

COBRA coverage doesn’t last forever. The duration of coverage depends on the qualifying event:

18 months: For employees who lose their jobs or have their hours reduced.

29 months: If a person is disabled (this must be determined within the first 60 days of COBRA coverage).

36 months: For dependents who lose coverage due to the employee’s death, divorce, or legal separation.

Employers should notify former employees when their COBRA coverage is about to end, so they have time to find other options.

 

Best Practices for Employers

To stay compliant and help employees during transitions, consider these best practices:

1. Create a COBRA Compliance Plan

Make a clear plan that outlines how you will notify employees, manage elections, and handle payments. Assign specific roles to ensure everyone knows what they are responsible for.

2. Use a Third-Party Administrator (TPA)

Think about hiring a TPA that specializes in COBRA administration. They can help manage notifications, elections, and payments, making the process easier for your HR team.

3. Communicate Clearly with Employees

Make sure your communication about COBRA coverage is simple and easy to understand. Provide employees with written materials that explain their rights and responsibilities. Designate HR representatives who can help answer questions.

4. Stay Updated on Changes in the Law

Keep an eye on any changes in COBRA regulations, as laws can change. Regularly review your policies and practices to ensure they are up-to-date.

5. Provide Resources for Alternative Coverage

Help employees transition from COBRA to other health insurance options. Share information about state health insurance marketplaces, Medicaid, or private insurance plans they can consider.

Common Misconceptions about COBRA

Let’s clear up some common misunderstandings about COBRA:

Myth 1: COBRA is Free: COBRA allows employees to keep their health coverage, but they have to pay for it. The cost may be higher than what they paid while employed.

Myth 2: Employers Can Deny COBRA Coverage: Employers must offer COBRA coverage unless the employee was fired for serious misconduct.

Myth 3: COBRA Coverage is Indefinite: COBRA coverage is temporary and has set time limits based on the qualifying event.

Final Notes

Understanding COBRA is essential for employers as we head into 2025. By meeting your obligations to notify employees, provide coverage, and keep accurate records, you can help ensure compliance and support your employees during their transitions.

COBRA provides important health insurance continuity for employees facing significant life changes, allowing them to access necessary healthcare services. By proactively managing COBRA responsibilities, you create a supportive workplace that helps employees feel valued and cared for.

For personalized help with COBRA regulations and compliance, consider reaching out to a healthcare benefits expert or legal advisor. They can offer guidance tailored to your organization’s needs and help you implement effective strategies for managing COBRA.

GLP-1 Medications and Employer Health Plans: What You Need to Know

/in , , , ,

GLP-1 medications—such as Ozempic, Wegovy, Mounjaro, and Zepbound—are growing in popularity for their ability to promote weight loss. While many employers already cover these drugs for diabetes treatment, fewer offer coverage for weight loss purposes. With increasing interest in using GLP-1 medications to address obesity, more employers are reconsidering whether to include them in their health plans.

If you’re an employer considering coverage for GLP-1 medications for weight loss, here are a few key points to keep in mind:

1. Coverage Options for GLP-1 Medications

Employers have two main options when it comes to offering coverage for GLP-1 medications:

  • Prescription Drug Benefit: You can include coverage through your medical plan or as a standalone prescription drug benefit. Before offering this, you’ll need approval from your insurance carrier or stop-loss provider. A supplemental rider might also be necessary. It’s important to consider how covering these drugs could impact the cost of future renewals.
  • Health Reimbursement Arrangement (HRA): HRAs allow employers to reimburse employees for GLP-1 medication costs. These must be employer-funded and tied to a major medical plan. Employees on high-deductible health plans (HDHPs) must meet IRS minimum deductible requirements to remain eligible for health savings accounts (HSAs).

2. Tax Implications

When prescribed for diabetes, GLP-1 drugs are typically tax-free. However, if they are prescribed for weight loss, they may only remain tax-free if there’s a medically diagnosed condition, such as heart disease or hypertension. Otherwise, the benefit could be considered taxable income for employees.

3. Managing Costs

Covering GLP-1 medications can be expensive, so employers may need to adopt strategies to manage plan costs while still supporting employee health. Here are a few options:

  • Restrict Coverage: Consider limiting coverage to employees who meet specific criteria, such as a BMI of 30 or higher, or 27 with an obesity-related condition. You can also restrict coverage to employees actively participating in lifestyle programs.
  • Prior Authorization: Require prior authorization to ensure the medication is being used for legitimate medical reasons, not cosmetic purposes.
  • Provider Restrictions: Limit prescriptions to certain healthcare providers, such as primary care physicians or endocrinologists.
  • Lifetime Maximums: Set lifetime maximums for GLP-1 medications, but ensure these limits comply with Affordable Care Act (ACA) regulations.
  • Separate Cost Structure: Consider placing GLP-1 medications in a higher-cost tier within your health plan to help offset expenses. Be sure to consult legal counsel to ensure compliance with regulations like HIPAA and the ADA.

4. Balancing Employee Health and Cost Management

Although covering GLP-1 medications can strain health plans due to their high cost (which can reach $18,000 per employee annually), employers should weigh the potential long-term benefits. These medications may improve employee health and ultimately reduce healthcare expenses. Many employers have noted improved employee satisfaction and engagement when offering such coverage.

As demand for these medications rises, experts believe that most corporate health plans will eventually include weight loss drugs. For now, employers must navigate the complexities of covering these treatments, consulting with pharmacy benefit managers (PBMs) and carriers to find a balance that fits their goals.

Final Notes

The conversation around covering GLP-1 medications for weight loss is growing, and employers are grappling with the costs and benefits. While most plans currently cover these medications for diabetes, only about 27% extend coverage for weight loss. As the market expands and more data becomes available, it’s likely that more companies will adopt this coverage. For now, it’s important to work through the details and consult a benefits consultant to find the best approach for your group health plan.

Any Questions?

We are in the business of providing healthcare to everyday people, ensuring peace of mind through trust and transparency.

Our customer service is what sets us apart. We work when you work. Our carrier partners have given us exclusive offerings to complement our medical plans, giving you the best possible price. Our speed of implementation and innovative approach to benefit coverage is second to none.


Learn more about us and our services, here.

USEFUL LINKS

EMPLOYER PORTAL
EMPLOYEE PORTAL
PRIVACY POLICY 
THE BLOG

CONTACT SBMA

888-505-7724
[email protected]

HOURS

Mon – Fri: 6:00am—5:00pm (PST)
Sat: CLOSED
Sun: CLOSED

FOLLOW US

© SBMA 2024 – all rights reserved

site designed by digitalstoryteller.io

© SBMA 2024 – all rights reserved
site designed by digitalstoryteller.io