The Kaiser Family Foundation just released their 2019 Employer Health Benefits Survey, and it contains disturbing news. It concludes that new employer benefit designs are increasingly exposing consumers to the list prices of their drugs, and that they are paying much higher prices. Employers are making their employees bear more of the costs of prescription drug drugs. And as drug prices continue to increase and companies bring more expensive medicines to market, these consumers are in big trouble.
A little bit of background: Every year the Kaiser Family Foundation conducts an annual survey of employer sponsored health benefits, and the 2019 report looked at the benefits at over 2,000 companies. Employers are one of the nation's biggest payers for prescription drugs, because almost all large employers and many small employers provide health benefits to their employees. 99% of the workers in these covered plans have prescription drug benefits. As drug costs increase, so do the costs for the employers.
These employer prescription drug plans reward consumers for using more affordable generic and lower tier drugs. And if consumers want to use drugs on higher tiers they have to pay more. But Adam Fein, CEO of Drug Channels, looked at the data and concluded that "Many people with employer-sponsored insurance face out-of-pocket costs linked to prescription list prices regardless of the actual net, post-rebate costs. That’s because coinsurance percentages are computed based on the price negotiated between the pharmacy and the plan or PBM. These negotiated prices are typically close to list prices. Even worse, patients pay the entire negotiated price when they are within a deductible."
And for consumers who have high deductible health plans with a savings option, companies are increasingly providing them with three tier plans instead of the usual four tier plans. And about 10% of these consumers are in plans where the cost sharing is the same no matter what the drug type or how expensive it is. Furthermore, many consumers now have no out of pocket maximum costs for certain drugs, especially more expensive specialty drugs.
These are all bad trends. The list prices of drugs are much higher than the prices after discounts. The whole idea of these discounts is to reduce drug prices for everyone. If consumers aren't getting the benefits and their costs are closely linked to skyrocketing list prices, the discounts aren't serving their intended purpose.
And as drug prices increase, many employers are changing their plans and shifting more of the costs onto their employees. Such arrangements are bad for employee health, bad for the companies, and unsustainable over the long run. Policymakers should take action to lower drug prices in order to reverse these trends, and employers should invest in the health of their employees.