Kaiser Survey Shows Dramatic Growth in Pharmacy Copayments

The Kaiser Family Foundation and the Health Research & Educational Trust (HRET) released the 2010 Employer Health Benefits Survey this month and while the "headline" showed average premiums increasing only 3% -- the real news is that families are seeing significant increases in out-of-pocket costs including deductibles, copayments and tiered copays that esclate the cost share for more costly drugs and services,

Since 2005, workers’ contributions to premiums have gone up 47 percent, while overall premiums rose 27 percent, wages increased 18 percent, and inflation rose 12 percent. Many employers are also raising the annual deductibles workers must pay before their health plans begin to share most health care costs. A total of 27 percent of covered workers now face annual deductibles of at least $1,000, up from 22 percent in 2009.

Of particular note, one in 8 employers now have 4 tiers for drug benefit copayments a trend which has doubled in just 2 years. Such tiers often leave families with overwhelming copayments for chronic and/or high cost biologicals.

The nation’s recession contributed to the shift in burden to workers. In response to the economic downturn, 30 percent of employers say they reduced the scope of health benefits or increased cost sharing, and 23 percent report increasing the amount employees pay for coverage, the survey finds. A summary of the study can be found at http://ehbs.kff.org/pdf/2010/8086.pdf

Employers likely to Change Plan Design and Benefits for 2011

A new Mercer survey shows that many employers will need to change their plan design and/or contributions for 2011 and beyond to an extent that will cause the plans to forfeit "grandfathered" status. Given the need to impose cost savings - or else absorb an unpalatable level of health benefit cost increases - only half (53%) of surveyed employers indicated they would retain grandfathered status for their plans.

Healthcare reform included a proviso that plans would not have to implement many of the cost-sharing and coverage mandates - provided the plans only imposed minimal cost-sharing requirements on members. For example, a plan cannot increase deductibles or out-of-pocket (OOP) limits by more than 15 percentage points beyond the increase in the medical inflation, nor can they raise copays by more than that amount, or $5, whichever is greater. Also, plans cannot increase employee coinsurance percentages. However, survey results demonstrated that, as a Mercer partner commented, "The rules for maintaining grandfathered status were tougher than many employers expected. As they start to get a clearer picture of projected cost for 2011, many are finding they need more flexibility to get their cost increases down to a level they can handle." Maintaining grandfathered status becomes more challenging over time so we expect this trend will grow.

What does this mean for the average American with employer-sponsored coverage including self funded plans? Well just under half of the plans will have their coverage, copays and contribution stay exactly the same for 2011 which is of itself remarkable. But for the rest, the trend will continue for higher premium and out of pocket costs where such increases are permitted under health reform. Health reform has brought more transparency and focus on these issues -- but the cost issue especially for working families remains.