The 2012-13 Digest provides interesting— and as far as I know, unique—how HMOs work with Pharmacy Benefit Managers (PBMs). A few highlights:
- HMOs are more than one-quarter of the total insurance market. Medicare and Medicaid HMOs are the fastest-growing part of the HMO business.
- HMOs increasingly outsource benefit management services to PBMs.
- HMOs rarely adopt a PBM’s national formulary.
In 2011, national enrollment in health maintenance organizations (HMOs) was 79.5 million, the highest level since 2003. Government beneficiaries—Medicare, Medicaid, and the Federal Employees Health Benefits Plan (FEHBP)—account for 40% of total enrollment. Here’s a summary of 2011 HMO enrollment, by payer type:
Recent growth has come from Medicare and Medicaid HMOs. From 2006 to 2011, the number of Medicaid and Medicare HMOs grew by 25%, from 367 plans in 2006 to 460 plans in 2011.
Here are the top five HMO chains, by enrollment:
- United Healthcare: 23.0 million
- Blue Cross Blue Shield: 14.9 million
- Kaiser Foundation Health Plan: 8.1 million
- Aetna: 2.9 million
- Coventry Health Care: 2.4 million
Like other plans sponsors, HMOs use pharmacy benefit managers (PBMs) to administer the HMO’s prescription-drug plan. In 2011, per-member per-year (PMPY) drug expenditures were $575, equal to 13.9% of an HMO’s operating expenses.
The digest shows that 80% of Health Maintenance Organizations (HMOs) create proprietary formularies rather than adopting the PBM's formulary. Only 14% of HMOs rely on the PBM’s formulary. The remaining HMOs adopt the PBM’s formulary with modifications.
The table below summarizes the digest’s data on HMO-PBM relationships. (HMO definitions below.)
- Nearly all HMOs rely on PBMs for prescription processing. This is the most basic, straightforward activity provided by a PBM.
- More than 80% of HMOs also use a PBM for dispensing—presumably from a PBM’s mail pharmacy. Note that a PBM’s share of HMO prescriptions is much lower than 80%, given the fact that about 27% of HMO prescriptions were filled from the HMO’s in-house pharmacy. Staff-model HMOs, which deliver medical services at HMO-owned health centers, are much less likely to use a PBM for dispensing.
- Three out of four Independent Practice Association (IPA) and network HMOs rely on a PBM for overall plan administration, while Group and staff model HMOs tend to bring plan administration in house.
- A slight majority of HMOs (55%) rely on a PBM for drug utilization review.
BACKGROUND: TYPES OF HMOS
Here are the definitions provided in the Digest.
- Independent Practice Association (IPA)-Model HMO: In IPA-model HMOs, physicians practicing in their own offices participate in a prepaid health care plan. The physicians charge agreed-upon rates to enrolled patients and bill the IPA on a discounted fee-for service or capitated basis.
- Network-Model HMO: A network-model HMO is an organizational form in which the HMO contracts for medical services with a network of medical groups.
- Group-Model HMO: There are two types of group model HMOs: (1) the closed panel plan, in which medical services are delivered in the HMO-owned health center or satellite clinic by physicians who belong to a specially formed but legally separate medical group that serves only the HMO; and (2) the plan in which the HMO contracts with an existing, independent group of physicians to deliver medical care.
- Staff-Model HMO: A staff-model HMO consists of a group of physicians who are either salaried employees of a specially formed group practice that is an integral part of the HMO plan, or salaried employees of the HMO. Medical services in staff plans are delivered at HMO-owned health centers.