Leon offers three concrete actions that could lessen the effect of the Cadillac tax:
- Use available technologies to research your vendors’ economics
- Offer your employees digital tools such as OneRx to help them identify the potential cost savings of coupons or paying cash for their prescriptions
- Educate your employees on their health insurance options and promote wellness programs to workers
Three Ways The C-Suite Can Prepare for the Cadillac Tax
by Leon Greene, Cofounder and Executive Vice President at Truveris
The Cadillac tax is a 40% excise tax on those employers that provide generous health benefits to workers, on plans exceeding $10,200 for an individual or $27,500 for a family. It was approved in 2013 and will go into effect in 2018. To contain costs—and ultimately avoid the tax—employers have spent the past few years shifting healthcare costs to employees. However, the Kaiser Family Foundation estimates that one in four companies will be impacted when the tax is implemented.
We’ve seen not only changing plan dynamics but also significant changes in the prescription drug landscape. Prices have been outpacing inflation, with no end in sight. A desire to control costs coupled with increasing drug prices creates a challenging situation for employers and employees alike.
Why has the prescription drug landscape changed?
According to the Truveris National Drug Index, over the past 12 months, the price paid for drugs has risen by more than 10% for the second consecutive year. The increases in specialty have been well reported. But we are now seeing this inflation across the full breadth of categories, including, for the first time, generics.
What’s more, the liability exposure for the average family has escalated. As employers have shifted more than one quarter of the insured workforce in the U.S. to high-deductible health plans, these workers are faced with more out-of-pocket expenses. A greater share of these out-of-pocket dollars is being used to pay for medications, especially among the middle class. To cut expenses, insured individuals are skipping tests, treatments, and follow-up appointments. Ultimately, this may cost the entire healthcare system more money, since physicians and patients are not adequately treating their conditions.
These combined trends have put pharmacy benefits at the forefront of the larger health benefits equation. The C-suite can’t afford to sit on the sidelines. Market forces and public policy are altering the cost structures of health benefits, and all stakeholders can and should take steps to improve the situation.
How can companies avoid the Cadillac tax?
Unfortunately they can’t.
But that doesn’t mean employers shouldn’t take action.
Here are three best practices for mitigating the effects of the Cadillac tax:
1. Have your pharmacy benefits “check up.”At Truveris, we’ve seen pharmacy benefits grow—from accounting for single-digit spend to as much as 20-30% of total healthcare spend. Make sure your vendor and plan design are equipping you to face the cost realities of the next two years. Products such as RxChoice, TruGuard and TruBid provide pricing transparency as well as claims readjudication to ensure you’re designing the best plans for your workforce.
2. Offer digital tools that put the value of your benefits at the fingertips of covered employees. High-deductible plans are here to stay, but tools that provide price transparency on medications can help your employees curb costs. Here’s the logic: if you don’t know how much something costs, you can’t identify opportunities for cost savings.
OneRx is a free mobile app that allows users to compare the lowest prices on prescription medications at local pharmacies (www.onerx.com). It’s the first solution that meets the needs of both insured and uninsured Americans. Employees can input their insurance details and search for medication prices, then compare how much it would cost them with or without insurance. This is more important than ever—according to Truveris research, 35% of covered individuals do not realize that it can be cheaper to pay for medications using savings solutions, such as coupons and discounts, than it is using their healthcare plan.
We’ve seen price transparency positively impact how individuals select and acquire other healthcare services. Now we’re bringing the benefits of transparency to pharmaceutical drugs at a time when it’s truly needed.
3. Consider alternative savings vehicles as part of your benefits communications.Cost shifting also requires that employees assume more responsibility in managing their own health and related expenditures. Providing tools that help them defray the out-of-pocket liability is a win for everyone.
More employers are promoting wellness apps and programs to workers as tools to help them save. Product offerings are made available through internal digital platforms, email, physical brochures and posters, text, and others. We recommend highlighting these savings vehicles in your benefits communications during open enrollment. It’s the perfect time to educate employees on their health insurance options––and on how they can take full advantage of their chosen plan while controlling out-of-pocket costs.
It’s important to start your planning now, and understand the opportunities of integrating with digital tools like OneRx to help your employees avoid the consequences of the Cadillac tax. Visit onerx.com/employers to learn more.
The content of Sponsored Posts does not necessarily reflect the views of Pembroke Consulting, Inc., Drug Channels, or any of its employees.