Not-For-Profit Employers Scramble to Find Relief on Prescription Costs

Kansas City, Kan.— According to the Kaiser Family Foundation, Americans filled more than 3.7 billion prescriptions in 2010. Because the rate at which individuals developing chronic health conditions continues to increase, the expected decline in drug costs comes as little comfort to not-for-profit employers who are largely footing the bill, as an overwhelming majority still offer prescription coverage to employees as a part of their medical plan. These increasing costs translate to higher premiums for employers and employees, as well as increasing co-pays.

“In the not-for-profit industry, prescription drug co-pays have been trending upwards on all plan types over the last few years, although on most plans formulary co-pays have seen the largest increases,” said Amy Kaminski, director of marketing for Compdata Surveys. “On POS plans for example, formulary co-pays have increased 20.8 percent since 2009, while non-formulary co-pays have gone up by 8.9 percent.”

Formulary drugs are medications included on a list of preferred medications issued by the insurer. Drugs not on this list are referred to as non-formulary and generally incur higher co-pays and may require pre-authorization from the insurer before coverage is granted.

The use of value based insurance design (VBID) has made headlines lately as a means to control prescription costs. Using VBID, services and treatments are priced based on the overall value to an individual’s health, so the greater the value the lower the cost. As a result, co-pays on medications for chronic conditions, such as high blood pressure or diabetes, may be reduced or eliminated completely. The assumption being that reduced out-of-pocket costs will encourage employees to continue taking needed medications, keeping them healthy and reducing long-term medical costs to the employer.

The use of high deductible health plans (HDHP) is also rapidly increasing as a means to control costs. In 2009, 13.2 percent of not-for-profit employers offered HDHPs, compared to 24.1 percent in 2012. Because HDHPs carry a higher deductible, the premium costs are generally reduced. Ninety-two percent of not-for-profit employer sponsored HDHPs include prescription coverage, with 68.8 percent of those reporting a co-pay requirement. The average formulary co-pay under an HDHP is $30, with non-formulary co-pays averaging $52. Generic drug co-pays on these plans are the least expensive at $10.

About the Survey
Compensation Data 2012 Not-For-Profit provides a comprehensive summary of pay data, benefits information and pay practices with an effective date of March 1, 2012. More than 100 industry-specific job titles and 400 benchmark titles were surveyed ranging from entry-level to top executives, with data collected from more than 3,100 not-for-profit organizations across the country.

Compdata Surveys has been providing comprehensive data at affordable prices to organizations from coast to coast since 1988 and is the nation’s leading compensation and benefits survey data provider. Thousands of organizations provide data in each of our eight industry specific surveys each year, ensuring the reliability of our results. For more information about the compensation and benefits surveys, contact Michelle Willis at (800) 300-9570.