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Why Your Plan Needs A Drug Maximum

Benefits, Claims, Health

More and more employers are understanding the value of managing drug risk in their Group Benefits plans.

5 years ago, a high claimant was people claiming $200 per month in prescription drugs. There is now a new category of very high-cost drugs. Designed for relatively rare conditions and can cost between $20,000 – $1,000,000 per year.

As a matter of fact, employers are questioning the practicality of an employee potentially taking more from the benefits plan on an ongoing basis than their earned income.

The new category of drugs does not accommodate in Benefits plans.

The Ground Had Shifted Beneath the Insurance Industry’s Feet

Traditionally, most benefits plans have had unlimited drug maximum, however, the risk has changed. To tell the truth, it does not make sense that many are talking about the rising cost of benefits plans due to increasing drug costs. As well, at the same time trying to preserve unlimited drug maximums that are the primary contributor to this issue. 

Almost every week I see articles written by consultants, health and wellness people, and “industry experts”. For instance, they are all emphatically stating that we need to preserve unlimited drug maximums by almost any and every method possible.

There have been various attempts to create a solution for preserving the status quo:

  • Mandatory Generic drug plans
  • Formularies that restrict access to certain drugs
  • Industry EP3 Pool (which apparently is not working as expected)
  • Annual deductibles
  • Cut back on other benefits (usually the ones that staff value)

What they don’t seem to consider is who the typical client is that’s paying the premiums for these plans. As approx. 90% of employers share the cost of benefits 50/50 with their staff. It is business owners and staff that fund the premiums that pay the claims which Insurers pay on their behalf.

For example, 86% of businesses (of 3 or more) are between 3 – 19 staff, a typical business is comprised of 7 people. My guess is they do not have unlimited resources to pay for every drug the pharmaceutical companies can produce.

My question is, why does it seem that most people are ignoring that the simplest and most effective method of managing risk, is to simply limit exposure to unknown risk?

Changing Drug Plans is more than ok, it’s necessary

It is said to clients and advisors, “At best, benefits are to meet most of the need. Of most of the people. Most of the time. Drug plans do not meet the specific needs of each individual”

Employers could get back to offering premium drug coverage, manage risk, and contain costs. How? If they implement an annual drug maximum of $1,000 to $50,000 per family member per year. This would depend on what they and their staff find affordable.  

The only approach that ultimately manages risk. Implement the same solution as every other coverage in Group Benefits plans, introduce an annual drug maximum.

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