The document discusses challenges in calculating member pharmacy costs for health insurance plans. It describes how chronic conditions often require significant pharmacy utilization, but medications may not be covered by plans or may be on high-cost tiers. The Medicare Part D Plan Finder tool aims to help members find low-cost plans but has limitations. State health exchange data is available for some plans but may not provide full details needed. Calculating costs accurately is challenging due to issues like combined deductibles, drug pricing differences between pharmacies, and modeling non-formulary drugs.

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Calculating Member Cost
Sharing for Pharmacy Claims
Presented By:
Jason Gomberg, FSA, MAAA

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 Chronic Disease and Pharmacy Cost
 Medicare Part D Plan Finder
 Health Insurance Exchange Data Availability
 Pharmacy Pricing Issues
Agenda

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Chronic Disease and
Pharmacy Cost

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 Many chronic conditions have known and significant pharmacy utilization at time of
open enrollment:
─ Diabetes
─ HIV
─ Asthma
─ Heart Disease
─ Rheumatoid Arthritis
─ Multiple Sclerosis
Consumer Health Insurance Shopping

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 Medications may not be covered on formulary
─ Pay full cost
─ Switch to alternative
 All medications may be on high cost sharing tiers
─ For example:
• Multiple Sclerosis products costing $5,000+ / month at 50% coinsurance
o Reach member out of pocket maximum in month two or three
o Member protected remainder of year
o Member might prefer to spread cost out over year
Barriers to Obtaining Medications

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Medicare Part D Plan Finder

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 Medicare.gov website
 Allows member to enter:
─ Address
─ Expected medication options
• Exact drug list plus number of prescriptions
• Not taking any drugs
• I am in above average / average / below average health
─ Preferred retail pharmacy option
Overview

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 Plan listing based on annual expected member cost
─ Expected pharmacy cost sharing + plan premium
─ Incorporates formulary placement of drugs plus retail pharmacy copays
─ Assumes non-formulary drugs paid 100% by member
─ Does not give month by month estimates
 Summary of plan characteristics
─ Utilization management on any entered drugs?
─ Are all entered drugs on formulary?
─ Basic plan design information
Outputs

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 Algorithm used to calculate drug costs is available online
─ SAS based model
─ https://www.cms.gov/Medicare/Prescription-Drug-
Coverage/PrescriptionDrugCovGenIn/OOPCResources.html
 Pros
─ Relatively good job at helping members find low cost plan
─ Non-formulary drugs count as 100% member paid, creating strong penalty for plan in rankings if drugs
are not covered
 Cons
─ If members do not enter in exact drug information, may over penalize plans for narrow formularies
─ Assumes member not willing to switch medications
Model Review

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Health Insurance Exchange
Data Availability

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 Plan Benefit Template (PBT) and Formulary Files
─ Describes plan designs for each of state plans
─ Publically available in: Idaho, Indiana, Iowa, Maryland, Michigan, Minnesota,
Nebraska, New Hampshire, Oregon, Tennessee, and Virginia
 Not all PBTs line up with formulary files perfectly
 May be difficult getting alternative data for tools
─ Formulary files on individual company websites may not be complete or have enough
information to make benefits decisions
State Data Available

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Pharmacy Pricing Issues

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 Combined deductibles difficult to determine what percent is applicable to pharmacy cost
for an individual
 Must match individual drugs to pharmacy tier
 Pricing may be different by pharmacy (especially generic drugs)
 Patient may be willing to switch medications for cost savings
Plan Designs

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 List of estimated prescriptions in given year
 If list not available
─ General health of member?
─ List specific conditions where pharmacy important portion of treatment?
 Preferred retail pharmacy option (or mail)
 Other factors of importance?
Member Entry Dimensions

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 Generic drug pricing may be different by pharmacy
─ Where to find usual and customary (U&C) price points by pharmacy?
─ Maximum Allowable Cost (MAC) plan specific
─ Lesser of logic (MAC versus U&C versus Copay)
 Retail versus Mail pricing differences
 Model non-formulary drugs
─ Assume member pays for out of pocket?
─ Model members will switch therapy?
─ Other alternatives?
Calculation Complexities