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City Of Woodhaven Presentation

  1. 1. 03.30.2010  Presentation for the   City of Woodhaven   Presented By:  
  2. 2. Table  • HR Connection 5.0 Presentation    • HR Connection 5.0 Overview     • What is an HRA?    • Zywave Rx Fact Sheet     • Perspectives     • Legislative Brief—Electronic Disclosures    • Legislative Brief—COBRA Answers for Employ‐ ers    • Trends Fact Sheet     • Agent Call List  
  3. 3. INTRODUCTION TO HRCONNECTION® 5.0 Rated HR for Human Resourceful. 1
  4. 4. THE PROBLEMS HR & EMPLOYEES FACE • Employers need to educate and empower employees. • Employees need benefit information. • Newer, more efficient ways of communicating benefits and other company information are becoming more prevalent. 2
  5. 5. THE SOLUTION: HRCONNECTION 5.0 • Cornerstone Benefit Plans, Inc. is pleased to bring you the solution to your HR and benefits communication challenges. • HRconnection – the most powerful HR communication system available – helps you deliver company information in one secure and convenient location that is easily viewed by employees. • It’s customizable to your needs and preferences. 3
  6. 6. HRCONNECTION HELPS . . . • EMPLOYERS manage company information in one secure and convenient location that employees can view from any computer with Internet access. • EMPLOYEES reach a comprehensive resource for company and benefits information, any time of the day or night, by answering most questions that would normally be directed to the HR department. • HUMAN RESOURCES personnel to function more efficiently and devote more time to strategic issues. • Obtain up-to-date company and benefits information and useful forms. • Connect to comprehensive human resources information 24 hours a day, 7 days a week. • Access real-time answers to frequently asked questions on important issues and topics. 4
  7. 7. HRCONNECTION HELPS HUMAN RESOURCES . . . • Showcase benefit programs to employees and their families • Provide centralized employee self-service, any time, reducing inquiries directed to HR. • Reduce printing and distribution costs by providing materials online. • Communicate important company information to all employees in a consistent, timely, and useful manner. • Attract and retain valued employees by portraying a high-quality image. • Provides a wealth of information for employees in an easy-to-use and understandable format, which includes: - Company Information - Human Resources - My Information - Setup and Administration - Vacation Administration 5
  8. 8. HOME PAGE Each employee will have there own user ID and Password Here the Employee can access HR document, Employer can add company bulletin, and Employee Documents. Benefit Designs Ex: Expense Reports, Mileage Reimbursement Forms, ect. Employees & Employers can track Vacation If an Employer would like & Sick Day’s online Election’s made by the Employee, this can be done for a fee. This site is brought to you by: 6
  9. 9. COMPANY INFORMATION HR will be able to list there Contact Information. HR & Employees will be able to post bulletins, and even access the employee directory! This site is brought to you by: This site is brought to you by: 7
  10. 10. EMPLOYEE INFORMATION • Empower employees to manage personal information, including the ability to: – Add, review or update personal information, as well as emergency contacts, dependents and beneficiaries – Manage time-off requests and view a summary by type – Enter life events – Manage/view benefit elections 8
  11. 11. EMPLOYEE INFORMATION Employees will be able to access there own Personal Information. They will be able to track vacation and sick days, change there address, view there medical plan, and even notify HR if there is a Change in Life Status. This site is brought to you by: This site is brought to you by: 9
  12. 12. COMPANY INFORMATION • Educate and assist employees on company-specific information, including: – Company history – Holiday and event listings – Departmental contacts – Employee directory – Company bulletin board – Provides employees online access to: • Job descriptions/postings • Company handbook • Forms • Recommended links • Policies and procedures • Career growth, such as training opportunities Eliminates the need for distributing bulky and costly employee materials. 10
  13. 13. COMPANY INFORMATION Employees can access the following at any time: -Job Postings -Company Handbook -Policies & Procedures This site is brought to you by: This site is brought to you by 11
  14. 14. BENEFIT PLANS • Bundles everything employees want to know about their benefit plans in one secure location. Benefits are listed by type, and employees can obtain detailed plan information and benefit summary information, including the ability to: • View plan design information, including rates & eligibility • Access Summary Plan Descriptions (SPDs) • Compare plan benefits • Obtain plan form • View carrier contact information • Access Frequently Asked Questions 12
  15. 15. BENEFIT PLANS Employees will be able to view all plans the company is currently offering. 13
  16. 16. WHY HRCONNECTION? • Easy navigation and interactive features for employees. • Easy to set up and update; fast and flexible administrative functions. • Delivering targeted employee information is easy with a customizable home page that includes an at-a-glance design to display: – A welcome message and seasonal announcements. – A list of links to employer-recommended Web resources. – Targeted employee communication campaigns. – A dashboard of upcoming time off and time remaining, personalized to the user. 14
  17. 17. ADMINISTRATION • From portal setup, to uploading custom content, to reporting... HRconnection offers administrators the following capabilities: • Upload employee data • Add, edit or delete benefit plan data • Administer life events • Schedule, approve and track vacation • Publish content • Select portal look, feel and functionality • Create election and employee reports 15
  18. 18. WITH HRCONNECTION . . . educate and empower your employees! – It’s flexible and secure – choose the features that make sense for you – Provides easy online access to users – Allows HR to do more with less Get resourceful today with HRconnection 5.0! 16
  19. 19. Cornerstone Benefit Plans, Inc. is pleased to provide City of Woodhaven with HRconnection®, an intuitive HR communication Web portal that helps you deliver company information in one secure and convenient location that is easily viewed by employees. Customizable to your needs and preferences, HRconnection offers you the following flexible features and benefits. CHOOSE YOUR OPTIONS TRAINING AND SUPPORT Customization of portal look, feel and menu options A customized implementation Self-serve access to company and employee communication information and access to a dedicated including City of Woodhaven’s history, handbooks, forms, directories and Cornerstone Benefit Plans, policies Inc. Account Manager Online benefits elections including standard and customizable reporting On-screen, context-sensitive Help Anytime access to benefit plan information Online Quick Reference Time-off approval, tracking and reporting capabilities Guides Database of employee information useful for reporting Select portal functionality is optional based on preferences Visit
  20. 20. CUSTOM PORTAL DESIGN CAPABILITES Unsurpassed custom design options include the ability to: Select from three portal design layouts Choose from 12 standard color schemes or easily customize your own Control images including company logo, name and stock photos Offer different information for different groups of employees Create your own sub-menu items such as a job descriptions page, custom messages page, etc. WELCOME Delivering targeted employee communications is easy with a customizable home page that includes: Home page welcome message and seasonal announcements Links to employer-recommended Web resources Scheduled employee communication campaigns Quick view of upcoming time off and time remaining, personalized to the user COMPANY INFORMATION Educate and assist employees on company-specific information including: Employee directory Departmental contacts Holiday and event listing Mission statement and vision Company history © Copyright 2009 Zywave, Inc.
  21. 21. MY INFORMATION Empower employees to manage personal information including the ability to: Add, review or update personal information Manage time-off requests and view a summary by type, such as vacation, personal or sick day Update life event changes such as beneficiary, dependent or marital status formation Manage and review benefit elections View both current and future personal elections throughout the year HUMAN RESOURCES Helps you eliminate the need for distributing bulky and costly company materials and provide online access to career information to employees including: Handbooks Forms Directories Policies and procedures Career growth, job posting and training information BENEFIT PLANS Bundles everything employees want to know about their benefit plans in one secure location. Benefits are listed by type such as medical, dental, vision, etc. Within each plan type, employees can obtain detailed plan information and benefit summary information including the ability to: View plan design information including rates and eligibility Access Summary Plan Descriptions Compare plan benefits Obtain plan forms © Copyright carrier contact information View 2009 Zywave, Inc. Access Frequently Asked Questions
  22. 22. REPORTING OVERVIEW By capturing employee and plan information in HRconnection 5.0, administrators have the ability to create the following standard reports quickly and easily in a variety of formats. Election Reports Employee Reports Benefit Comparison Report - Use this report to compare Employee Changes - Monitor changes to information employee elections at two points in time Employee Username - Useful for distributing portal login Carrier Extract Report - Extract election information for information submission to carriers Employee Vacation Requests - Extract request details Census Report - Create an employee census for any line of coverage Employee Vacation Totals - Create a new upload for a subsequent time period Election Changes Report - Extract employee, dependent and plan information for employees whose elections changed due to life events, open enrollment or terminations Elections Summary - Create an election summary for an individual or all employees (available to employees in the benefit plans section of the portal) Flexible Spending Report - Extract annual and per pay period FSA contributions by employee Payroll Extract Report - Pull payroll information Personal Instruction Sheet - Generate a personal instruction sheet for employees to use during open enrollment and for employees who do not have access to the internet to make their elections Plan Design Report - Provides detailed information, including rates and benefits, on any of the plan offerings Premium Report - Reconcile a carrier’s monthly billing Projected 401(k) Premium Report - Show projected employee 401(k) contributions © Copyright 2009 Zywave, Inc.
  23. 23. ADMINISTRATION From portal setup to uploading custom content to reporting, HRconnection 5.0 offers administrators the ability to: Select portal’s look, feel and functionality with a full range of customization options Upload employee data including dependent information, addresses, phone numbers, emergency contacts, job titles and custom fields from a spreadsheet Add, edit or delete benefit plan data Administer life events including opening up enrollment periods for life event changes or for new hires, creating a mass life event for new hires and sending benefit election reminders Manage all aspects of vacation tracking including the ability to do accruals Publish portal content according to type such as bulletin board posting, policy, handbook, welcome page message, etc. Generate reports and manage data imports Update and maintain broker access information Access online, self-serve Help for all “How do I...?” questions HRconnection® 5.0 SYSTEM REQUIREMENTS • Microsoft® Windows® Vista or Windows® XP operating system • Microsoft® Internet Explorer® internet browser 6.x or higher, or Mozilla® Firefox® internet browser 3.x or higher • Dedicated, high-speed internet connection recommended • Minimum monitor resolution of 1024 x 768 • HRconnection 5.0 is not supported on Apple® Macintosh® computers © Copyright 2009 Zywave, Inc.
  24. 24. What is a Health Reimbursement Arrangement? A Health Reimbursement Arrangement (HRA) is an employer-funded account that is designed to reimburse employees for qualified medical expenses that are paid for out-of- pocket. There are no annual contribution limits on HRAs; however, the employer usually sets the contribution below the annual deductible. HRAs are often designed to operate with a high deductible health plan (HDHP), thereby reducing premium costs while encouraging employees to spend wisely. Your employer sets up the HRA, determines the amount of money available in each employee’s HRA for the coverage period, and establishes the types of expenses the funds can be used for. What are the benefits of an HRA? You may enjoy several benefits from having an HRA: - Contributions made by your employer can be excluded from your gross income. - Reimbursements may be tax-free if you pay qualified medical expenses. - Any unused amounts in the HRA can be carried forward for reimbursements in later years. Who is eligible for an HRA? HRAs are employer-established benefit plans. These may be offered in conjunction with other employer-provided health benefits. Employers have complete flexibility to offer various combinations of benefits in designing their plan. You do not have to be covered under any other health care plan to participate. Self-employed persons are not eligible for an HRA. Certain limitations may apply if you are a highly-compensated participant. An HRA may reimburse medical care expenses only if they are incurred by employees or former employees (including retirees) and their spouses and tax dependents. HRA coverage must be in effect at the time the expense is incurred. Are HRAs really best only for the young and healthy? No. HRAs and other HDHPs are well-suited for a very wide demographic of people. According to Aetna, the average age of its HRA plan members is 42, the same average age as those who opted for more traditional plans. What is a High Deductible Health Plan (HDHP)? A HDHP has: - A higher annual deductible than typical health plans; and - A maximum limit on the sum of the annual deductible and out-of-pocket medical expenses that you must pay for covered expenses. Out-of-pocket expenses include copayments and other amounts, but do not include premiums.
  25. 25. An HDHP may provide preventive care benefits without a deductible or with a deductible below the minimum annual deductible. Preventive care includes, but is not limited to, the following: 1. Periodic health evaluations. 2. Routine prenatal and well-child care. 3. Child and adult immunizations. 4. Tobacco cessation programs. 5. Obesity weight-loss programs. 6. Screening services (i.e. cancer, heart and vascular diseases, infectious diseases, etc.) Amount of Contribution Your employer funds the account, so it costs you nothing out-of-pocket. There is no limit on the amount of money your employer can contribute to the accounts. Additionally, the maximum reimbursement amount credited under the HRA in the future may be increased or decreased by amounts not previously used. The maximum annual contribution is determined by your employer’s plan document. There may also be a cap amount for the HRA. Your employer can choose to fund your HRA with an annual contribution or on a monthly basis. Distributions from an HRA Distributions from an HRA must be paid to reimburse you for qualified medical expenses you have incurred. The expense must have been incurred on or after the date you are enrolled in the HRA. Debit cards, credit cards and stored value cards given to you by your employer can be used to reimburse participants in an HRA. If the use of these cards meets certain substantiation methods, you may not have to provide additional information to the HRA. If any distribution is, or can be, made for other than the reimbursement of qualified medical expenses, any distribution (including reimbursement of qualified medical expenses) made in the current tax year is included in gross income. For example, if an unused reimbursement is payable to you in cash at the end of the year, or upon termination of your employment, any distribution from the HRA is included in your income. This also applies if any unused amount upon your death is payable in cash to your beneficiary or estate, or if the HRA provides an option for you to transfer any unused reimbursement at the end of the year to a retirement plan. If the plan permits amounts to be paid as medical benefits to a designated beneficiary (other than the employee's spouse or dependents), any distribution from the HRA is included in income. However, if before August 15, 2006, the plan contains such a provision, this rule will not apply until plan years beginning after December 31, 2008. Reimbursements under an HRA can be made to the following persons: 1. Current and former employees 2. Spouses and dependents of those employees 3. Employees’ covered tax dependents 4. Spouses and dependents of deceased employees
  26. 26. Qualified Medical Expenses Qualified medical expenses are those specified in the plan that would generally qualify for the medical and dental expenses deduction. Examples include amounts paid for doctors' fees, prescription and non-prescription medicines, and necessary hospital services not paid for by insurance. You can use your HRA funds for deductibles, copayments and coinsurance. Balance in an HRA Amounts that remain at the end of the year may be carried over to the next year depending on your employer’s plan design. Your employer is not permitted to refund any part of the balance to you. These amounts may never be used for anything but reimbursements for qualified medical expenses. What if I terminate my employment during the Plan Year? If you cease to be an Eligible Employee (e.g. you die, retire or terminate employment), your participation in the HRA Plan will end unless you elect COBRA continuation coverage. You will be reimbursed for any medical care expenses incurred prior to your termination date, up to your account balance in the HRA, provided that you comply with the plan reimbursement request procedures required under the plan. Any unused portions will be unavailable after termination of employment. The rules regarding COBRA are contained within your Summary Plan Description. Will I have any administrative costs under the HRA plan? Generally, no. Your employer bears the entire cost of administering the HRA plan while you are an employee. How long will the HRA plan remain in effect? Although your employer expects to maintain the HRA plan indefinitely, it has the right to terminate the HRA plan at any time. Your employer also has the right to amend the HRA plan at any time and in any manner that it deems reasonable, in its sole discretion. Are my benefits taxable? The HRA plan is intended to meet certain requirements of existing federal tax laws, under which the benefits that you receive under the HRA Plan generally are not taxable to you. Your employer cannot guarantee the tax treatment to any given participant, since individual circumstances may produce differing results. What is the difference between an HRA and FSA? HRAs are employer-funded, which means your employer determines the amount that goes into the HRA account. FSAs are employee-funded, which means the funds are deducted from your salary. You determine the amount to go into your FSA account. What does the IRS require me to report on my taxes concerning my HRA? Nothing. Your HRA is a health benefit. Content © 2007-2009 Zywave, Inc. All rights reserved.
  27. 27. ZywaveRx™ ZywaveRx was formed by leveraging the buying power of a nationwide network of employee benefits brokers — including Cornerstone Benefit Plans, Inc. — that collectively represents over A cure for the common PBM 1.3 million self-funded lives. ZywaveRx lets you compare your current pharmacy benefits manager (PBM) to two leading national PBMs, Express You know that health care costs are rising, fast. Scripts and Systemed. With ZywaveRx, You know there’s no slowdown in sight. But, do Cornerstone Benefit Plans, Inc. can provide you access to exclusive, you know that pharmacy benefits are one of the extremely favorable terms for your pharmacy benefits. biggest contributors to those rising health care costs? The highlights of the ZywaveRx™ program include zero dollar administrative fees, low dispensing fees, In fact, drug benefit costs are raising 15 – 20% deep pharmacy discounts, and aggressive rebates. Using ZywaveRx’s per year, and account for 10 – 15% of total exclusive online savings calculators, Cornerstone Benefit Plans, Inc. can health care expenditures. Clearly, keeping drug compare your current PBM, Express benefits costs in line can go a long way toward Scripts, and Systemed to determine the most cost-effective program for you. improving your overall health benefits costs. But, ZywaveRx lets us meet several critical drug benefits are popular, highly utilized objectives for your pharmacy benefits benefits; simply slashing or eliminating them program: isn’t the right answer. Choice. We don’t limit your choice to one PBM. With ZywaveRx, you can choose between two of the nation’s Cornerstone Benefit Plans, Inc. has the solution leading firms. for you: ZywaveRx. Accountability. Express Scripts and Systemed know that we are presenting more than one option to our clients. We expect nothing but the highest level of service from them both in order to win your trust. Support. Express Scripts and Systemed are dedicated to helping Cornerstone Benefit Plans, Inc. and our clients understand their organizations, their products, and the ZywaveRx terms. Favorable terms. Express Scripts and Systemed can provide extremely favorable terms for our clients. You will be able to retain a cost-effective pharmacy benefits program for your employees for years to come. Content © 2008 Zywave, Inc. All rights reserved. The information contained herein, including its attachments, contains proprietary and confidential ™ information. Any distribution of these materials to third parties is strictly prohibited. ZywaveRx is a registered trademark of Zywave, Inc.
  28. 28. PERSPECTIVES PROVIDING INSIGHT INTO TODAY'S EMPLOYEE BENEFITS ISSUES Increasing A Annual Healthcare Cost Increases, Healthcare Costs 16.0% 15.2% National Averages 2001-2009 and Your Employee 14.7% 14.0% 12.3% Health Plan 12.0% A 10.0% 9.2% 7.9% Ninth Edition 8.0% 6.0% 6.4% 6.0% 5.3% HEALTHCARE costs, and consequently employee health 4.0% benefits costs, have been increasing at an alarming rate for nearly a decade. While the upward trend in healthcare costs seems to be 2.0% slowing, cost increases that are outpacing the rate of inflation are 0.0% still commonplace; costs increased in 2008 and are expected to 2001‐02 2002‐03 2003‐04 2004‐05 2005‐06 2006‐07 2007‐08 2008‐09  increase slightly in 2009. Avoiding rising healthcare costs is (proj.) nearly impossible, but you can learn about why they continue to Source: Hewitt Health Value Initiative™, 2008 rise and what you can do to minimize the fallout for your B Exhibit 1 organization and your employees. The next few pages will discuss the latest healthcare cost figures, the factors leading to nearly a decade of unprecedented rate hikes, and some solutions that firms around the U.S. are 2008 Healthcare Cost Increases, undertaking to help soften the blow. Major Metropolitan Areas Atlanta 7.2% National Healthcare Cost and Renewal Rate Boston 4.5% Projections Chicago 3.7% Overall national healthcare costs have been skyrocketing for Dallas/Ft. Worth 8.1% over a decade, and are now just beginning to level off. From 1994 Denver 5.3% to 1998, average annual healthcare cost increases hovered around Detroit 7.5% 2 percent. From 1999 to 2000, however, costs leapt 9.4 percent and the annual percent change then entered and stayed in the Houston 2.6% B Los Angeles 7.5% double digits until finally taking a slight downturn from 2005 to 2007. Minneapolis 9.1% Exhibit 1A, right, depicts the percent change in average New York City 8.7% annual healthcare cost increases from 2001 to 2009. Cost Orlando 9.2% increased to 6 percent in 2008. Hewitt projects healthcare costs for Philadelphia 8.1% 2009 to be around 6.4 percent, compared to 6 percent in 2008. San Francisco 6.7% The overall cost of healthcare has a direct impact on the rates Tampa Bay Area 7.1% employers pay for employee health benefits. Still, health benefits Washington, D.C. 6.7% costs have varied widely across the country for the last several 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% years, hitting some metropolitan areas much harder than others. Exhibit 1B, right, illustrates healthcare cost increases (or in one Source: Hewitt Health Value Initiative™, 2008 case, decrease) in major metropolitan areas in 2008. 1
  29. 29. While the rate increase has slowed in recent years, experts jumbo employers (20,000 or more employees). Nationally, expect significant annual increases in healthcare costs to continue enrollment in CDHPs jumped from 5 percent to 7 percent of all indefinitely. According to the 2008 Hewitt Health Value covered employees. This migration into lower cost CDHPs is one Initiative, the average cost of healthcare benefits for active factor helping to hold down benefit cost increases. employees rose to $8,331 per year in 2008 and is expected to CDHPs delivered substantially lower costs per employee than grow to $8,863 in 2009. either PPOs or HMOs in 2008. CDHP costs averaged $6,207 per Exhibit 2A, below, shows the average total health benefit employee, compared to $7,768 for HMOs and $7,815 for PPOs. costs for active employees for the years 2002 to 2007. Exhibit Employer account contributions are a standard feature of 2B below depicts the 2008 healthcare costs per employee in U.S. HRAs but not HSAs. Over a third of large HSA sponsors do not major metropolitan areas. contribute. Of those that do, the average contribution is According to the survey, employers see consumerism and approximately $694. With deductibles in traditional PPOs rising, health management as the most effective way to manage health the CDHP is becoming a more attractive option for employees benefit costs for the future, as opposed to the simple cost-shifting who have a choice. measures that have been used traditionally. Shift to Consumerism Yields CDHP Growth Factors Leading to Increased Healthcare Costs Why are U.S. healthcare costs skyrocketing? Several market The percentage of all employers offering a consumer-directed conditions working in tandem have lead to a decade of health plan (CDHP) based on either a health reimbursement unrelenting increases. Understanding why your annual health account (HRA) or a health savings account (HSA) continues to plan renewal rates may be significantly higher than the previous rise; in 2008, it increased from 7 percent to 9 percent, as small year is the key to formulating alternatives and solutions to your employers continue to adopt these new types of plans. Growth in particular plan’s challenges. It is also the key to educating your CDHPs was strongest among larger employers, where offerings employees about the reasons behind any plan or contribution rose from 14 percent to 20 percent among employers with 500 or changes you may decide to introduce. more employees, and from 41 percent to 45 percent among Annual Healthcare Costs Per Employee, National Averages 2002-2009 $10,000  $8,863  $9,000  $8,331  $7,857  $8,000  $7,464  $6,915  $7,000  $6,334  $6,000  $5,639  $4,914  $5,000  $4,000  A $3,000  $2,000  $1,000  $0  2002 2003 2004 2005 2006 2007 2008 2009  Exhibit 2 (proj.) 2008 Healthcare Costs Per Employee, Major Metropolitan Areas Atlanta $7,677 Boston $9,477 Chicago $8,147 Dallas/Ft. Worth $9,277 Denver $8,062 Detroit $8,374 Houston $8,740 B Los Angeles $7,296 Minneapolis $8,766 New York City $8,540 Orlando $7,573 Philadelphia $8,634 San Francisco $8,696 Tampa Bay Area $8,331 Washington, D.C. $7,552 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 Source (both): Hewitt Health Value Initiative™, 2008 2
  30. 30. Demographics: The Aging of America It is an inescapable fact: the U.S. population is aging. As a One of the major factors result, there is a subsequent rise in the occurrence of chronic diseases like asthma, heart disease, and cancer, and a resultant driving up the cost of need for more resources to fight these diseases. This leads to healthcare is the growth of elevated utilization of prescription drugs and other medical services, and an overall rise in dollar expenditures on healthcare. healthcare providers. Dramatic Rise of Prescription Drug Costs Please turn to the attached Special Report: Prescription Drug Increased Utilization and Consumer Demand Costs and Your Employee Health Plan for a discussion of why Utilization of many healthcare services has risen over the prescription drug costs are on the rise. decade. A number of factors such as improvements in medical procedures and technology, the influence of managed care, Expansion of Providers elevated consumer awareness and demand, and a boost in the One of the major factors driving up the cost of healthcare is number of practicing physicians, caused health services like the the growth of healthcare providers. While these systems provide number of surgical procedures and the number of prescription many benefits to the communities they serve, they also require a drugs dispensed to rise significantly. Other services, such as great deal of capital to fuel their growth. These capital breast cancer screenings, immunizations for children, and expenditures by hospital systems and other providers place diagnostic procedures like CT and MRI have also experienced upward pressure on the costs of many medical services. sharp utilization increases. Consolidation of Managed Care Companies New Medical Technology The landscape of the managed care industry has changed. Life expectancy and disease-specific mortality rates in the Years of under-pricing, weak underwriting, and the costly U.S. are steadily improving. Old techniques are being replaced process of assimilating acquisitions has lead to serious dips in with new, often expensive treatments using new medical devices, profitability and stock prices for a large number of carriers. diagnostic products, drugs, and surgical procedures. These Those who couldn’t make the cut have either sold off their include everything from digital mammography to hip managed care operations to a bigger fish, or have completely replacement to radioactive “seeds” used to treat prostate cancer. gone out of business. Companies that haven’t exited the market It is not surprising that these new procedures come with hefty altogether are now faced with much less competition and a price tags, and therefore drive the overall cost of healthcare — renewed commitment to achieving healthy returns. This has and subsequently health benefits costs — upward. ultimately resulted in increased rates. Weakening of the Managed Care System Political Environment and Government Regulation The booming economy of the late 1990s, consumer demand, Healthcare issues, particularly those surrounding health plans and the regulatory environment discussed above have led to a and medical liability, have become one of the most hotly debated general weakening of the managed care system. topics in the political arena, while health insurance is one of the During the economic boom of the late 1990s, patients and most regulated insurance sectors on both the state and federal employers migrated away from the tightest forms of managed levels. care, HMOs. Employers seeking to hire the best employees in the State and federal mandates have increased twenty-five-fold tight job market moved towards offering plans that allow patients over the last three decades. Often these mandates duplicate or to see doctors that are “out-of-network” or have much less strict conflict with each other, and they almost always come with referral processes, such as Point-of-Service (POS) plans. In increased costs for the healthcare system. addition, many employers making health plan purchase decisions On the political front, concerns about timely access to quality focused on keeping employees happy by ensuring that most healthcare services and calls for federal laws to protect doctors in an area were in the chosen network, rather than consumers led to a variety of legislative initiatives, including the choosing narrower networks with deeper discounts. now defunct Patients’ Bill of Rights. Homeland security interests, Provider contracting has also placed a strain on the managed a slowing economy, the war in Iraq, and other domestic issues care system. Many hospitals that have taken a beating due to the have since forced most of the political debate to the backburner. Balanced Budget Act of 1997 — which cut billions of dollars However, if the Patients’ Bill of Rights were resurrected or other from Medicare managed care payments — and by other financial legislation regarding medical liability were initiated, the negative difficulties are now willing to walk away from health plans that impact on healthcare costs is expected to be significant. they view as offering insufficient reimbursement rates and Issues such as prescription drugs for seniors, Medicare prohibitive payment practices. In many cases, these threats have reform, and coverage for the uninsured will also continue to play won hospitals and other providers significant increases in a big role on political and legislative agendas in the coming reimbursement for the first time in several years. These actions years, and will undoubtedly continue to place upward pressure on are having a domino effect as other providers become more costs. courageous and attempt to exert power during negotiations with 3
  31. 31. health plans. With the level of premium increases seen over the last several Improving Employee Education and Communication Studies agree that the only way for consumer-driven years, employers have backed away from offering rich benefits, strategies to have their desired impact (to drive smarter consumer and instead have employed a number of tactics to reduce costs. behavior among employees) is for companies to also invest heavily in the communication, education, and decision support Healthcare Spending and Medical Cost Inflation tools that will result in better decision-making by employees and Overall healthcare spending and medical cost inflation are their dependents. Requiring active enrollment is increasing, as are ascending, often due to many of the factors discussed above. decision support tools that can help employees evaluate their options. Employers React — What Can You Do? You and other employers are undoubtedly trying to determine Increasing Disease Management and Wellness Programs The number of companies using disease management programs how to keep accelerating health plan rates from having and wellness programs continues to grow, according to the 2008 debilitating repercussions on your organization. After years of Kaiser/HRET Employer Health Benefit Survey: trying to absorb most of the costs because of attraction and retention issues, many firms are now trying to attack the root • 54 percent of firms offering health benefits offer at least causes of rising costs with sustained, systemic changes. Small some type of wellness program. businesses in particular continue to face the critical decision to • Among firms offering health benefits and wellness raise employee contributions or to discontinue offering the programs, 33 percent of employers report their primary coverage altogether. reason for offering wellness programs is to improve the Many employers plan to make significant investments in health of employees and reduce absenteeism. longer term solutions aimed at improving the health and productivity of their workers. These strategies involve introducing more consumer-driven plans, value-based design, Other Strategies for Reducing Costs improving employee education, influencing positive employee The following are some additional tactics that employers are behavior changes through condition management and wellness using to reduce healthcare costs. programs, and improving the amount and quality of data available on healthcare costs and quality. CONTRIBUTION STRATEGIES Employers are looking for ways to control costs by Introducing or Expanding Consumerism evaluating how they differentiate contributions for employees While basic cost-shifting remains a prevalent means for and their dependents. Pay-based contribution models are also managing costs, there is evidence of a movement toward more commonly used. consumer-oriented solutions. Those companies that want to balance costs and employee relations are incorporating more of a DEPENDENT COVERAGE CHANGES consumerist focus into their plans. Changing the rules for dependent coverage may be one way to influence employee behavior. The most common practices Value-Based Plan Design include: Employers are beginning to acknowledge that cost-shifting and implementing higher cost sharing for dependents; cost-cutting strategies are not enough. In addition to the providing flexible credits for opting out of coverage; consumerism plan designs, employers are looking at new models, requiring additional contribution if an employee’s working such as value-based design. This option incentivizes employees spouse does not accept coverage from his or her own to use appropriate care and services to manage their health. employer; and According to Hewitt’s research, almost 20 percent of large requiring an employee’s working spouse to accept coverage employers have implemented a value-based design and another from his or her own employer. 40 percent are interested in learning more about these plans. CHANGE PRESCRIPTION DRUG COVERAGE Efforts to control overall healthcare costs by making changes to prescription drug benefits include: Requiring active enrollment is using a three-tier design, increasing coinsurance, increasing, as are decision requiring step therapy, requiring the use of generics, support tools that can help requiring mail order of certain drugs, and using a therapeutic MAC/reverse copay design. employees evaluate their options. 4
  32. 32. Which Solution is Right for You? Should you pass costs on to employees at the risk of losing some of them? Or, should you try to manage costs in some of the other ways discussed in this report? Ultimately, it is a decision that you need to come to through thoughtful and detailed analysis of your plans and with the advice of your broker-consultant. Below are some questions you can address in order to begin developing an effective strategy that is right for your organization. Is our program structure, plan design, and pricing appropriate? Do we have the right vendors, services, contracting, and funding in place? Are our employee communication efforts appropriate and effective? Do we have the right disease and case management programs for our employees? Do our pricing and plan design features encourage cost- conscious behavior on the part of our employees? Do our employee communication efforts and resources motivate our employees to become educated and effective healthcare consumers? What Should I Tell My Employees? It’s a fact: healthcare costs and health benefit costs continue to increase at exceptionally high rates from year to year. You want to continue to offer valuable health benefits to your current and future employees, and you want those benefits to help you attract and retain good employees. However, you also need to consider the cost-effectiveness of those benefits at a time when hefty rate hikes are the norm, rather than the exception. The information contained in this report is designed to help you understand why your renewal rates may have increased, and to consequently help you educate your employees about the reasons for any plan or contribution changes you may have to make. If your employees understand current trends in the healthcare industry, they will be more supportive of any such changes and will appreciate the resources required to provide them with their healthcare benefits. ◊ Perspectives is provided to [B_Officialname] clients for informational purposes. Please seek qualified and appropriate counsel for advice on how to apply the topics discussed herein to your employee benefits plan. Content © 2007-2009 Zywave, Inc. 5
  33. 33. PERSPECTIVES PROVIDING INSIGHT INTO TODAY'S EMPLOYEE BENEFITS ISSUES Special Report: Prescription Drug Trends Ninth Edition Overview and increased use of specialty drugs; lower rebates from drug Prescription drug costs continue to represent an increasingly manufacturers; and changes in the therapeutic mix of drugs. 3 large portion of healthcare expenditures. Understanding the The portion of prescription drug expenses paid by private pharmaceutical market is key to determining new approaches health insurance has increased substantially over the past 16 for addressing these rising costs. years (from 26% in 1990 to 44% in 2006). This trend has contributed to a decline in the share that people pay out of According to the Centers for Medicare & Medicaid Services their own pockets (from 56% in 1990 to 22% in 2006.) The (CMS), spending in the U.S. for prescription drugs was $216.7 government’s share of expenditures remained fairly constant. billion in 2006, more than 5 times the $40.3 billion spent in However, according to the U.S. Department of Health and 1990. 1 While prescription drug spending has been a fairly Human Services (HHS), the implementation of the Medicare small proportion of national health care spending compared to Part D drug program in 2006 significantly changed the mix of spending for hospital and physician services (10% in 2006, funding sources, as the government’s share rose from 28% in compared to 31% and 21%, respectively) it has been one of 2005 to 34% in 2006, the private insurance portion fell from the fastest-growing components, until recently growing at 48% to 44%, and the consumer out-of-pocket share declined double-digit rates compared to single-digit rates for hospital from 24% to 22% (Figure 2). and physician services. In 2006, the annual rate of increase in prescription spending was 9%, compared to 7% for hospital care and 6% for physician services 2 (Figure 1). Figure 2: Percent of Total National Prescription Drug  Expenditures by Type of Payer, 1990‐2006 Figure 1: Average Annual Percentage Change in  60 Selected National Health Expenditures, 1996‐2006 56 50 50 Consumer  49 48 49 48 20 18 44 Out‐of‐ 43 43 18 40 Pocket 16 15 15 36 35 34 14 14 31 28 14 13 13 30 31 26 Private  26 28 12 11 23 Health  20 20 22 21 22 25 25 22 10 9 9 9 18 Insurance 8 8 8 8 8 8 7 7 7 7 7 7 6 6 6 6 10 6 4 4 5 5 5 Public  4 3 3 0 Funds 2 1990 1992 1994 1996 1998 2000 2002 2004 200 6 0 Source: Kaiser Family Foundation calculations using National Health Expenditure  1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 historical data from Centers for Medicare & Medicaid Services.  Hospital Care Physician & Clinical Services Prescription Drugs Source: Kaiser Family Foundation calculations using National Health Expenditure  Notes: Consumer Out-of-Pocket includes direct spending by consumers historical data from Centers for Medicare & Medicaid Services.  for health care goods and services not covered by a health plan and cost- sharing amounts (coinsurance, copayments, deductibles) required by public and private health plans. It does not include consumer premium Prescription spending growth slowed from 1999 to 2005 payments and cost sharing paid by supplementary Medicare policies, which are included in the Private Health Insurance category. May not because of the increased use of generic drugs, the increase in add to 100% due to rounding. tiered copayment benefit plans, changes in the types of drugs used, and a decrease in the number of new drugs introduced. However, the growth in drug spending in 2006 resulted from Within public funds, the funding shares changed from 7% the increased use of prescription drugs believed to be because Medicare and 68% Medicaid in 2005, to 53% Medicare and of the implementation of Medicare Part D, new indications for 26% Medicaid in 2006 (Figure 3, next page). existing drugs, strong growth in several therapeutic classes, 6
  34. 34. condition not previously treated with drug therapy, they can also lead to increased drug spending. However, new drugs can Figure 3: Distribution of Total Public Prescription  reduce drug spending if they enter the market at a lower price Drug Expenditures by Type of Payer, 2005 & 2006 than existing drug therapies, for instance, if a new drug enters a therapeutic category with one or two dominant brand 25% competitors. The number of new drugs approved by the U.S. Food and Drug Administration (FDA) has fluctuated over the 2005 68% past decade, with 39 approvals in 1997, 27 in 2000, 20 in 7% 2005, and 18 in 2006. 9 21% Drug spending can also be reduced when existing brand drugs 2006 26% lose patent protection and face competition from new, lower 53% cost generic substitutes. Analysis by the FDA shows that generic competition is linked with lower drug prices: on 0% 10% 20% 30% 40% 50% 60% 70% 80% average, the first generic competitor prices its product only Other Public Medicaid Medicare slightly lower than the brand-name manufacturer; the second Source: Kaiser Family Foundation calculations using National Health Expenditures  generic manufacturer reduces the average generic price to historical data from Centers for Medicare & Medicaid Services.  nearly half the brand name price; and then prices continue to fall at a slower pace as additional generic manufacturers Notes: “Medicaid” includes federal and state funds for Medicaid and the market the product. The average generic price falls to 20% or Medicaid State Children’s Health Insurance Program (SCHIP) lower of a brand’s price for medications with a large number expansion: “Other Public” includes other federal, state, and local expenditures and the Medicaid SCHIP program. of generic equivalents. 10 About 75% of FDA-approved drugs have generic counterparts. In 2007, 21% of total prescription drug sales and Driving Forces 65% of total prescriptions dispensed were generic medicines. According to the Kaiser Family Foundation’s September 2008 From 2005 to 2006, generic sales rose to 8%. 11 Federal “Prescription Drug Trends” report, changes in prescription legislation allowing FDA approval of generic substitutes for drug spending are primarily driven by three main factors: brand name biologic drugs was initiated in 2007 but has yet to changes in the number of prescriptions dispensed (utilization), be enacted. price changes, and changes in the types of drugs used. Advertising. Prescription use in general and movement to Increased Utilization. It is a fairly simple concept: More higher-priced drugs can be influenced by advertising. The total people are using more prescription drugs, thereby driving amount manufacturers spent on advertising declined from overall spending upward. From 1997 to 2007, the number of 2004 to 2005 ($11.9 billion to $11.4 billion), rose to $12 prescriptions purchased increased 72% (from 2.2 billion to 3.8 billion in 2006, and declined sharply in 2007 to $10.4 billion. billion), compared to a U.S. population growth of 11%. The This fluctuation is a new trend, as advertising spending had average number of retail prescriptions per capita increased increased every year from 1996 to 2004. Advertising directed from 8.9 in 1997 to 12.6 in 2007. 4 The percent of the toward consumers (television, radio, magazines, newspapers, population with a prescription drug expense in 2005 was 59% and outdoor billboards) decreased from 2006 to 2007 (from for those under age 65, and 91% for those 65 and older. The $4.8 to $3.7 billion), and the share directed toward physicians percentage of these populations with a drug expense has (through pharmaceutical representatives and professional remained basically steady since 1997, when they were 59% journals) also decreased (from $7.2 to $6.7 billion). However, for those under age 65, and 86% for those 65 and older. 5 spending for consumer advertising in 2007 was more than four Increased Prices. Prescription drug prices increased at 3.5% in times the amount spent in 1996 ($3.7 billion vs. $0.8 billion), 2006 – the same rate as in 2005. 6 Retail prescription prices 7 while 2007 physician advertising was almost two times the (which reflect both manufacturer price changes for existing 1996 amount ($6.7 billion vs. $3.5 billion). 12 Changes to drugs and changes in use to newer, higher-priced drugs) prescription advertising rules are currently being considered increased an average of 6.9% a year from 1997 to 2007 (from by the FDA and Congress. an average price of $35.72 to $69.91), more than two-and-a- Profits. From 1995 to 2002, the number one most profitable half times the average annual inflation rate of 2.6% over the industry in the nation (profits as a percent of revenues) was same decade. In 2007, the average brand name prescription pharmaceutical manufacturing. It ranked third in 2003 and price in was over three times the average generic price 2004, fifth in 2005, second in 2006, and third in 2007 – with ($119.51 versus $34.34). Manufacturers received 78% of the profits of 15.8%, compared to 5.7% for all Fortune 500 firms average retail prescription price of $69.91, retailers received in 2007. 13 Increasing only 3.8% from 2006, prescription drug 19%, and wholesalers received 4% in 2007. 8 sales were $286.5 billion in 2007 – the smallest growth rate Changes in Types of Drugs Used. When new drugs enter the since 1961. According to IMS Health, the slower sales growth market and existing drugs lose patent protection, prescription is attributed to loss of exclusivity of brand name medicines, drug spending is affected. If new drugs are used in place of fewer new product approvals, the leveling of year-over-year older, less expensive medications, they can increase overall growth from the Medicare Part D program, and the impact of drug spending. In addition, if new drugs supplement rather safety issues. 14 than replace existing drug treatments, or if they treat a 7
  35. 35. Insurance Coverage Response Lack of insurance coverage for prescription drugs can be A variety of public and private strategies have been employed detrimental to the industry. An April 2008 survey found that to try to contain rising prescription drug costs. uninsured adults ages 18-64 are more than twice as likely as Utilization Management Strategies. Health plans have those who are insured to say that they or a family member did excluded certain drugs from coverage, used quantity not fill a prescription (45% compared to 22%), cut up pills or dispensing limits, and increased enrollee cost-sharing skipped doses of medicine (38% compared to 18%) in the past amounts. In 2007, 75% of workers with employer-sponsored year because of the cost. 15 coverage had a cost-sharing arrangement with three or four Prescription drug coverage comes from several sources, both tiers, almost three times the proportion in 2000 (27%). 22 private and public: Copayments for nonpreferred drugs climbed from an average of $29 in 2000 to $43 in 2007 (an increase of 48%). Employer Coverage. The main source of health coverage in Copayments for preferred drugs increased by 67%, from an the U.S. are employers, providing coverage for 177 million average of $15 in 2000 to $25 in 2007 (Figure 4). (59%) of Americans in 2007. 16 Sixty percent of employers offered health insurance to their employees in 2007, and 65% Figure 4: Among Covered Workers with Three‐ or Four‐Tier  of employees in those firms are covered by their employer’s Prescription Drug Cost Sharing, Average Copayments, 2000‐2007 health plan. 17 Other employees likely obtained coverage 80 through a spouse. Nearly all (98%) of covered workers in 71 70 employer-sponsored plans had a prescription drug benefit in 60 59 59 2007. 18 s 50 r 38 43 43 Medicare. Previous to January 1, 2006, the traditional a 40 l l o30 29 32 Medicare program (the federal health program for the elderly D 22 25 25 and disabled) did not provide coverage for outpatient 20 15 18 8 9 10 11 11 prescription drugs. As a result, 27% of seniors age 65 and 10 older, and one-third of poor (34%) and near-poor (33%) 0 seniors, had no drug coverage in 2003. 19 The Medicare Generic Preferred Nonpreferred Fourth‐Tier* Prescription Drug, Improvement, and Modernization Act of 2000 2002 2004 2006 2007 2003 put into effect a voluntary Medicare outpatient Source: Kaiser/HRET Survey of Employer‐Sponsored Health Benefits, 2000‐2007,  Exhibit 9.4 prescription drug benefit (Part D), under which the 44 million Red numbers=Estimate is statistically different from estimate for the Medicare beneficiaries can enroll in private drug plans. previous year shown at p <.05. HHS data shows that as of January 2008, approximately 90% *Fourth-tier drug copay information was not obtained prior to 2004. of Medicare beneficiaries have drug coverage; 25.4 million beneficiaries have Medicare Part D drug coverage from either Discounts and Rebates. Drug programs, both private and a stand-alone prescription drug plan (17.4 million, including public, negotiate with pharmaceutical manufacturers (often 6.2 million low-income seniors and people with disabilities, using pharmacy benefit managers, which are contracted known as dual eligibles, who were transferred from Medicaid organizations) to receive discounts and rebates which are drug coverage to Medicare Part D drug coverage), a Medicare applied based on volume, prompt payment, and market share. Advantage drug plan (7.6 million), or other Medicare health Manufacturers who want their drugs covered by Medicaid plan types (0.4 million). Another 10.2 million beneficiaries must provide rebates to state Medicaid programs for the drugs have coverage from creditable employer or union retiree plans they purchase. Somestates have also negotiated additional (including FEHB and TRICARE retiree coverage.) About 4 rebates, or supplemental rebates. million beneficiaries have creditable drug coverage from the The Department of Veterans Affairs, the Defense Department, VA and other sources, and around 4.6 million beneficiaries did the Public Health Service, and the Coast Guard – as well as not have creditable coverage (were not enrolled in a Part D other government agencies – participate in a program called drug plan or a source of creditable coverage.) 20 the Federal Supply Schedule, where they purchase drugs from Medicaid. Medicaid is the joint federal-state program that pays manufacturers at prices equal to or lower than those charged to for medical assistance to 60 million low-income individuals their “most-favored” nonfederal purchasers. In order to and is the main source of outpatient pharmacy services to the participate in Medicaid, another program, the Section 304B low-income population. There are differences in state policies Program, requires manufacturers to provide drugs to certain in regard to copayments, preferred drugs and amount of nonfederal entities (such as community health centers and prescriptions which can be filled, but all state Medicaid disproportionate share hospitals) at reduced prices. This programs provide coverage for prescription drugs. In 2006, program may be expanded, as federal legislation was about 6 million dual eligibles were transferred from Medicaid introduced in 2007, but nothing has yet been enacted. drug coverage to Medicare Part D drug coverage, representing Medicaid. Prescription drugs have been one of the fastest- an estimated 14% of Medicaid beneficiaries and accounting growing Medicaid services. The Deficit Reduction Act of for about 45% of Medicaid prescription drug spending in 2005 gave states more authority to control Medicaid drug FY2003. 21 States have been required to make payments to spending through increased cost sharing for non-preferred Medicare to help finance Medicare drug coverage for these drugs, changes in the way Medicaid pays pharmacists, transferred and future dual eligibles since January 1, 2006. allowing pharmacists to refuse prescriptions for beneficiaries 8
  36. 36. who don’t pay their cost sharing, and inclusion of authorized is manufactured in the U.S. Although it is generally not legal generic drugs in the calculation of “best price” for drugs. A for individuals or commercial entities such as pharmacies or 2006 survey of 50 states and D.C. found that more than half wholesalers to purchase prescription drugs from other had Medicaid pharmacy cost containment measures in place in countries, the government does not always act to stop FY2006, including preferred drug lists and prior authorization individuals from purchasing drug products across the border. programs (about 75% of states), supplemental rebates from Importation of pharmaceutical products from Canada through manufacturers (about 70% of states), and state Maximum Internet sales and travel to Canada totaled about $700 million Allowable Cost (MAC) programs for generic and multi-source in sales in 2003 – 0.3% of total U.S. prescription sales. The brand drugs (about 60%); smaller proportions of states were same amount of prescription drugs was estimated to have members of multi-state purchasing coalitions (about 25%) or entered the U.S. from the rest of the world, mostly through the had limits on quantities dispensed per prescription (about mail and courier services. 30 Legislation enacted in 2006 20%). 23 By 2007, most states had already implemented many allows U.S. residents to transport up to a 90-day supply of of these approaches, so new action to control drug spending qualified drugs from Canada to the U.S. Actual savings slowed. 24 amounts, drug safety, and marketplace competition and pricing are importation issues being debated. The Centers for Medicare & Medicaid Services issued a rule referred to as the AMP Rule in July 2007 that would have set limits on federal government reimbursements to states for Outlook Medicaid prescriptions; however, in December 2007, a U.S. HHS projects U.S. prescription drug spending to increase from District Court issued a preliminary injunction against this $216.7 billion in 2006 to $515.7 billion in 2017, a 138% change. Several bills have since been introduced in Congress increase. The average annual increase in drug spending from to address this issue. the previous year is expected to decline from 8.5% in 2006 to 6.7% in 2007 because of a drop in drug price growth, but then Medicare. The Medicare Part D drug benefit moved spending rise to 9.6% in 2017 (or an 8.2% average annual increase over from the private sector and Medicaid to Medicare, making the 11-year period). Drug spending as a percent of overall Medicare the nation’s largest public payer of prescription health spending is projected to increase from 10% in 2006 to drugs in 2006 – when Medicare spending rose from 2% in 12% in 2017. HHS asserts that over the next 10 years, drug 2005 to 18% in 2006 – of total U.S. prescription spending. 25 spending growth will accelerate due to a leveling off of Medicare is prohibited from directly negotiating drug prices or growth in the use of generic drugs, rising utilization rates, and rebates with manufacturers under the Medicare Part D a mild increase of new drugs coming onto the market. 31 ◊ legislation, but will rely on the private Part D drug plans to negotiate these discounts/rebates. In 2007, the 110th Congress considered but did not pass legislation to allow or require Medicare to negotiate drug prices with drug makers. Reprinted with Permission from the Kaiser Family Foundation. The Purchasing Pools. Some public and private organizations have Henry J. Kaiser Family Foundation is a non-profit, private operating banded together to form prescription drug purchasing pools to foundation dedicated to providing information and analysis on health increase their purchasing power through higher volume and care issues to policymakers, the media, the health care community, shared expertise. Examples include joint purchasing by the and the general public. The Foundation is not associated with Kaiser Permanente or Kaiser Industries. Department of Defense and VA; multi-state bulk buying pools through which states purchase drugs for their Medicaid, state employees, senior/low-income/uninsured pharmacy assistance Perspectives is provided to [B_Officialname] clients for informational programs, or other public programs; and individual state purposes. Please seek qualified and appropriate counsel for advice on how to purchasing pools. 26 apply the topics discussed herein to your employee benefits plan. Consumers. In order to reduce their prescription costs, © 2007-2009 Zywave, Inc. consumers are turning to a variety of methods, 27 such as requesting cheaper drugs or generic drugs from their physicians and pharmacies, using the Internet and other sources to make price comparisons, using the Internet to 1 All spending amounts in this report are in current dollars (i.e., not purchase drugs, buying at discount stores, buying over-the- adjusted for inflation). counter (OTC) instead of prescribed drugs, buying drugs in 2 Centers for Medicare & Medicaid Services, National Health bulk and pill-splitting, using mail-order pharmacies, 28 and Expenditure Accounts, Historical, using pharmaceutical company or state drug assistance programs. Over half of physicians say they frequently talk 3 Aaron Catlin et al., “National Health Spending in 2006: A Year of with patients about the out-of-pocket costs of medicines they Change For Prescription Drugs,” Health Affairs 27, no. 1, prescribe; 62% say they switch patients to less expensive (January/February 2008). drugs, and 58% say they give patients office samples. 29 4 Kaiser Family Foundation calculations using data from IMS Health, Importation. The high cost of prescriptions has led some to (About Us, Press Room, US Top-Line Industry suggest that individuals be permitted to purchase prescription Data), and Census Bureau, The per capita number may differ from the number reported at KFF’s website products from distributors in Canada or other countries. This because of differing data sources which use is referred to as “importation,” or “reimportation” if the drug 9