Corporate Systems Administration
examines rising insurance costs

 

Employee benefit management company focuses on prescriptions

 

 

Johnson City, Tenn. – Prescription drug costs have shot up nearly 20 percent, burdening many employers offering employee benefits, says Tom Repass, chief executive officer of Corporate Systems Administration Inc., which provides benefit management services to major employers throughout the region.

 

“Most medical plans have experienced stability but the cost of prescription drugs is anything but stable,” Repass says.

 

The National Institute for Health Care Management Research and Educational Foundation reported that prescription drug spending increased 19 percent to $132 billion in 2000, keeping prescription drugs at the top as the fastest-rising component of health care inflation.

 

The study reflects higher spending driven by Americans taking more medicines and demanding more expensive brands that have been heavily advertised.  Drug companies spent more than $2.1 billion last year advertising their products, a 17 percent increase over 1999, according to data gathered by health care information companies.

 

Pharmaceutical industry critics fear that advertising pushes up costs and causes some patients to take drugs they don’t need or ignore low-cost choices, including generic or over-the-counter remedies that may be just as effective.

 

“The cost of medicines has some employers struggling to stay within their budgets,” Repass says.  “Some are trying to shift more of the cost to workers and encourage lower-cost choices.”

 

Some offer insurance plans with tiers of coverage and charge patients higher co-payments for expensive, brand name drugs. The number of patients covered by such plans has doubled in the past year, according to PCS, a pharmacy benefit management company.

 

But the Segal Company, a New York benefits consulting group, concludes from a survey that many employers have been reluctant to institute aggressive cost management strategies or demand that workers share in the rising cost.

 

Repass says employers are hurting if they are in those categories, or under self-funded insurance plans, have failed to build adequate reserves to cover the prescription cost increases.  “More than 80 percent of all U.S. workers have health insurance plans with some form of self funding,” he says. “It’s cost efficient because administrative expenses and taxes are lower. The plans are also more flexible and less susceptible to abuse, but a key element is building reserves.”

 

Under self-funded plans, employers contribute into trust funds, strictly protected by federal regulations. Benefits and expenses are paid out by the trusts. Employers are protected with stop-loss insurance, which establishes maximum loss levels to the fund. If claims don’t reach maximum levels, then unspent funds can be carried forward to offset future expenses. Some employers elect to save premium costs by going without a coverage cap. This requires using the savings or other funding to build a reserve to cover high claims.

 

“The need to build reserves may become even greater yet,” Repass says. There are predictions that prescription costs will jump another 20 percent next year.”

 

Such predictions, he says, underscore the challenge facing business and Congress as it debates whether to add a prescription drug benefit to Medicare.

 

Repass is founder of CSA, a third party administration firm that helps employers offer affordable and efficient health care coverage. The services include the design of self-funded plans, cost management and expert local administration from CSA’s locations in Johnson City and Greeneville, Tenn., and Savannah, Ga.

 

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For more information, contact Repass at Corporate Systems Administration Inc., at 423-282-3420.

Visit CSA on the World Wide Web at www.csabenefits.com