Rapid growth in prescription drug costs over the past few years has led employers and health plans to adopt changes in an effort to constrain drug spending. Employers have implemented a number of strategies to reduce growing drug costs, the most prominent being tiered cost-sharing arrangements which give workers a financial incentive to choose less expensive drugs. Almost seven in ten workers are in plans with a three-tier or four-tier cost-sharing arrangement.
A large number of covered workers across all plan types also have a mail order discount plan available to them. Relatively few workers are required to use generic drugs if they are available. Restrictions on mental health coverage remain a common feature of health plans in 2004. These restrictions include annual limits on the number of outpatient visits and the number of inpatient days.
Prescription Drug Benefits
- As with prior years, nearly all (99.9%) covered workers in employer-sponsored plans have a prescription drug benefit (Section 8; Exhibit 8.2). To combat rising costs, firms are increasingly providing employees with financial incentives to encourage use of generic drugs and certain categories of preferred brand name drugs.
- A majority of covered workers (88%) in 2004 have some sort of tiered cost-sharing formula for prescription drugs. In past reports, we documented the increase in three-tier cost sharing arrangements, where a worker faces one copayment for generic drugs, a higher one for preferred drugs (such as brand name drugs with no generic substitutes), and an even higher one for nonpreferred drugs (such as brand name drugs with generic substitutes). This year we began asking employers whether they have copayment structures with four tiers. These new four-tier arrangements typically build another layer of higher copayments and/or coinsurance for specifically identified types of drugs, such as lifestyle or injectable drugs. Sixty-eight percent of covered workers are enrolled in plans with three or four tiers of cost sharing for prescription drugs (Exhibit 9.1).
- The average drug copayments for generic ($10), preferred ($21) and nonpreferred ($33) drugs increased slightly over the last year. Average copayments for a four-tier drug are $48 (Exhibit 9.2).9
- For workers with coinsurance rather than copayments for prescription drugs, cost-sharing levels average 20% for generic drugs, 26% for preferred drugs, 31% for nonpreferred drugs, and 31% for four-tier drugs (Exhibit 9.3). While average coinsurance remains essentially unchanged from 2003, rates for preferred and nonpreferred drugs are higher in 2004 than in 2001.
- Other strategies used by firms and health plans to curb the rising cost of prescription drug coverage include mandatory use of generic drugs (when available) and mail order discount plans. The last time the survey included these questions was in 2000.
- Nineteen percent of all covered workers in 2004 face mandatory use of generic drugs, essentially unchanged from 18% in 2000.
- The percentage of covered workers in PPOs who have a mail order discount plan available to them increased from 73% in 2000 to 84% in 2004. The availability of mail order discount plans in HMO and POS plans is statistically unchanged from 2000 (Exhibit 9.6).
Mental Health Benefits
- Although nearly all covered workers (98%) have mental health benefits, limits on the number of visits for outpatient care and the number of days of inpatient care remain a common feature of all plan types (Section 8; Exhibit 8.2).
- Only 19% of covered workers have coverage for an unlimited number of outpatient mental health visits in 2004. The likelihood of having a limit on the number of outpatient mental health visits is similar across plan types (Exhibit 9.7).
- Many plans limit the number of inpatient mental health days covered. Overall, only 21% of covered workers have coverage for unlimited inpatient mental health days. Approximately 59% of covered workers face an inpatient limit of 30 or fewer days (Exhibit 9.8).
