The Importance of Self-Funding

Specialty drug prices are on the rise. Increasingly, five-figure specialty medications are coming to market, with some drugs topping $100K per year. Self-funded employers may be concerned about – or already feeling the pinch of – the rising costs. Fully insured employers without full visibility into the details of their pharmacy plan may have limited awareness of the risk their plan faces – but the risk is there regardless.

In either case, many employers choose to address the risk by sticking with the apparent security of a fully insured plan. In an uncertain market, it can be tempting to put your trust in the hands of an insurer that can promise stability and safety.

That safety and stability can be an illusion, however, and many employers find that self-funding really is the best choice for their plan in the face of rising specialty costs and other market uncertainties.

The False Comfort of a Fully Insured Plan

In times of upheaval, a fully insured plan can seem appealing because someone else – the insurer – is managing the plan, responding to industry changes, and diluting the risk by spreading it out over a large pool of covered members. Costs for the employer are stable – they’re paying a fixed monthly premium, with the only changes coming when they add or remove members from the plan.

With the insurer managing the plan, the employer also has fewer choices to make. Most plan elements, such as providers, networks, clinical and cost containment programs, are chosen by the insurer. It can be particularly attractive to smaller employers worried about the unpredictable nature of health benefits.

But remaining fully insured isn’t the best approach for every employer. For many, a self-funded plan is the most stable, secure option to curb specialty drug costs in the face of market uncertainty.

The Benefits of Self-Funding

In a self-funded arrangement, the employer is responsible for the actual cost of its members’ pharmacy claims. That can be an intimidating prospect, but in fact, a properly managed self-funded plan can be significantly less expensive than a fully funded one.

A self-funded plan offers the benefit of control, flexibility, and visibility. Rather than having to rely on the insurer, a self-funded employer can see their own claims data, so they can see where healthcare dollars are being spent and make data-informed choices about any adjustments that might need to be made.

Self-funding also gives employers the ability to carve out their pharmacy benefit – managing it separately from the medical plan. This allows them to choose their own vendors, negotiate the terms of their own contracts, and monitor their own plan performance, all of which offers the potential for savings and confidence.

Of course, financial issues do have to be considered, and expensive specialty drugs and high-cost claims for chronic or complex conditions are barriers for some employers. However, a properly optimized plan ensures favorable contract terms, robust clinical management, and additional cost containment solutions – that give employers the best of both worlds – improved pricing and increased transparency for their benefit plan.

Making the Move

Self-funded plans are a great choice for many employers, but not all. Before making any big decisions, thoroughly analyze each client’s unique goals. Consider employees’ overall health and past pharmacy utilization, if that data is available from their insurer. And it’s important to understand the plan’s real cost – not just the given price tag, but the net cost after any rebates, discounts, plan fees, and contract terms are taken into account.

To take full advantage of the carved-out model, self-funded employers can optimize their benefits by using a pharmacy benefits optimizer (PBO) like RxBenefits, which acts as an objective third party to negotiate and manage contracts, manage clinical utilization, and provide exceptional service. In other words, employers can choose a carved-out model without taking on the burden of managing their pharmacy plans. That’s what RxBenefits is for.  

With the help of a well-informed benefit advisor, supported by a PBO like RxBenefits, employers can find an approach that meets their unique needs and offers a sense of security in insecure times.