Half of Companies See 11% or More Increase in Drug Coverage Costs in 2004

January 14, 2005 (PLANSPONSOR.com) - A Segal Company survey has found that over half of companies saw an increase of over 11% in the cost of providing prescription drug coverage to employees in 2004.

Fifty-seven percent of respondents to the survey – which were not numerous enough to make the survey statistically significant, the company said – have taken steps to control current and future plan costs associated with specialty drugs, such as biotech or injectable ones.

Survey respondents also revealed that 26% of organizations use an insurance company to provide health and pharmacy benefits at their company. Fifty-seven percent of respondents believe that their current pharmacy benefit manager, be it an insurance company or otherwise, is partnering with their company to control costs. Twenty-six percent did not think that such a partnership exists.

Respondents were also asked about unscheduled absence at their company. Thirty-two percent did not know the unscheduled absence rate at their company, while the most common answer of those who did was a rate of 6% to 10%. When asked to identify the three top reasons for absence, the most-chosen answers were employee illness (70%), child’s illness (65%), and employee’s chronic medical condition (35%). Only 15% selected worker stress or employee entitlement as a top-three answer, while 11% said worker dissatisfaction was a reason.

There was no consensus on how to manage such absences. Thirty-three percent said a paid time off program that pools vacation, sick days and other time off into one “bank” was the answer, while 24% selected each of the following:

  • coordination of all sources of paid leave and unpaid leave
  • bonus programs for perfect attendance
  • an integrated disability management program.

Respondents were also asked about their modifications to their coverage due to Medicare reform. Almost 75% of respondents already offer a high-deductible health plan and health savings account, as allowed under the Medicare Modernization Act. Debit card technology may not be as prevalent as thought, with 87% of people offering flexible spending accounts not offering a debit card.

Among those who offer retiree drug coverage, 56% that they would not reduce or eliminate prescription drug coverage when Medicare Part D takes effect. Only 14% said they would apply for the subsidy that was created by the Modernization Act for plan sponsors who maintain a certain level of drug coverage for retirees (See Majority of Employers Will Continue Drug Coverage after Medicare Part D Initiated ).

A summary of the survey results is at http://www.segalco.com/publications/surveysandstudies/fall04BMFE.pdf .

The Segal Company ( www.segalco.com ) is a national benefits, compensation, and human resources consulting firm.