By: Eileen Auen, Chairman and CEO, PMSI
Unless you have a detailed understanding of the health care and insurance marketplaces, you may be one of the many who think that there is little difference between group health insurance and workers’ compensation benefits. Having been privy to both of these industries, I am frequently asked about these differences and thought it would be beneficial to talk about one of the areas of biggest difference—pharmacy benefits.
Although it is hard to distill into only a few points, I generally try to highlight the following:
- The focus of care. Group health benefits generally focus on sickness and illness while workers’ compensation focuses on workplace injuries and returning individuals to work. Although a fairly obvious difference, it underlies many of the other differences that make workers’ compensation unique, including drug mix.
- The types of drugs used. Because of the focus of care, the medication mix in workers’ compensation is much more focused towards pain management rather than illness management.
In 2011, PMSI reported the top five drug classes in workers’ compensation based on total spend as:
- Analgesics – narcotics (34%)
- Anti-convulsants (11%)
- Skeletal muscle relaxants (8%)
- Anti-inflammatory medications (8%)
- Anti-depressants (7%)
For the same time period, IMH Institute for Healthcare Informaticsi reported the top five drug classes for group health based on total spend as:
- Oncologics (7%)
- Respiratory agents (6%)
- Lipid regulators (6%)
- Anti-diabetes (5%)
- Anti-psychotics (5%)
But the difference does not stop there. The costs associated with the primary drugs used in each market are also very different. The chart below shows the range of Average Wholesale Price (AWP) for the top ten drugs for each type of insurance:
Several differences are easily seen. First of all, the range between minimum cost and maximum cost is significantly smaller for group health than workers’ compensation. The widest variation is about $16 on the group health side and as much as $130 on the workers’ compensation side.
Additionally, industry data shows that the average prescription price for group health in 2008 was $71.69ii, whereas PMSI’s transactional data shows the average cost for this same time period was $134.57.
Naturally, when costs are high, a buyer is motivated to find less costly alternatives. However, because of the relative lack of individual financial responsibility on the part of workers’ compensation claimants, this motivation rarely exists, which leads to the next difference.
- Utilization Control. Group health PBM’s use several tools to control product utilization that are not generally available to the workers’ compensation market. While these tools show significant cost savings on the group health side, workers’ compensation cannot use many of these proven techniques due to regulatory requirements/limitations.
- Co-pay Differentials. One of the most recognizable group health tools is a multi-tiered co-pay system that encourages the use of generics. When a plan participant opts for the generic equivalent of a prescription, they are rewarded with a less expensive co-pay. However, since there is no co-pay in workers’ compensation, the injured worker has no incentive to request a generic if the physician has not made an indication.
- Drug Formularies. Group health plans offer drug lists in a tiered format that encourages plan participants to opt for the drug based on the co-pay and/or co-insurance. This way, they have the option of choosing the medication they prefer (such as brand over generic), but are then required to pay a larger portion of the expense. Formularies specific to workers’ compensation are generally devised around the employer/industry, and type and phase of the injury and lack the financial incentives to drive utilization of lower cost drugs.
- Step Therapy. Using step therapy, patients are prescribed lower cost drugs as an initial therapy treatment and if this proves ineffective, the medication is “stepped up” to a more expensive drug. This way, if the lower cost drug proves to be effective, costs are kept to a minimum. In workers’ compensation however, many states have strict regulations about direction of care. Step therapy can happen in workers’ compensation but has to fall within strict regulatory guidelines. PMSI has had successful outcomes with clients who have opted to take this approach.
The differences between group health and workers’ compensation do not end at the medical cost line. There are also some very important administration differences between the two types of benefits, the first of which is authorization for prescribed treatments.
- Clinical Oversight. Workers’ compensation payors take a cautious approach to ensuring that prescribed therapies are appropriate to the injury and offer the best hope for medical improvement and return to work, the latter of which is not a focus in the group health market. Additionally, the broad use of pain management drugs in workers’ compensation requires close clinical monitoring due to the well-documented side effects and associated addiction risks. At PMSI, roughly 30% of transactions are prior-authorized by clients. This is at least five times what is common in the group health marketplace. This, as well as the difference in eligibility management, leads to more administrative work at the pharmacy level.
- Eligibility Management. In group health, the benefits are generally offered to all employees and there may be an enrollment period and/or restrictions on services available. However, in workers’ compensation, only the injured worker receives benefits and there is no waiting period or restrictions. Because of this, an injured worker often shows up a pharmacy with a valid prescription but no identification card. This creates a real challenge for the pharmacist as he or she weighs the various alternatives available for processing the prescription – making the injured worker pay cash, processing through a third party biller, turning the injured worker away or attempting to find the employer’s correct Pharmacy Benefit Manager (PBM).
Clearly, the differences between the two types of insurance require the expertise of PBMs which focus solely on each discipline. The unique differences, regulations and details which accompany both types of transactions require the full focus of a PBM specializing in each market. A workers’ compensation-focused PBM, such as PMSI, with the clinical staff and expertise to fully understand the unique requirements of this market, can make the biggest impact on appropriate care and containing costs.
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iThe Use of Medicines in the United States: 2010, IMS Institute For Healthcare Informatics, retrieved December 28, 2011 from www.imshealth.com/ (PDF)
ii2010 Prescription Drug Trends, Kaiser Family Foundation, retrieved January 13, 2012 from www.kff.org (PDF)
About Eileen Auen
Eileen Auen is the chairman and CEO of PMSI, a leader in developing solutions to control the growth of medical costs in workers’ compensation. In 2010, Auen was named one of Business Insurance’s Women to Watch. In 2011, she was selected as Business Woman of the Year, in the Business Services category, from the Tampa Bay Business Journal. Eileen’s previous positions include serving as CEO of APS Healthcare as well as executive positions at Aetna, CIGNA and HealthNet.
Founded in 1976, PMSI is a leader in developing solutions to control the growth of medical costs in workers’ compensation. As one of the nation’s largest and most experienced companies focused solely on workers’ compensation, we deliver proven solutions for cost containment across the claims lifecycle. PMSI’s solutions for Pharmacy, Medical Services and Equipment, and Settlement Solutions deliver quantifiable results and improve the quality of care for injured workers. We provide our customers with the innovation, focus, expertise, analytics and technology needed to successfully deliver workers’ compensation benefits.
For more information on PMSI, visit: www.PMSIonline.com
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This is not a paid placement.