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A September 2006 study by the U.S. Department of Transportation National Highway Traffic and Safety Administration stated that U.S. medical losses that were associated with auto accidents totaled $32.6 billion annually, with each critically injured survivor costing an average of $1.1 million. Approximately 10 percent, or $3.26 billion, of the medical losses associated with auto accident s are for medication expenses.
These costs are growing exponentially and are estimated to increase an additional 148 percent by 2018. Auto no-fault insurers are realizing the necessity to contain medication costs, yet are faced with the constant challenge of providing exceptional service to their insureds. How can this be achieved?
How We Got Here
Several factors have attributed to rising medication costs for the auto no-fault industry. The first factor is price inflation, which is projected to increase medication costs by 148 percent in 10 years, according to a May 2007 study by the Kaiser Family Foundation. This is attributed to a rise in prescriptions, changes in the mix of medications being used (from older, less expensive medications to newer, more costly medications), and manufacturer price inflation for existing medications.
The second factor is brand medication use. The Kaiser Family study also states that brand medications can cost up to three times more than their generic counterparts. All too often, brand medications are used in place of generics due to lack of education on the availability of new generics and a general misconception that brand medications are more effective than generics.
The third factor is inappropriate utilization. On average, inappropriate utilization of prescription medications results in overspending, costing auto no-fault providers an additional 10-15 percent. Overspending occurs when prescriptions are filled that are not related to an insured's injuries. For example, an insured refills a high blood pressure medication, birth control pills, diabetes supplies, or anti-depressants and passes those costs on to the insurer. These unrelated or non-compensable medications cost the insurer hundreds of dollars each month and may result in court-ordered coverage of unrelated medications.
A Cost Containment Solution?
For auto no-fault insurers to respond to the mounting challenge of managing pharmacy costs, many are finding pharmacy benefit manager (PBM) to be useful.
A PBM offers programs and services that give auto no-fault insurers more insight into their companies' total medication costs, while streamlining pharmacy benefit processes. Programs typically include network discounts, a national network of pharmacies, and other comprehensive programs such as mail order and drug utilization review to assist in the overall goal of cost containment.
Auto no-fault insurers should carefully research potential PBMs, as some are better equipped than others to handle the nuances that come with auto no-fault claims and case management.
There are a variety of factors to look for when considering a potential PBM partner. These factors include network participation and discounts, mail-order programs, generic substitution, drug utilization review, ease of use, workflow, cost savings, administrative benefits, and insured satisfaction.
For an insurer to receive a discount on prescription medication, a PBM partner must have a vast national network of retail pharmacies that honor the discount. It must also provide the best accessibility to the insured. The most effective PBMs have programs that encompass each phase of prescription fulfillment, which include capturing initial prescriptions, ongoing prescription needs, and long-term or catastrophic prescription requirements. In addition to these programs, a PBM should offer comprehensive training to ensure that the program is used effectively.
Mail-order programs offered by PBMs are extremely effective at providing extended care to insureds who require ongoing prescription medications, as many ongoing medications are prescribed for 90 days. A PBM program should identify good candidates for conversion to mail order. In addition, mail-order programs represent a cost savings for the insurer because they are typically lower in price than a retail pharmacy for both brand and generic medications. A PBM should also have a program in place that automatically converts medications from brand to generic (if a generic substitution is available).
Drug utilization review (DUR) uses a variety of factors to eliminate fulfillment of medications that are inappropriate. DUR programs include formulary management (ensuring injury-specific medications), historical medication usage, physician intervention, and a number of other clinical factors. A well-managed DUR program, coordinated by licensed pharmacists, is the most valuable benefit of a PBM. No matter the network discount on a prescription, savings are irrelevant if the medication should not have been dispensed. A quality DUR program can result in incremental savings between eight-12 percent above the prescription cost savings.
While a PBM program is not entirely effortless on the part of the insurer and claim professional, it should be easy to use. An effective PBM program should not only reduce overall medication costs, but also reduce the claim professional's administrative responsibilities. In addition, a wide range of reports and reporting options should be available to continually assess the program's value.
PBMs follow a specific workflow for determining, managing, and analyzing prescription drug benefits for auto no-fault claims. This process typically entails the insured reporting the loss. Next, the claim is entered into the insurance provider's system. The claim professional will then send eligibility information to the PBM. Next, the PBM mails a drug card to the insured. The insured takes the drug card and prescription to the pharmacy. Then, the pharmacy adjudicates prescription and checks DUR edits. The PBM is contacted to determine if prior authorization is required. If the prescription passes all DUR edits, the pharmacy bills the PBM. PBM pays the pharmacy and bills the insurance providers, which pay the PBM. PBM provides ongoing reporting to the insurance provider.
By using a PBM, auto no-fault insurers can receive average savings of up to 25 percent on their overall spending. While many auto no-fault insurance companies partner with a PBM to minimize the impact of rising drug costs, they also realize administrative and insured satisfaction benefits.
Some examples of the administrative benefits a PBM provides to the claim professional include: less paperwork for medication invoices and reimbursement issues; easily accessible prescription history for the insured; reduction in the amount of inbound and outbound phone calls; and increased ability to detect utilization issues and potential problems.
Satisfying insureds should be the highest priority of auto no-fault insurers. A PBM can assist with this by reducing out-of-pocket expenses for the insured, making it easier for the insured to get the medications they need through a vast national network, and offering a mail-order program.
Selecting the Right PBM
Determining the right PBM can be a daunting task. The first step is to choose a company that has experience in the auto-no fault insurance market. Since laws vary from state to state, a PBM that specializes in auto no-fault insurance will understand the nuances and how they affect pharmacy benefits.
In addition, insurers should look for a PBM that has a vast national network of retail pharmacies. The most effective PBMs offer a deeply discounted network that encompasses a large number of pharmacies.
It is also important to understand what the PBM vendor includes as part of its DUR process. A quality DUR program should be concurrent. Formularies should be injury-based and created and managed by pharmacists. It is important for insurers to know what the DUR program specifically monitors and what it may not. Insurers should ask what percentage of claims is audited in the DUR program, and whether intervention, step therapy, prior authorization, and pharmaceutical evaluation programs are offered. Insurers should also ask if prescribing physicians are proactively contacted to request a letter of necessity. Finally, a PBM should offer access to a pharmacist to answer questions.
A long-term PBM partnership requires ease-of-use programs that assist the claim professional with daily job functions. A PBM should be able to customize its workflows to meet the insurance company's needs. It should also offer the claim professional a user-friendly, Internet-based claim management tool that is always available. During the implementation process, a PBM should provide an account management team to offer guidance. It should also include a conversion plan as part of its implementation process. A quality PBM will have customer service representatives available 24/7, provide education and technical support at no cost, and offer continuing education for claim professionals.
The ability to integrate a PBM's technology into existing business applications is important. Insurers should ask these questions:
How does the technology integrate with our existing business applications?
Can the technology be customized to meet our specific business rules and challenges?
On which technology platforms are the systems based?
Is the platform web-based?
Does the PBM have EDI capabilities?
It is critical for insurers to measure the impact of their PBM relationship. Insurers need to know what types of reports a PBM offers, and in what file formats. Reports should be available in real time and should also include cost-saving analysis capabilities. Insurers should also understand how notifications are delivered for inappropriate or potentially fraudulent utilizations; if clinical reporting is offered; whether reports can be customized or not; and if there is a charge for ad hoc reports. PBMs are an extremely useful partner for medication cost containment. By asking the right questions and doing the proper research, auto no-fault insurers can capture significant savings while increasing the satisfaction of the insured's experience. Jeni Niesen-VerMeulen is director for Progressive Medical, Inc., based in Westerville, Ohio. She can be reached at 866-271-8678, jeni.vermeulen@progressive-medical.com . Interested in more auto-claim news and in-depth articles? Head over to Claims' auto-claim channel for more information.
