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What is a Drug Formulary?

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Drug Formulary – plain and simple is the number and type  of drugs covered by your benefit plan.

You  can  provide  prescription  coverage for your employees that would cover  everything, but depending on your insurance provider you could pay a very high premium.

Conversely you could choose a formulary  that would cover only a  few  prescriptions or not cover medications for arthritis or MS, or even birth control. This type of program would control  costs but you would have very upset employees.

2 very common formularies used:

–          National formulary –  8,760 drugs

–          Provincial formulary –  varies by Province  BC covers  5,085 drugs

These formularies are used by governments, some Unions and Associations.

There are other formulary options which cover as few as  4000 drugs and as many as 13,500 drugs. We feel that a employee benefit plan should offer coverage in the 13,500 range. This will provide your employees adequate coverage.

Many agents are recommending and selling benefit plans with  a reduced drug formulary option. The  reduction in  coverage obviously will reduce your costs and claims. Is this the right advice from the agent? By changing the drug coverage which employee is affected and how?

We know  there are other forms of cost containment options that will give your employees the coverage they need without reducing the integrity of your plan design.

Such as

1. Deductibles for extended medical

  • Per person or by family
  • Dispensing fee deductible on prescriptions, this makes an employee shop around to buy as dispensing fees vary from $4.50 to $12.00

2. Cost sharing

  • Co-insurance on drug coverage –  lowering the coinsurance so the employee is responsible for a larger portion. Example from 80% to 70%

3. Drug maximum cap

  • Instead of having an unlimited allowance on drugs, set an annual maximum. (We do not like this option)

These measures are not always necessary. But  we believe  employees should be made aware and take responsibility for the rising costs associated with their benefit plan. Through  education we can show employees how to reduce some of the fees they pay for services they use. The years of unlimited corporate resources is over for awhile.

Another option available is a POOLED priced benefit plan.  Our company has been providing pooled benefits within 3 exclusive pools for the last 30 years. This type of plan allows you to purchase your benefits at wholesale pricing, and can create a cushion for high claiming years that will not drastically affect your premiums. This gives small to medium size business the protection they need with a plan design they want.

5 Comments

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