Employers “Tiering Up” To Save On Drug Costs

Survey finds employers adding copay tiers to prescription drug benefits as costs rise.

Bronze, silver gold and platinum designations aren’t just for medical plans anymore. They’re being applied to prescription drug benefits by employers to shift some of the cost of high-priced and higher-priced drugs to employees.

That’s the takeaway from a new report on prescription drug benefits trends released by United Benefit Advisors, the Indianapolis-based employee benefits consulting firm. The report is based on health plan benefits data provided to the firm by about 10,000 employers over the past 11 years.

Some 44.1 percent of the employers in UBA’s database used four or more tiers in their prescription drug plans for workers in 2015, according to the report. That’s up from 27.9 percent in 2013, representing a nearly 60 percent increase in just two years.

Under a tiered approach, prescription medications are separated by type with each tier coming with a different copay level for enrollees covered by the plan. Typically, a health plan charges higher copays for higher tiers. The first tier often is generic medications followed by formulary brand medications in the second tier, non-formulary brand medications in the third tier and expensive biotech or specialty drugs in the fourth or higher tier.

Some 48.9 percent of the employers in the UBA’s database still used three tiers in 2015, but the clear expectation from the report is that the number of employers using three tiers soon will be eclipsed by the number of employers using four or more tiers.

“By segmenting these drugs into another category with significantly higher copays, employers are able to pass along a little more of the cost of these drugs to employees,” the report said.

The median copay for drugs in the first tier of a four-tier plan was $10 in 2015, according to the report. It was $35 for second-tier drugs; $60 for third-tier drugs; and $100 for fourth-tier drugs.