Ways to Share Benefits Plan Costs, Part 4: Prescription Deductibles

Karen Taylor Smith is the Senior Manager, Group Benefits at The Benefits Trust. She has worked with The Benefits Trust since 1997, using her deep knowledge of employee benefit plans to customize the right solutions for businesses. Karen speaks, blogs, and contributes regularly to various media outlets on group benefits and compensation topics.

Ways to Share Benefits Plan Costs, Part 4: Prescription Deductibles

Welcome to part four of our sharing benefits plan costs series. In this blog, we are discussing the common types of prescription drug deductibles. In our earlier blogs, we examined the value of payroll deduction, co-insurance, and annual deductibles.

There are two common types of prescription deductibles: a flat dollar amount per prescription, or a dispensing fee deductible/cap. While a flat dollar amount is a form of cost sharing, it may not be the optimal choice for many employers as the impact of a flat dollar deductible can erode over time. A dispensing fee deductible or cap can be more effective for several reasons.

Dispensing fee deductibles or caps improve drug cost management. A drug plan that does not employ any form of prescription drug deductible can have a large impact on a company’s benefits spending over time.

Introducing a dispensing fee deductible or cap encourages “smart shopping”. This method of cost sharing is based on employees paying for what they use. Therefore, more drug spending will directly impact the user. Since dispensing fees can differ widely between different pharmacies, implementing dispensing fee deductibles or caps will bring the dispensing cost to the forefront when employees are deciding where to fill their prescriptions.

Employees will be motivated to limit the amount spent out of their own pockets, thus limiting (or eliminating) the cost of the dispensing fees borne by the benefits plan.

For these reasons, dispensing fee deductibles and caps are likely to become increasingly popular with plan sponsors – particularly as prescription drug and dispensing fees escalate. Federal and provincial changes to generic drug pricing, as well as manufacturer rebate practices, will have a significant impact on drug store profits. Across the board, the industry is forecasting increases to dispensing fees as a result.

Dispensing fee deductibles or caps are simple for plan sponsors to implement and manage through a pay-direct drug card. Prescription drug deductibles have many advantages. Ultimately, they lead to drug plan cost savings, intelligent cost sharing, and greater plan effectiveness.

>> The Benefits Trust can help you build a customized benefits plan, no matter the size of your organization. Contact us today!

Note: Dispensing fee deductibles or caps cannot be applied in Quebec, as pharmacists in Quebec are not required to report drug ingredient costs and dispensing fees separately. Flat dollar amount deductibles are more commonly applied in Quebec for this reason.

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