The Cadillac Tax is Delayed... Now What?
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Transcript of The Cadillac Tax is Delayed... Now What?
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The Cadillac Tax is Delayed…Now What?
Kevin Host, PharmDPresident, Pharmaceutical Strategies Group
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Cadillac Tax Overview
What Now?
HR Strategies
1
2
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Cadillac Tax Overview
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Cadillac Tax Overview
2010Cadillac Tax became law under the Affordable Care Act (ACA) with a start date of January 2018
2015Cadillac Tax delayed from 2018 to 2020 by Congress and President
2020Cadillac Tax to go into effect on January 1, 2020… maybe
Non-deductible tax on employer-sponsored health plans that exceed
certain thresholds
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The Cadillac Tax annual limits are based on the total value of coverage. These totals are calculated similar to COBRA and include:• Medical coverage (insured or self-
insured) for active and former employees
• Employer Health FSA contributions• Employer HSA contributions• Onsite clinics
Cadillac Tax Annual Limits
$10,200
$27,500
Individual Family
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• Revenue source to fund the ACA• Initially estimated to raise $120 billion from
2018 – 2024
• Belief high-value benefits lead to overall increased healthcare spending• Therefore shifting more responsibility to the employee
would lead to a decrease in healthcare spending
Why the Tax?
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Reality Check
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2018 2023 20280%
5%
10%
15%
20%
25%
30%
35%
40%
45%
26%30%
42%
% of Employers Offering Health Benefits with Plans that Would Exceed HCPT Threshold with 5% Premium Growth
Impact of Cadillac Tax
Source: Kaiser Family Foundation
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• Increase deductibles and other cost sharing• Eliminate covered services• Cap or eliminate tax-preferred savings accounts (FSAs,
HSAs, HRAs)• Eliminate high-cost health insurance options• Use less expensive (narrow) provider networks• Offer benefits through a private exchange• Control unnecessary or ineffective spending to reduce
plan spending
Employer Strategies to Avoid Tax
Source: Kaiser Family Foundation
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• December 2015: tax delayed until January 2020
• Future of tax likely tied to Presidential race results
Trump or Hillary? Tax or no tax?
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What Now?
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Control unnecessary or ineffective spending to reduce
plan spending
Pharmaceutical Spending
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Inflation US Healthcare Prescription Drug0%
2%
4%
6%
8%
10%
12%
14%
0.8%
5.3%
12.2%
National Health Expenditures2014
Source: Kaiser Family Foundation
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• High-cost
• Treats a complex and/or rare disease
• Requires special handling and administration
• Includes additional patient education or monitoring
What’s a specialty drug?
2005 20130
10000
20000
30000
40000
50000
60000
$18,239
$53,384
Average Annual Retail Cost of a Specialty Drug
Source: AARP Public Policy Institute
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FDA Drug Approvals
2013 2014 20150
10
20
30
40
50
60
Total28
Total39
Total51
Specialty19
Specialty19
Specialty38
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PMPY Spend
Trend Total
Traditional $708.09 -0.1%
Specialty $352.66 17.8%
Impact to Benefit Cost
Source: Express Scripts 2015 Drug Trend Report
Per Member Per Year (PMPY) spending for specialty drugs is growing at a rapid rate
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Pharmacy Benefit
54%
Medical Benefit
46%
Percentage of Spending by Benefit Type
Medical Versus Pharmacy Benefit
• Nearly half of benefit spending is within the medical benefit
• Traditional PBM utilization management strategies are no longer enough to manage spendSource: EMD Serono Special Digest, 12th Edition
HR leaders must consider proactive strategies to manage pharmacy spend across both the pharmacy and medical benefits.
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HR Strategies
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Leverage Your Clinical Assets
Leverage clinical
expertise to improve
formulary and clinical
management
Utilize hospital-owned
pharmacies to reduce drug
spend for employees
Drive employee
engagement and wellness
through dedicated
clinical staff
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Track Spending Across Benefits
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OVERVIEW• Large employer was experiencing higher than expected
spend on certain specialty drugs identified• Artemetrx developed custom prior authorization
criteria to offset the cost increases
OUTCOME• $5 Per Member Per Month savings• Totaled $1.6 million in annual savings
Case Study
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OVERVIEW• Large public sector employer group• 30% increase in specialty pharmacy spend Q1 ‘15 over Q1 ‘14• Artemetrx analyzed drug spend and identified savings
opportunities by combining pharmacy and medical claims data
OUTCOME• Realized $12 million in savings within 120 days
• Formulary exclusion: $9 million• Prior authorizations: $2 million• Copay assistance: $1 million
Case Study
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Kevin Host, PharmDChief Operating Officer
Pharmaceutical Strategies GroupArtemetrx
www.psgconsults.com
www.Artemetrx.com