1199SEIU Benefit Funds Cost Containment Program Problem Identification The 1199SEIU Benefit Funds are not-for-profit, multi-employer Taft-Hartley funds that are self-insured and self-administered. The Funds’ approach to health care coverage for the nation’s largest health care workers union is different from that of many other payers. As health care costs continue to rise, many plans have shifted costs to participants. 1199SEIU provides 420,000 working and retired members and their dependents with access to quality, comprehensive care with no out-of-pocket costs. The Funds’ experience shows that first-dollar coverage helps keep members healthy and health care costs low. Over the years, the Funds instituted a mandatory generics program requiring members to use generic equivalents or pay the full difference between the cost of the generic and brand-name drug, and a Preferred Drug List (PDL) allowing members to choose from preferred medications in 15 drug classes with no out-of-pocket cost. Members choosing to use non-preferred drugs pay a differential capped at $16. In 2004, the Funds were mandated through collective bargaining agreements to aggressively pursue new strategies to contain rising health care costs. The pharmacy program offered the best opportunity to achieve these savings. Objectives The Benefit Funds sought to implement innovative pharmacy cost containment programs to continue to: Drive members to use medications and distribution channels for which the Fund has leveraged deep discounts. Provide members with free options if they follow the Funds’ plan design. Engage members and encourage them to use their benefits wisely – ensuring they know this is critical to sustaining the level of coverage they receive. Target Audience The 1199SEIU Benefit Funds’ 420,000 active and retired members and their dependents are the target audience. Solution Mandatory Mail-order for Long-term Medications Members can receive 90-day prescriptions for maintenance medications at no cost through the mail or at the Rite Aid pharmacy chain. If they still choose to fill 30-day maintenance prescriptions at other retail pharmacies, they must pay out of pocket. Expanded Preferred Drug List (PDL) The original PDL of 15 drug classes was expanded to include any drug class where there was a cost-saving opportunity from greater discounts, higher rebates or member cost differentials. By selecting just one or a few brand-name medications in each class, the Funds were able to leverage deep discounts with drug manufacturers, limiting costs while still providing members with the most clinically effective medications on the market. The PDL more than doubled in size to 40 drug classes or about 55% of total prescriptions. When members choose preferred drugs in these classes, they have no out-of-pocket costs. Eliminating Differential Cap The $16 differential cap on non-preferred medications was eliminated, bringing the preferred program in line with the mandatory generics program. Now, members must use either the range of deeply discounted generic or preferred drugs and pay nothing, or they must pay the full cost of the difference between the brand-name or non-preferred medication out of their own pockets. The average differential is now $68.The vast majority of members choose the "free” option. Sensitivity to Member Issues Buy-in from members is key to the success of the Funds’ prescription initiatives. Sensitivity to member issues in both plan design and member communication is a priority. For instance, when instituting mandatory mail order for maintenance medications, the Funds anticipated members would be concerned about the security of their prescription drugs, the convenience of using the pharmacy, and the impact of mail order on the jobs of 1199SEIU pharmacists. So the Benefit Funds negotiated a retail pharmacy alternative, giving members the option to order and pick up their three-month supply at Rite Aid, an 1199SEIU participating pharmacy chain, instead of ordering from the mail-service pharmacy. As a result, members were more willing to make the change and understood that the program was developed with their needs in mind. The strategy increased compliance by making the most cost-effective choice the most convenient choice as well. Engaging Members in Protecting Their Benefits Through campaign communications, targeted newsletters, trainings with union delegates, and polls and surveys, The Funds have educated members about the richness of their benefits within the national context and the importance of making changes in order to preserve them. Results When members follow the Funds’ plan design, they spend nothing for medications they need. When they do not, they incur costs. The pharmacy cost containment programs have lowered the Fund’s prescription drug cost by almost 10% per year. The initiatives have saved the Funds more than $200M since 2005 and have kept its prescription trend to a -1% in 2008.